Eating-out operators will need ‘bank of goodwill’ to weather another recession

Creating a relevant position in the market and having a clearly targeted offer should be a priority as economists warn of a potential recession on its way, according to Peter Backman, managing director of foodservice analysts Horizons.

Backman said: “It was independents – and also the group operators who heavily discounted and shouted ‘we’re cheap’ – that suffered [in the previous recession] because they didn’t have economies of scale, the marketing wasn’t so effective and they didn’t necessarily have the skills or ability to buy more cheaply.

“What companies ought to be doing, right now, is building up a ‘bank of goodwill’, creating a position in the market where it’s clear what they’re offering and, generally, telling customers that this is a great place to eat, offering them what they want at a good price.”

Then, he said: “You can flex the price if bad times come and start doing offers, and it won’t harm the positioning if that goodwill is built up beforehand.”

Pertinent​

This advice was particularly pertinent for gastropubs, he added.

“Like in the last recession, gastropubs found it quite tough because they’re expensive. At the very top end of the restaurant sector there was no recession at all, but it was the next level down, the £25 to £50 per head level, that suffered.

“There were people for whom meals in those establishments were aspirational but if they didn’t have the money, they could do without it. So instead of going to a gastropub they would go somewhere not quite as smart.”

Economists have speculated that another recession could be just around the corner, although exactly when and for how long a downturn would last is debateable.

Backman said: “There will be a recession because there always is. Surprisingly it’s now six or seven years since the last one – although it’s taken a long time to grow out of it – so we’re due for another one in the next two or three years because that’s the cycle.

Recession​

“When there is a recession, people will have less money or they will be more concerned so they won’t spend as much money – eating out will be one of the things that suffers. 

“If it is people who dine out that are affected then, paradoxically, it may not be too bad for pubs because eating in a pub is often cheaper than eating in a restaurant.”

If this were to be the case, he said, there could be a potential spending shift from restaurants to pubs.

But operators large and small are, generally, in a much healthier financial position than they were five or six years ago, and are reasonably well positioned to withstand a downturn, he added.