35 of UK’s Top 100 restaurant groups now loss-making – up 75% in just a year

  • Oversaturated market, minimum wage hike put pressure on restaurants
  • Another minimum wage rise just weeks away

35 of the UK’s Top 100 restaurant groups are now loss-making, up 75% from just 20 last year, shows research by UHY Hacker Young, the national accountancy group.
UHY Hacker Young says that trading conditions have become increasingly difficult for restaurant chains dealing with oversaturation in the market as well as rising costs.
The firm adds that this research comes on the back of the high-profile struggles of several major restaurant chains in recent weeks, including:

  • Jamie’s Italian, started by Jamie Oliver, which has closed 12 branches as part of a Company Voluntary Arrangement (CVA) to restructure its £71.5m debt
  • Byron, the burger chain, which may close up to 20 of its 67 branches following a period of paying reduced rent
  • Prezzo, the Italian chain, which is expected to close some of its 300 branches as part of a restructuring
  • Strada, another Italian chain, which closed 11 branches over the festive period
  • Barbecoa, another Jamie Oliver chain, which entered administration in mid-February
  • EAT, the sandwich chain, which was rumoured in early February to be considering closing some of its 100 branches

UHY Hacker Young says that pressures of competing with numerous similar ‘fast casual’ restaurants in an overcrowded high street are a major driver of many large restaurant groups registering losses over the past year.

It adds that the National Minimum wage, which has risen by an above-inflation 19% to £7.50 per hour over the last five years, has added a substantial cost burden to large restaurant chains. From April 2018, the minimum wage will rise even further to £7.83.

Peter Kubik, Partner at UHY Hacker Young, comments: “More than a third of the biggest companies in the restaurant sector are losing money, and there is little respite on the horizon.”

“Pressures on the restaurant sector have been building for years, and the last year has pushed a number of major groups to breaking point.”

“With Brexit hanging over consumers like a dark cloud, restaurants can’t expect a bailout from a surge in discretionary spending.”

“Consumers only have a finite amount of spending power when it comes to eating out, and the oversaturation of the market means that groups that fall foul of changing trends can very easily fail.”

“The Government has ratcheted up costs with a series of above-inflation rises in the minimum wage, and we are just weeks away from another 4.4% rise in April. That will be tough for a lot of restaurants to absorb.”

About UHY Hacker Young:

 The UHY Hacker Young Group is one of the UK’s Top 15 accountancy networks with 110 partners and more than 620 professional staff working from 22 locations around the country. The offices within the Group provide a wide range of accounting, tax and business advisory services, with a reputation for integrity and reliability within the financial community, and particularly with London’s Stock Markets. UHY Hacker Young are also ranked 15th in the ARL Corporate Advisers Rankings Guide amongst other UK audit firms for advising London Stock Exchange listed companies.

UHY Hacker Young is a founder member of the UHY International network with offices in every major financial centre in the world. Further information can be found at www.uhy-uk.com

 

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Keep Calm and Control Costs in 2018

Melvin GoldThe UK has been a country of uncertainty in 2017, fuelled by the drip-drip of 24-hour news. On a macro level it seems that 2018 will see more of the same: Brexit, terrorism, politics, economics and much more besides, writes leading independent hotel consultant Melvin Gold FIH as he makes some predictions as to what lies in store.

But Britons have proved themselves to be resilient folk as has always been the case. Yes, there is much to complain about and much to worry about, but the country fundamentally keeps calm and carries on.

It is perhaps surprising that hotel markets in both London and the regions are ending 2017 in positive territory, strongly so in the case of London. Nonetheless, the second half of 2017 has been tougher, as economic factors produced headwinds and the supply pipeline increasingly moved from the drawing board to reality. Inbound tourism has boomed, the weak pound having seemingly magnetic properties. For the time being the UK appears relatively cheap. That has benefitted London, Edinburgh and the country’s most popular tourist cities.

The brave souls at PWC put their necks on the line every year in preparing the hotel sector’s most widely available forecast. For 2018 they forecast London’s RevPar growth at 2.4% and the rest of the UK at a similar 2.3%. If those levels are achieved, they are likely to be similar to UK inflation, so not much in the way of real growth, but given the way the news is reported and some of the retail figures, it could be far worse.

Of course there are variances by specific location and market, too complex to discuss here. It is also also worth reminding ourselves that regional UK is not a single hotel market, and neither is London.

Although the uncertainties connected with Brexit have adversely affected the currency to create the tourism boom, most hoteliers are more concerned about its effects on costs rather than revenues. The currency change, perhaps exacerbated by the uncertainties of future rights of work and residency, has seen some European workers relocate to other countries. The value of their remittances home was affected by the currency movement. Increasingly hoteliers and restaurateurs bemoan staff shortages and recruitment difficulties and if this prevails – which it probably will – it is likely to cause a more competitive labour market and wage levels rising. The Autumn 2017 budget saw the announcement of a 4.4% increase in the National Living Wage in any case, which is well beyond sector revenue growth forecasts.

Notwithstanding that, there remains a quantum of new hotels still to enter the market in many towns and cities. PWC took that into account in their forecast but nonetheless those hotels need staff and even if they are supported by demand growth they may imbalance the labour market.

This is not the only cost pressure, though. Pension contributions, imported food and beverage, energy, and property taxes are all likely to rise. Thus it is likely that 2018 will be a year which, if hoteliers have reason to complain, it will be about staff shortages and rising costs. Revenues may give less cause for complaint, other than the fact that they fail to keep pace with costs which impacts margin. In such an environment it is the smartest and canniest operators that will have least grounds for complaint.

One thing sure to distract from the other headlines and create inflows of tourists is a royal wedding and we will have one of those in May 2018. Tourism chiefs and hoteliers will raise a glass to the happy couple.

Melvin Gold FIH, is a leading independent hotel consultant and commentator.
More about him and the range of services offered by his company can be found at: www.melvingoldconsulting.com

Members of the Institute of Hospitality will receive your annual statistical report ‘Spotlight on Hospitality’ at the start of 2018, packed full of informed insights into the year ahead. Remember to renew your membership to secure this and many more benefits in the coming year.

JS137444204
The Royal Wedding will be a welcome boost for hoteliers and tourism chiefs in 2018

Keep Calm and Control Costs in 2018

Melvin GoldThe UK has been a country of uncertainty in 2017, fuelled by the drip-drip of 24-hour news. On a macro level it seems that 2018 will see more of the same: Brexit, terrorism, politics, economics and much more besides, writes leading independent hotel consultant Melvin Gold FIH as he makes some predictions as to what lies in store.

But Britons have proved themselves to be resilient folk as has always been the case. Yes, there is much to complain about and much to worry about, but the country fundamentally keeps calm and carries on.

It is perhaps surprising that hotel markets in both London and the regions are ending 2017 in positive territory, strongly so in the case of London. Nonetheless, the second half of 2017 has been tougher, as economic factors produced headwinds and the supply pipeline increasingly moved from the drawing board to reality. Inbound tourism has boomed, the weak pound having seemingly magnetic properties. For the time being the UK appears relatively cheap. That has benefitted London, Edinburgh and the country’s most popular tourist cities.

The brave souls at PWC put their necks on the line every year in preparing the hotel sector’s most widely available forecast. For 2018 they forecast London’s RevPar growth at 2.4% and the rest of the UK at a similar 2.3%. If those levels are achieved, they are likely to be similar to UK inflation, so not much in the way of real growth, but given the way the news is reported and some of the retail figures, it could be far worse.

Of course there are variances by specific location and market, too complex to discuss here. It is also also worth reminding ourselves that regional UK is not a single hotel market, and neither is London.

Although the uncertainties connected with Brexit have adversely affected the currency to create the tourism boom, most hoteliers are more concerned about its effects on costs rather than revenues. The currency change, perhaps exacerbated by the uncertainties of future rights of work and residency, has seen some European workers relocate to other countries. The value of their remittances home was affected by the currency movement. Increasingly hoteliers and restaurateurs bemoan staff shortages and recruitment difficulties and if this prevails – which it probably will – it is likely to cause a more competitive labour market and wage levels rising. The Autumn 2017 budget saw the announcement of a 4.4% increase in the National Living Wage in any case, which is well beyond sector revenue growth forecasts.

Notwithstanding that, there remains a quantum of new hotels still to enter the market in many towns and cities. PWC took that into account in their forecast but nonetheless those hotels need staff and even if they are supported by demand growth they may imbalance the labour market.

This is not the only cost pressure, though. Pension contributions, imported food and beverage, energy, and property taxes are all likely to rise. Thus it is likely that 2018 will be a year which, if hoteliers have reason to complain, it will be about staff shortages and rising costs. Revenues may give less cause for complaint, other than the fact that they fail to keep pace with costs which impacts margin. In such an environment it is the smartest and canniest operators that will have least grounds for complaint.

One thing sure to distract from the other headlines and create inflows of tourists is a royal wedding and we will have one of those in May 2018. Tourism chiefs and hoteliers will raise a glass to the happy couple.

Melvin Gold FIH, is a leading independent hotel consultant and commentator.
More about him and the range of services offered by his company can be found at: www.melvingoldconsulting.com

Members of the Institute of Hospitality will receive your annual statistical report ‘Spotlight on Hospitality’ at the start of 2018, packed full of informed insights into the year ahead. Remember to renew your membership to secure this and many more benefits in the coming year.

JS137444204
The Royal Wedding will be a welcome boost for hoteliers and tourism chiefs in 2018

Will UK wage increases hurt Hospitality? New US research suggests it won’t

There’s been a lot of scaremongering in the UK from the press, businesses and some professional associations and trade bodies about the new National Living Wage (NLW) and the “burden” its salary increase will place on retail, care and hospitality businesses, which often employ lower paid staff.

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Increased wages are a way to reward hard working staff

The Institute of Hospitality takes a more positive perspective. Our Chief Executive, Peter Ducker, posits that the National Living Wage is an opportunity for hospitality businesses to retain and reward their best employees. And new long-term research from hospitality experts in the United States suggests wage increases won’t have the negative effect the naysayers are suggesting.

According to academic research published by Cornell’s Center for Hospitality Research (CHR) at Cornell’s School of Hotel Administration (SHA), “US federal and state minimum wage increases over the past twenty years have not resulted in fewer restaurants or lower employment in the United States”. The new study, “Have Minimum Wage Increases Hurt the Restaurant Industry? The Evidence Says No!,” was written by SHA faculty Michael Lynn and Christopher Boone and is available FREE from CHR.

To control any impact on the organisation and its employees, hospitality businesses should prepare now for the increased salary costs resulting from the NLW. Instead of viewing the NLW as a burden, businesses should see it in a positive light. The Institute’s new Management Guide, from contributors BusinessHR, explains what hospitality employers need to know to get to grips with the NLW and reward their hard-working employees. Find the new guide at Management Guides.

 

 

Hospitality Managers: new #IoHWebinar helps you get to grips with forthcoming wage challenges

This operations-focused #IoHWebinar outlines how hospitality managers can prepare for – and reduce the impact of – several forthcoming pay challenges affecting UK businesses.

The experts from BusinessHR will discuss what these wage challenges mean for hospitality owners and operators. The changes begin with the mandatory National Living Wage, effective on 1st April 2016, followed by successive wage increases over the next four years. Modifications to holiday pay, overtime, equal pay and working time are covered, too.

Make sure your business can handle the NEW wage challenges with our #IoHWebinar
Make sure your business can handle the NEW wage challenges with our #IoHWebinar

In this #IoHWebinar, scheduled for 1st March at 3pm, BusinessHR’s experts will explain how the wage challenges require careful planning and systems changes to ensure compliance and to avoid penalties. Webinar attendees will also receive a FREE pdf guide explaining the necessary steps to prepare for the National Living Wage and further wage increases whilst safeguarding the business and its employees.

Attendees will have the opportunity to have their questions answered by the BusinessHR experts during the webinar.

Managers, are you certain your business knows all it needs to about these changes and how to manage them? If not, this new #IoHWebinar is a ‘must-attend’ event.

Book HERE to ensure you have a seat at the #IoHWebinar on Tuesday, 1st March 2016 at 3pm and be ready for the wage changes coming our wage.

Peter Ducker FIH, chief executive of the Institute of Hospitality, assesses reactions to the National Living Wage

The announcement of the introduction of George Osborne’s national living wage (NLW) from this April 2016 was met with a wide range of speculation and opinion. I was disappointed that some of the big players in our industry were the first to say that it would spell job losses. For a dynamic and growing sector like ours which faces big challenges to recruit and retain talented people, this is the wrong message to send out.

Another widely-voiced opinion has been that small and medium-sized hospitality businesses will find it particularly hard to comply with the minimum wage increase (a rise of 50p to £7.20 per hour). Yet the significant number of small cafes, bars, restaurants and event caterers that choose to pay the higher voluntary living wage (£8.25 per hour or £9.40 inside London) goes against this view.

Salut Wines, Mantchester, values its staff and is ready for the NMW
Salut Wines, Manchester, values its staff and is ready for the NMW

The owners of Salut wine bar in Manchester, for example, say there are positive business benefits to paying the voluntary living wage: training isn’t wasted because employees tend to stay and customers are pleased to see the same faces.

For such small employers, there is no uncomfortable adjustment to make come April. They are already paying well above the legal minimum.  In contrast, large hotel and restaurant companies are absent from the 2,130 firms listed on the Living Wage Foundation website.

Of course, our industry’s response to the NLW has been positive too. Many catering and hotel managers have said they believe it will help us attract more motivated and well-trained employees and retain them.  More than a million workers across all sectors are set to directly benefit from the increase and a new government survey shows that 59% of respondents said they will feel more motivated at work as a result of the increase in pay.

However, it is worth noting that the NLW increases the wage-floor for everybody over the age of 25, not just for employees in hospitality. Therefore how can we be sure it will make us more attractive?  In nearly every other sector, there are major employers who are already paying the higher voluntary living wage rates. The supermarket chains Aldi and Lidl are among the latest to sign up (as well as offering extremely attractive graduate packages). If you were an entry-level jobseeker, would you choose to clean hotel bedrooms or stack shelves in a supermarket for better pay?

For now, when it comes to pay, it is mostly SMEs that are setting the best examples in hospitality.  Others will have to absorb the extra NLW costs through a combination of productivity gains, increases in prices, a dip in profits, reducing hours or new hires, and changes to their overall pay structures.

Managing the UK’s forthcoming National Minimum Wage and the introduction of the National Living Wage

Learn how to manage NMW and NLW with Institute resources
Learn how to manage NMW and NLW with Institute resources

There appears to be a storm brewing in the hospitality industry as claims that the increase to the National Minimum Wage (NMW) next month and the introduction of the National Living Wage (NLW) will negatively impact UK hospitality sector. It is projected that the NLW could increase hospitality payrolls by up to 3.5% by 2020. The retail and care sectors will also be impacted.

What hospitality managers need is good guidance to manage the changes to ensure minimal impact to the workplace. The Institute is providing detailed guidance for employers explaining the NMW and NLW changes and how to manage them styp-by-step. The information is provided by the human resources experts at BusinessHR, a resource that also makes up part of every Institute member’s benefits package. Members can click on the NMW and NLW guidance HERE.

For articles about the forthcoming changes, see the following:

Although much of the recent reporting has been negative, it’s important to consider the wage changes as a way to benefit loyal and hard working hospitality employees. The industry’s recent productivity problems, highlighted in a 2015 productivity report from People1st, show that retention and training of current staff can be an effective way of building a better and more productive business. Consider the costs of staff turnover, the replacement and training costs for each new staff person and even the interruptions to service inexperienced staff can bring in the workplace. Improved wages could be a great way to build and retain a skilled hospitality workforce.

Our industry’s growing vacancy rates and ultra-competitive hiring landscape mean retention should be one of the most important methods in every business’s HR process. The up-to-date resources and information provided by the Institute to its members means they can successfully navigate any stormy weather ahead.