Hard times in the London restaurant scene?

Laid dinner tableA “perfect storm” of rising costs are threatening the economics of the UK capital’s vibrant restaurant industry
Two unrelated activities in recent weeks have prompted me to re-evaluate my thinking about the challenges confronting the London restaurant community in 2017, and the impact on the many layers of the wine industry which supply or indeed depend on this market.
The first of these unrelated activities involved my moonlighting role as business adviser to a small but expanding group of London restaurants. The third restaurant in this group opened on schedule on 1st December. While successful in terms of launch and ensuing customer levels, its business plan has had to absorb significant cost increases compared with those envisaged when the project first kicked off in late-2015.
Many regular readers of Network News will be familiar with the escalating costs of restaurant operations – whether in London or San Francisco – but try these for a perfect storm:
So, who would now consider opening a restaurant in the UK, particularly in London? Apparently 200 people or organisations did open in London during the 12 months up to November 2016, according to Harden’s annual report published on 23rd November 2016. A new peak figure since Harden’s started tracking restaurant openings/closures 26 years ago, far exceeding both the previous record of 179 in 2015 and the 2008 pre-financial-crash peak of 158 openings. But closures also peaked at 76, 20 more than in 2015. So, net new openings in London in this last twelve months were 124, only one more than in 2015. I tend to agree with Peter Harden’s prediction that churn will increase and net new openings will decline.
In the first couple of weeks of the New Year, several high-profile 2017 London openings are already being trumpeted, often turbo-charged by very effective PR campaigns. Not least among these is Robert de Niro’s multi-million investment to create The Wellington, an 85-bedroom luxury hotel with two restaurants and a member’s club spanning three buildings in Covent Garden. Sadly, this high-profile investment will force the relocation of the much-loved and iconic Joe Allen’s and possible closure of its sister restaurant, Orso.
On the flip side, first news of 2017 London restaurant closures has hit the headlines. The Jamie Oliver Restaurant Group has just announced the closure of four London units, blaming Brexit effects and lower footfall. While commentators questioned Brexit effects as the primary cause for these closures, it would be prudent to expect more closures in 2017 than in 2016 as we progress through the inevitable uncertainties of the coming 12 months.
However, I’m not yet ready to abandon my long-held posture as a paid-up member of the “glass-half-full” brigade. London will remain a dynamic global hub for the food service and bar communities. Here’s what’s keeping that glass at least half-filled:
So, while predictions are risky at the best of times, here goes: net new restaurant openings in London in the 12 months to November 2017 will be in the range 90 to 110. And our small restaurant group will open its fourth location. Let’s review again in 12 months’ time.
Author: Brian Howard
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