The latest edition of the Market Growth Monitor from CGA and AlixPartners claimed this was partly a reflection of moves by major pubcos to switch to directly managed sites and a switch to food.
The report also found across the licensed sector as a whole, the nation’s number of licensed premises dropped by 2.4% in the 12 months to June 2019 to just under 117,000 with the rate of pub and bar closures lower than the market average at 2%.
CGA business unit director for food and retail Karl Chessell said: “These are turbulent times for the pub, restaurant and bar sectors.
“As our new research shows, conditions are especially tough for independents, leased pubs and Italian restaurant operators.
“But while licensed sites are clearly in overall decline, things may not be quite as bleak as recent media commentary has suggested.”
Managed pubs revival
He added: “You don’t have to look too far to find bright spots in the market. The emergence of dynamic young restaurant brands, the soaring popularity of certain cuisines and the revival of managed pubs in many parts of the country all provide grounds for optimism and operators that can respond nimbly to shifting consumer tastes have a lot to look forward to.”
The research also reported a 3.4% drop in restaurant numbers in the 12 months to June 2019 – an average of about 18 net closures a week.
For group-owned restaurants, defined as businesses with more than one site, the reduction in numbers was smaller at 1.2% – reflecting the fact some groups, especially small to medium-sized operations, continue to open new sites.
In a new review of cuisine types, the Market Growth Monitor shows the Italian, Indian and Chinese sectors have recorded the most net closures in the past 12 months.
The number of group-owned restaurants specialising in Italian food fell by 3.2% after site closures and some high-profile business restructuring with the collapse of Jamie’s Italian the most prominent casualty.
Chessell added: “The trend suggests more market contraction could follow.”
However, the research also revealed the Middle Eastern, Turkish and Caribbean sectors all have at least 60% more restaurants than they did five years ago and the number of vegetarian restaurants have risen by more than a third in just 12 months.
AlixPartners managing director Graeme Smith said: “The rapid growth of restaurants focused on certain cuisine types highlights how they can quickly find favour in response to the fast-changing tastes of British diners.
“The Asian-led part of the restaurant market is of particular interest to investors. It is popular with consumers and there is a comparative lack of chains with national scale, making it ripe for further merger and acquisition activity.
“We would expect to see private equity become increasingly active in this segment of the market, in response to this consumer-led demand.
“However, overall market pressures can still result in valuations and terms falling short of sellers’ expectations.
“This was shown by the owners of Thai restaurant brand Giggling Squid choosing not to sell at the current time after its recent marketing process.”