Casual dining sector faces ‘restructuring wave’ - KPMG

Cash-squeezed consumers are 'overloaded with options of where to eat'
Cash-squeezed consumers are 'overloaded with options of where to eat'

Britain’s casual dining sector will endure a wave of closures in the coming months, with a quarter of restaurant groups already suffering severe financial stress.

The crisis ripping through the sector will continue long into 2018, according to KPMG, with company voluntary arrangements (CVA) proving a popular choice on the restructuring menu.

High street chains Byron burger, Jamie’s Italian and Prezzo have all embarked on CVAs since the start of the year, allowing them to close loss-making stores and secure rent discounts.

Figures from KPMG found that 25% of companies in the casual dining space had booked an operating loss at least once over the last two quarters.

It comes as restaurants struggle to stomach the cocktail of pressures engulfing the industry, as margins are gobbled up by rising business rates, the National Living Wage, the Apprenticeship Levy and persistently high inflation.

Speaking to the Press Association, KPMG partner Will Wright said cash-squeezed consumers are overloaded with options of where to eat and tend to choose “alternative ‘experiential’ dining experiences” over “familiar fare”.

He said: “We certainly anticipate this wave of restructuring to continue over the months ahead, as stakeholders take measures to ‘right size’ their estates to a more profitable core, with the ultimate aim of safeguarding their long-term futures.”

KPMG analysed 125 casual dining companies with revenues of £15 million or more.

It found that 78% of industry players had seen their net debt swell over the past two quarters. Of those that added to their debt pile, a fifth saw a decrease in their cash balance.

Margins were also coming under pressure, with 69% of firms working with operating margins of under 5%.