Rising energy prices have biggest negative impact on restaurant profits

10 February 2014 by
Rising energy prices have biggest negative impact on restaurant profits

Rising energy prices had had one of the biggest negative impacts on hospitality business profits over the past six months.

That's according to new information, taken from the Bookatable Dining Index.

The Index, based on interviews with 200 UK restaurants and supported by industry data, revealed the challenges currently facing the sector and suggests that rising energy costs are expected to stifle future growth in hospitality.

The study showed that despite over half (68%) of restaurants adopting measures to cut their energy usage in the last year, the vast majority (90%) said that rising energy costs have made them re-assess menu prices in the past six months.

Meanwhile, food costs also continued to cause concern. Bookatable's 2013 Dining Index revealed that food prices had overtaken rent and rates in the list of overheads facing UK restaurants, coming second only to staff wages, and the 2014 Dining Index now shows that the cost of food remains the biggest expenditure for one in five (20%). Eight out of 10 restaurants believe rising food costs have had the greatest impact on menu prices in the past six months.

When asked what measures they have introduced to reduce costs in the past six months, over half (60%) of restaurants report they have actively started to monitor food waste and almost a third (28%) have reduced portion sizes to avoid binning uneaten meals. The Bookatable data shows 70% of restaurants consider food wastage to be a huge concern for their business. A recent industry report estimated that the average annual cost of wasted food per outlet is £10,000.

Joe Steele, chief executive of Bookatable, said: "Bookatable's Dining Index shows the pressures felt by the restaurant industry. Many restaurants operating today have worked hard to survive the economic decline, but now face similar challenges that consumers will recognise from their own households, as food and energy prices soar. This is a real concern for the restaurant industry as well as diners, as while profits and growth suffer, the cost of eating out is impacted."

The report also found that while software and hardware remained the second lowest expenditure for restaurant owners, 88% of restaurants are now reaping the benefits of online bookings, compared with 68% six months ago.

The survey also revealed that eating out has become more of a 'social' experience, with customers using mobiles to share their dining experience on social networking websites. Nearly all restaurant owners surveyed (88%) have witnessed customers taking pictures of their food in their restaurant in the past six months.

In 2013, nearly half (48%) of restaurants said they were actively using Twitter and 73% using Facebook. In 2014, this has increased to 65% and 76% respectively.

Whilst a large proportion of social media buzz around eating out is positive, the new wave of food critics who upload a photo of a nice meal or check in at a restaurant pose a risk to merchants. The majority of restaurateurs (86%) believe that bad reviews have a negative impact on their business. Bookatable.com has launched a new 'top rated' badge scheme on its website, to spotlight restaurants that consistently receive high star ratings from diners.

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