While the restaurant sector featured heavily in the news during 2018, independent and smaller operators can be cautiously optimistic as we enter 2019, as innovation, new concepts and technology come to the fore, strengthening the sector as a whole, according to the latest annual report by specialist business property adviser, Christie & Co.
The report, ‘Business Outlook 2019: Navigate, Innovate, Accelerate,’ reflects on the themes, activity and challenges of the previous year and forecasts what 2019 might bring across the industries in which Christie & Co operates, including the restaurant sector.
Highlighting the prevalence of Company Voluntary Arrangements (CVAs) throughout 2018, following rapid expansion and the growth of the casual dining market over recent years. The report suggests further casualties on the high street are inevitable, expecting at least three larger corporate operators will resort to CVAs in the first half of 2019.
The report emphasises the importance of new concepts, unique offerings and customer experiences in order to attract a wider audience and drive business. Major changes on the high street will be driven by technology and customer experience, and the increasing popularity and simplicity of ‘Grab & Go’ and delivery services are likely to increase competition throughout 2019. New concepts are already establishing themselves at street food markets, pop ups and boxparks, while more established multi-site operators will be able to take advantage of the increasing availability of space on the high street.
Christie & Co reports movement in average prices in the restaurant sector down 1.3% on the previous year. Funding for restaurants is still forthcoming, as private equity continues to support a number of burgeoning hospitality businesses. Crowdfunding and emerging challenger banks have also become popular avenues for an ambitious existing operator.
The report suggests independent and smaller operators will be able to look forward to more opportunities to capture customer interest in 2019, as consumer preferences continue to shift towards more imaginative dining experiences. National brand operators have started to retreat from secondary markets, allowing independent and smaller operators will increasingly benefit from the emergence of better deals.
The 2018 Autumn Budget announced some rate relief for small businesses, and rents are set to stabilise at worst, but cost pressures and challenges linked to Brexit will continue to impact the sector. Still, sensitivity around pricing is unlikely to change in 2019 according to Christie & Co, and some operators will need to pass these increases on to the customer, despite efforts to absorb costs.
As of June 2018, EU nationals composed 40% of the UK’s hospitality workforce, as reported by leading software platform, Fourth Analytics, pressuring operators to become less dependent on talented migrant chefs and simplify menus, as the influx of new EU staff slows. Moreover, the report notes Brexit threatens to increase food import costs, which would require better menu creation and sourcing more ingredients from the UK or outside the EU.
Simon Chaplin, Head of Restaurants at Christie & Co comments, “The troubles being felt by many of the larger brands is not just down to cost pressures but reflects the general change in consumers tastes. Many are now looking for an experience, which can be an interesting menu, the venue or added entertainment. Independent operators are more nimble and able to fine tune their offer to fit the changing habits of the customer. Landlords are also seeing this and are looking to encourage such operators by offering ever improving lease terms to incoming tenants.”
The full Business Outlook 2019 report will be available on the Christie & Co website from 17.00 https://www.christie.com/news-resources/publications/january-2019/business-outlook-2019-navigate,-innovate,-accelera/