For many pub operators, headline turnover remained positive and was buoyed by a strong summer season, however profitability was under pressure, and we saw some operators reducing their trading hours or closing earlier in the week in response.
There was little to cheer about in the Autumn Budget in November. While the Government’s move to lower business rate multiples is a positive step, the benefits will be largely offset by higher rating assessments and further payroll pressures.
With margins squeezed further, it is likely pubs may need to raise prices or further reduce operating hours this year.
Similar pressures persist in the restaurant sector. Although the UK’s Top 100 restaurant groups reported double‑digit growth in annual sales and profit to mid‑2025, following two years of cost-cutting and site rationalisation challenges remain.
Strong demand
Food inflation remains above RPI, utilities continue to run around 10% higher year‑on‑year, and labour shortages, estimated at 100,000 vacancies, are contributing to rising staff turnover and strained service delivery.
Despite these challenges, demand for quality pub and restaurant assets remains strong.
In the pub sector, 91% of freehold pubs sold by Christie & Co in 2025 were for continued use as a pub, and less than 2% of sales were distressed.
Private buyers accounted for 57% of transactions, highlighting confidence at the individual investor level.
In the restaurant sector, franchising continues to attract hospitality entrepreneurs seeking certainty, while drive-thru and takeaway sites remain in high demand despite rising rents.
As part of our Business Outlook 2026 report, we recently conducted a sentiment survey for pub and restaurant stakeholders, and despite 62% reported feeling negatively about the sector, only around one in five are looking to sell in 2026, showing a determination among operators to succeed.
Growing polarisation
Both pubs and restaurants are experiencing growing polarisation. Well-invested venues with distinctive offerings are continuing to perform well, while under-invested businesses face rising levels of distress. In pubs, demand is strongest at the premium and value ends of the market, with the mid-market most exposed.
Larger pub companies are expected to accelerate estate churn in the coming year, reinvesting capital in stronger sites and pursuing consolidation to spread costs.
In restaurants, customer expectations continue to evolve. Loyalty schemes and targeted promotions now influence roughly one‑third of dining decisions, and brands that fail to innovate risk decline. Independent operators face tougher cost pressures but often benefit from strong customer loyalty and niche menus with locally sourced produce.
Supermarkets continue to draw value-driven consumers towards dine-in alternatives, reducing frequency of restaurant visits - however spend per occasion may rise when people do choose to eat out.
Looking to the year ahead, the market is likely to remain polarised. Technology will play an increasingly important role in driving efficiency and enhancing the customer experience, while sustainability, health and ethical considerations are expected to shape an increasing share of consumer decision-making.
The QSR segment will continue to expand, although oversaturation may temper growth for some brands. Franchising is likely to remain a key growth avenue this year, as operators seek diversification and operational resilience to be successful in today’s market.
