Corporate Finance, Deal Advisory, Transaction services
Industry update: Hospitality | Restaurants
The UK restaurant industry has proven resilient against a backdrop of continued economic uncertainty.
The industry’s performance is closely linked to consimer confidence and household disposable income, both of which have been recovering in recent times. This has encouraged consumers to return to restaurant dining, and as a result sector revenue has grown at a CAGR of 3.5% over the last five years.
Gerald Edelman has released its latest industry report, which provides a review of the Restaurant sector. This report focuses on key industry trends which are shaping the landscape of the market, M&A activity, threats to the sector and an overall outlook for the coming years.
Key takeaways from the report are:
- Consumers are moving away from traditional cuisines that have historically dominated the high street. In the last five years, there has been a 123% increase in Thai restaurants and a 49% increase in Mexican restaurants. Italian restaurants have decreased by 4% over the last year.
- The global shift towards a healthier lifestyle has supported the growth of vegetarian restaurants. A recent survey found that more vegetarian restaurants opened in 2018 than burger-led and steak-led restaurants combined.
- “Experiential dining” is increasing in popularity as Millennials and Gen Zs prefer to spend on experiences, rather than physical goods.
- The uncertainty of the current economic and political climate has deterred some investors from the sector. However, specialist operators are continuing to invest in concepts that capitalise on trends, such as non-traditional cuisines, healthy eating and experiential dining.
- Busy lifestyles are becoming the social norm, therefore time-poor consumers are looking for convenience food, which has led to restaurants facing greater competition from cafés and fast foods. Deliveroo and Uber Eats have accelerated this trend as consumers can order restaurant quality food to their doorsteps.
Nick Wallis, Partner of Gerald Edelman Deal Advisory, stated, “As a business, we are continually looking for new ways to provide business owners and investors with key insights into their sectors. We have seen a number of large chains entering into CVA, or in talks to restructure debt over the last few years, which has likely been caused by outdated concepts and a lack of agility. This has actually created opportunities for a number of brands, particularly those with new and niche concepts, and which is why M&A activity is still prevalent in the sector. We believe the number of deals will increase further in the coming years. ”