Warning on margins for catering outlets

Food inflation, overcapacity in the eating-out market and the downturn in consumer spending will increase pressure on the UK’s pubs and restaurants and are likely to lead to a higher number of business casualties this year, particularly in the pub sector.

This is the warning from market analyst Peter Backman of Horizons, as the company releases its 2008 statistics on consumer spending across the UK’s pound;40bn eating out market.

“Since the smoking ban many pubs have switched their focus from the sale of drink to food, meaning they are now competing with high street restaurants. This has led to an over-capacity of outlets in the mid-spend sector. At the same time consumers are tightening their belts as food, energy and fuel prices rise and the mortgage market looks increasingly vulnerable,” comments Backman.

“Because of this competition the UK’s eating out sector – which consists of some 263,000 outlets – will have to rationalise by driving the less successful operators, whether it be restaurants, quick service outlets or pubs, out of business.”

Horizons also believes that many operators in the eating out sector are currently overlooking the impact the high rate of food inflation will have on their margins.

Backman said: “Operators’ food costs are rising at more than 5% at the moment and I’d expect it to go significantly higher. This, coupled with increasing energy and labour costs and the fact that selling prices are rising more slowly, means margins, which are typically around 5%, are being squeezed hard.”

Latest figures from Horizons show that consumers eat out in pubs, fast food outlets or restaurants 1.3 times per week, spending an average of pound;6.01 on a meal, including drink.

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