Casual Dining: How to beat the crisis
Our Sectors • • • •
Technology, Communications & Digital Media Construction, Land & Planning Personal Affairs, Private Wealth & Philanthropy Retail & Hospitality
Our Expertise • • • • • • • • • • • •
Banking & Finance Charities Commercial & Corporate Data Protection & Information Disputes Employment & Immigration Family & Matrimonial Insolvency & Restructuring IP & Technology Real Estate Tax Trusts, Estates & Private Client
Casual Dining: How to beat the crisis These are the harshest of times for the casual dining industry. Much like it is elsewhere on the beleaguered high-street, it seems that every week brings headlines of another restaurant business becoming insolvent or making mass closures. The past few months alone have seen established names such as Prezzo, Byron, Gaucho, Jamie’s Italian, Côte Brasserie and Strada close numerous outlets. Meanwhile, Carluccio’s is undergoing an insolvency process (a Company Voluntary Arrangement) to try to rescue itself.
Barney Leaf
John McDermott
Partner barney.leaf@laytons.com +44 (0)161 214 1632
Associate Partner john.mcdermott@laytons.com +44 (0)161 214 1657
laytons.com | 3
Casual Dining | How to beat the crisis
Causes
Footprint
The industry is saturated, with an oversupply of tables
Do you have too many branches, or branches which are
available, whilst also facing rising costs of labour, supplies,
simply too close together? For instance, having one branch
and crippling rents and rates. Put simply, it is becoming
in a city centre and another on the edge of town without the
more expensive than ever to run a restaurant business - and
necessary footfall to make it worthwhile will lead to customers
this at a time when supply is starting to outstrip demand.
being split between the two sites, when the majority may
Laytons has a great deal of experience with businesses in the
favour one site. Is the duplication of overheads - wages,
leisure sector and those that operate chains of food outlets.
rents, rates, supplies - worth having, and are the customers
Our clients are also experiencing these increasing operating
geographically independent? Closing one underperforming
pressures and this article is aimed at providing our general
outlet, and maximising the profitability of the most successful
observations of the market and how operators are looking at
branch in that catchment area, may be the way forward.
many of the challenges facing them today.
Look before you leap
Key figures
If considering expansion, there are two key considerations to
A short look at some key figures tells its own story:
Is the area prosperous or not? What are your price points?
deal with. First, meticulously research any proposed location. Why would the local customer want to buy your dining
•
• •
By the end of 2017 there were 16.7% more restaurants
experience? Local knowledge and the understanding of local
in the UK than at the end of 2012. This figure has only
tastes are vital. Second, consider how you will preserve your
recently began to reduce as the closures referred to
business’s brand as the number of branches grows. A pitfall
above work their way into the statistics, with June 2018
of expansion is that it can be easy for the personality or charm
recording the first drop in UK restaurant numbers in 8
of an original restaurant to become lost as it scales up into a
years;
chain. Owning four restaurants is very different from owning
Company insolvencies in the sector in 2017 increased
one, and owning ten is different from owning four. For smaller
by a fifth, jumping from 825 to 1,000;
operators, the personal touch or character of a restaurant
78% of businesses in the sector reported that their debt
can often be its USP. As you grow this this is very difficult to
levels increased in 2017.
maintain, and your management infrastructure will need to grow to ensure you maintain consistency and control across
However, despite such challenging circumstances, there are steps restaurant owners can take to try to buck the trend, survive and thrive in the current climate:
4 | laytons.com
the chain.
Casual Dining | How to beat the crisis
Social media and technology
Benchmarking
Social media is crucial in appealing to millennials, who as
Identify your immediate competitors. Try their branches,
a demographic spend the most on eating out. If your
check their prices, identify what they do better than you, and
restaurant is based in a city the younger diner will be more
what you do better than them. Where they outperform you,
important to you than attracting the older diner. Industry
look at ways to address this. In areas where you are stronger
commentary indicates that an attractive Instagram page
than your competitors, emphasise this in your advertising,
can have a huge impact on enticing new customers. Also,
particularly if you have a USP that sets you apart. Also,
consider the timings of any new posts themselves – for
mystery-shop your own establishment – a genuine objective
instance, a photo posted of a new dish is likely to have more
assessment of your customers’ overall experience could be
impact if posted mid-to-late afternoon when thoughts turn to
invaluable in nurturing the profitability of your business.
that evening’s meal, as opposed to first thing in the morning. Likewise, photos announcing a new dish or cocktails posted
Upselling
just before the weekend will have more impact than if posted on a Monday morning. Similarly, look after your TripAdvisor
Pushing side dishes, larger options, double measures of drinks
account – don’t be drawn into online spats with anybody who
etc. can increase each average spend significantly. If done
leaves negative feedback, but do take stock of which aspects
well, customers won’t feel like they are being squeezed for
of your business attract the most praise, and which are
more cash, but will instead view it simply as part of the overall
received less favourably.
experience. And needless to say, the better the service, the
Look and ambience
more likely your customers will be to take up such offers.
Staff Training and Retention
Due to the dominance of social media, millennial diners are increasingly looking for venues where the décor and the
Over the last five years this has become an increasingly
food itself are “Instagram-able”. Presentation is becoming
important part of the dining experience. Customers require
increasingly important – as evidenced by the fact that
a more professional service, and the front-of-house staff are
Carluccio’s plans to invest a significant sum in renovating
required to have a greater level of training in relation to the
the interiors of its remaining branches following its CVA.
items the restaurant sells and also their customer contact
Freshening up the interior of your branches (if necessary), and
skills. Operators also require them to be able to manage the
finding any ways of making your dishes and drinks look as
sales process to enable them to maximise the spend of the
visually appealing as possible, may go a long way to enticing
customer and also ensure they enjoy the dining experience
those younger diners.
to motivate them to leave positive reviews and return to dine again. A higher standard of training also ensures a higher retention rate of staff.
laytons.com | 5
Casual Dining | How to beat the crisis
Act quickly Keep on top of your numbers. A firm and up-to-date grasp of your business’s accounts is key to assessing its performance. Identify both a desired profit target, and an absolute minimum baseline figure needed in order to break even. If profits start to dip below the baseline figure, act quickly to stop any critical loss of cash. Speak to your suppliers and landlord to see if any arrangements can be made about rent reviews, credit supply terms, etc. If it seems inevitable that cutbacks are necessary, then make them quickly – whether that means reviewing your staffing levels and arrangements, or looking at site closures. Whilst these are difficult and painful decisions, if labour costs or a branch are unsustainable, it is better to address this sooner rather than later before they drag the profitable part of your business down with them. Unfortunately you will never feel that you have done this too soon, you will only feel you let the situation drag on for too long. Such measures should hopefully allow you to focus on your business’s strength, and build the platform for its survival and future growth.
6 | laytons.com
Casual Dining | How to beat the crisis
Retail & Hospitality Laytons has a wealth of experience in advising clients in the hospitality industry. With a depth of expertise across our Corporate & Commercial, Insolvency, Real Estate, and Banking teams, we can help you with all aspects of your business, whether you are thriving and looking to expand, or are in financial difficulty and seeking advice on rationalisation, restructuring or insolvency.
Our Team Michael Barrington
Kathryn Beasley
Ben Crichton
Solicitor michael.barrington@laytons.com +44 (0)20 7842 8086
Solicitor kathryn.beasley@laytons.com +44 (0)20 7842 8061
Solicitor ben.crichton@laytons.com +44 (0)20 7842 8064
Martin Donoghue
John Gavan
Dimitri Iesini
Partner martin.donoghue@laytons.com +44 (0)20 7842 8016
Partner john.gavan@laytons.com +44 (0)161 214 1653
Partner dimitri.iesini@laytons.com +44 (0)20 7842 8081
Barney Leaf
John McDermott
Daniel Oldfield
Partner barney.leaf@laytons.com +44 (0)161 214 1632
Solicitor john.mcdermott@laytons.com +44 (0)161 214 1657
Partner daniel.oldfield@laytons.com +44 (0)20 7842 8037
Jun Park
Christopher Sherliker
John Skelly
Solicitor jun.park@laytons.com +44 (0)20 7842 8035
Partner christopher.sherliker@laytons.com +44 (0)20 7842 8015
Partner john.skelly@laytons.com +44 (0)20 7842 8025
Cameron Sunter
Liza Zucconi
Partner cameron.sunter@laytons.com +44 (0)20 7842 8036
Partner liza.zucconi@laytons.com +44 (0)20 7842 8092
laytons.com | 7
This information is offered on the basis that it is a general guide only and not a substitute for legal advice. We cannot accept any responsibility for any liabilities of any kind incurred in reliance on this information.
London
Manchester
Guildford
2 More London Riverside London SE1 2AP +44 (0)20 7842 8000 london@laytons.com
22 St. John Street Manchester M3 4EB +44 (0)161 214 1600 manchester@laytons.com
Ranger House, Walnut Tree Close Guildford GU1 4UL +44 (0)1483 407 000 guildford@laytons.com
www.laytons.com
Š Laytons LLP which is authorised and regulated by the Solicitors Regulation Authority (SRA Nº 566807). A list of members is available for inspection at the above offices.