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Food-led pubs have grown despite trade decline

By Nikkie Sutton , 20-Mar-2017
Last updated on 20-Mar-2017 at 11:50 GMT2017-03-20T11:50:34Z

Sector concerns: food-led pubs numbers rise despite fears
Sector concerns: food-led pubs numbers rise despite fears

The number of branded food pubs have continued to grow despite evidence showing a small decline in the number of licensed premises.

The latest Market Growth Monitor from AlixPartners and CGA Peach confirms that food-focused businesses have expanded, even though the sector saw a 1.3% decline in the overall number of licensed premises last year.

However, the report found the number of food-led licensed sites rose by 1.2% in the suburbs and in the north-east, where they increased by 3.8%.

Regional cities continued to be a key focus for expanding operators too, with the number of licensed premises in British cities up by 7.6% in the past five years.

CGA Peach vice-president Peter Martin outlined the challenges the sector faces such as rising rates, food costs and wage bills, exacerbated by uncertainty around the effect of Brexit on staffing and exchange rates.

Growth deserves recognition

He said: “Restaurants and pubs face significant cost challenges at the moment, many of them not of their own making.

“So it is no surprise to find the licensed sector contracted slightly in 2016 – but that should not distract from the success of food-led operations in recent years.

“It is a story of dynamic economic growth and job creation that deserves more recognition and support from Government.”

AlixPartners managing director Paul Hemming said: “We are continuing to see strong trading performances from many companies in the branded casual-dining sector, especially those who have had the resources to invest in their sites over recent years.

“Sales for these operators have been positive in the early part of 2017 but this benefit has been offset by strong cost pressures.”

Hemming set out both good and bad news for operators on how to achieve growth but also how tough the trade is.

Intense pressure

He said: “The drivers for like-for-like sales growth now include price rises, which operators are introducing as they juggle the complex interplay of pricing versus covers. Menu engineering is also at the forefront as operators look to drive efficiency to maintain or improve profitability.

“The pressure on independent operators and smaller groups is intense. Faced with fewer cost-saving options, less operational experience and often cash constraints, the future looks tough.

“Despite this, new offerings are coming to the market, and investor appetite for four-to-five-site businesses remains strong, as the recent Piper investment in Flat Iron confirms.”

Hemming lauded the growth of food-led pubs as “unsurprising” but warned the speed of the growth should send a further warning to the restaurant market.

He added: “The public still has an affinity with the pub and many of the new offerings deliver great value for money and good food.

“The sector is clearly not for the faint-hearted but this type of environment simply drives a more marked divide between the winners and losers.”

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