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Small restaurant groups’ growth outpaces larger rivals by up to six times

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Small restaurant groups’ growth outpaces larger rivals by up to six times

Small- and medium-sized restaurant businesses are growing by up to six times the rate of their larger rivals, as competition in the sector remains fierce.

That’s according to the latest Market Growth Monitor, a quarterly review of pub, restaurant and bar supply in Great Britain by Alix Partners and CGA Strategy.

While the market for new openings and sales was broadly flat, the Market Growth Monitor found that small restaurant groups (those with fewer than 25 sites) have achieved a 32% increase in premises over the past three years, more than four times the 7.6% growth rate of large companies (with more than 100 sites).

Meanwhile, medium-sized groups (with between 25 and 99 sites) have expanded their portfolios even more rapidly, increasing their numbers by 47.7%. That’s nearly six times faster than bigger firms.

Some of the casual dining brands to be pushing over the 25-site mark include Wahaca, Honest Burgers, Pho and Bistrot Pierre, while Franco Manca, Byron and Las Iguanas have moved to the next tier of medium-sized operators.

However, there have also been signs recently of how tough the market has proved to be, not just as a result of increased competition, but also because of business rate increases, food inflation and wage costs.

At the end of August, The Restaurant Group hailed early signs of improvement since it implemented a turnaround strategy to shore up flagging sales. Nonetheless, it still reported a 2.2% like-for-like sales drop of 2.2% in the 26 weeks to 2 July 2017, as well as a reduction in pre-tax profit from £25.5m, from £36.6m in the same period a year before.

And this month Dim-T and Wildwood owner Tasty made a £9.5m write-down on its accounts for the first half of 2017 amid a “weak trading environment”, while Franco Manca owner Fulham Shore also warned this month that trading was likely to be below current market expectations.

Commenting on the findings, AlixPartners managing director Paul Hemming said: “2017 has already proved to be a challenging year for operators. The past 12 months have left the industry battling unprecedented levels of competition, unrelenting price pressures, and an evolving retail market.

“Quoted UK operators have also been feeling the pinch, judging from the recent string of profit warnings. Despite these negative headwinds, small and growing innovative businesses continue to thrive across the country.”

CGA research also showed that Britain’s total number of licensed premises stood at just under 123,000 in June 2017 – slightly more than at the time of the last Market Growth Monitor, but 0.3% fewer than in June 2016. It said that the net fall was down to the long-term trend of closures of drink-led pubs, especially in the leased sector.

The Restaurant Group hails signs of improvement despite sales drop >>

Tasty makes £9.5m write-down as tough conditions hit sales and margins >>

Britain’s pub, bar and restaurant groups record flat August trading >>


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