Is Your Restaurant in Trouble?

Restaurant staff looking at tablet

Just months after a report revealed that one-fifth of the UK’s restaurants are on the verge of insolvency, the start of 2018 saw popular casual dining chains struggle, and their owners selling off sites to make ends meet. The publicly-listed The Restaurant Group, owner of popular chains such as Chiquito and Wagamama, has been forced to sell more than 30 sites following losses of £22.5 million for the first half of the year. Casual Dining Group, another big company with over 300 restaurants across the UK, also reported a pre-tax loss of £60 million, despite an increase in total revenue. The restaurants that have fuelled our cities and towns a decade ago are seemingly collapsing.

More than anything, these are lessons. The high street is changing, and restaurants need to change with it in order to keep the cash flowing. Large chains may struggle to do this, as their size makes it difficult to change without extensive restructuring. However, smaller restaurant businesses do not face the same issues, and are free to adapt to the changing industry.

If your restaurant is struggling, then don’t despair – you can easily fix things if you know what is going wrong. Here are seven of the most common reasons businesses struggle.

Seven reasons restaurants struggle

  • Unprepared for business growth – Sometimes a restaurant sees a sudden influx of business but is unable to react fast enough to meet the increased demands. They don’t have enough staff to meet the high demand, and there’s not enough time to hire and train new personnel. As a result, customers are left unhappy and the restaurant suffers a blow to its reputation that can be hard to recover from.
    To avoid this, always ensure that you have a detailed plan for business growth: set out clear business goals and financial targets, and make sure you’re prepared to meet them. If you cannot reach your targets, then adjust your plan as necessary.
  • Intense competition – There are currently a lot of restaurants in and around London, which means the competition is fierce. The casual dining market is heavily saturated so you will need more than just good food to attract new customers. Consider what your USP (Unique Selling Point) is, and make sure it’s clear to the public. Going the extra mile to stand out from the crowd will increase your chances of attracting potential consumers.
  • The falling pound – The formula is simple – when the pound is weak, it costs more to import goods from abroad. Restaurants that import their ingredients are finding it increasingly expensive to do so. Look for UK suppliers, and try changing your menu to avoid using ingredients that must be imported.
  • Inadequate accounting methods and systems – As a manager, you should be leading the business through these difficult times. You can’t afford to spend the majority of your time sorting out VAT return or working on the business accounts, so it’s wise to hire professional bookkeeping accountants in order to crunch the numbers, saving you both time and money.
  • Rise in minimum wage – The statutory minimum wage increased in April 2018 to £7.83 per hour, and is going to rise again to £8.21 per hour in April 2019. As a result, many restaurants are struggling to absorb the increased staff costs. Make sure you have the right amount of staff in your business – not too many, but enough to ensure high quality and consistent service. If you need assistance in managing your payroll, our outsourced payroll services can help.
  • Poor location – When it comes to the high street, location is everything. If your restaurant is out of sight or catering to a demographic that isn’t common where you are, then your sales are going to suffer. Before you do anything, you should always be researching where you plan to sell from. Make sure you check the average age of your consumers, the social demographics that are most common in the area, and the number of people that pass by on average. Failure to do this research can be lethal for a business, especially since you’re unlikely to realise the problems until your business is already set up and trying to operate.
  • Lack of staff – The UK’s decision to leave the EU is expected to hit the hospitality sector hard, as a quarter of Britain’s restaurant staff are EU nationals, and many of them may consider leaving after Brexit. Look to keep your staff retention high and your working conditions appealing – it may be more difficult to hire new staff than to keep your current roster.

Exploring your options

If you tackle these hard business issues early on, there may be a possibility to restructure your business and turn things around. If you can survive this rough patch, the possibilities are immense, as the once fierce competition will have dwindled significantly.

At Berley, our team of specialist hospitality accountants understand what you are facing and can provide specific help.

We’re also experts in business growth strategies – we can discuss your business plan and make sure it’s right for your restaurant’s vision, so you can avoid the common pitfalls.

The sooner you talk to us, the better. Once we have worked out a plan of action for your restaurant, we can support you through the process of implementing it.

Call Berley now on 020 7636 9094 to discuss how our expert team can help you, or get in touch via our Online Form.

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