Another day, another doom-laden headline about chain restaurants struggling in the time of Covid. In recent weeks there have been stories about The Restaurant Group closing 125 sites including branches of Frankie and Benny’s, Garfunkel’s and Chiquito; Pizza Hut considering insolvency and Byron burger company closing 31 of its 51 restaurants. The latest household name in trouble is Pizza Express which may close 67 sites as part of an insolvency agreement. For anyone whose job is at risk or has already been made redundant, it is of course terrible news, but it should come as no surprise.
Putting aside the obvious negative impact of the pandemic on eating out, with demand dropping like a rock into a still lake, the casual dining sector has been in crisis for several years. The ‘casual dining crunch’ began back in early 2018 when Jamie’s Italian, Strada and Prezzo were among the high street brands desperately re-structuring to stay afloat. The toxic mix of a massively oversaturated market coupled with relentlessly rising costs including rents, rates, staff and ingredients has meant that making a quick buck from fast-ish food has become increasingly difficult.
It would however be foolish to start ringing the death knell for the casual dining sector. Some brands like Jamie’s Italian may be no more (although it still exits as a franchise in a number of overseas locations including Brazil, Cyprus and Qatar) but many are battling on. The apparently bullet proof and perennially popular Nando’s look set to eventually re-open all of its 400 restaurants, and a Company Voluntary Agreement could see most if not all of Pizza Hut’s 250 locations begin trading again later this month. And if Pizza Express does close the expected number of stores, that will still leave them with 382 restaurants to eventually re-open (it currently has 166 restaurants operating). No one is going to go short of an overpriced dough ball.
Despite the severity of the situation, there is still a lot of investor interest in high street casual dining brands. The Casual Dining Group has been acquired in a pre-pack administration deal by a private equity firm saving Las Iguanas, Bella Italia and Café Rouge from extinction. Ask and Zizzi have also been snapped up by an investment management firm, although the deal will see the closure of a total of 75 sites between the two brands. With other familiar names including Leon and Wahaca having appointed advisors, it looks likely that there are more deals to be done, but to muddy the casual dining waters even further, not everyone believes that’s a good thing.
In an interview with the Financial Times, casual dining entrepreneur Hugh Osmond claimed that high street casual dining chains have ‘no future’, that their business model was ‘absolutely broken’ and that investors don’t ‘understand the business they are acquiring’.
So, what will high street dining look like in the future? According to Osmond, it’s upmarket chains like The Ivy Collection and, no doubt, his own Coppa Club group that deliver a more sophisticated experience than your average Café Rouge for not that much more money. With fewer than 40 Ivys in the UK and Ireland and just seven Coppa Clubs there is plenty of scope for expansion and its possible that they could be in a strong position to snap up sites from retracting brands.
Another contender are the increasingly popular food hall and street food market concepts springing up around the country including London’s Market Halls group and the recently opened Shelter Hall in Brighton (albeit located on the city’s seafront rather than on the high street). At their best, they are a breath of fresh air, allowing new operators to showcase their talent, offering the latest food trends at affordable prices and providing a platform from which to launch new restaurant concepts.
However, not everything in the food hall garden is rosy. Jonathan Downey, the man behind Street Feast in London, recently tweeted that his Dinerama location in Shoreditch was averaging just 28 per cent of sales compared to the same period last year. He has also announced that, unless a deal is struck with his landlord, the site may close for good in September.
Less likely to benefit from a contraction in the casual dining sector are local independent restaurants who, unless they specialise in pizza, pasta or burgers are more likely to be serving an entirely different customer base. It’s unlikely for example that former regulars at a closed Giraffe site would transfer their custom to a £40-a-head independently owned bistro, or that the operator of that bistro would be in a position to take over the former Giraffe site.
The truth is that food halls, upmarket concepts and local restaurants do not serve the same family-oriented market in the same way as the more familiar high street names. It is true that some are in need of a re-fresh and that the quality of the food and service could be improved, but what they can still deliver is the sort of familiarity, convenience and affordability that many diners crave.
Like them or loath them, casual dining chains have become part of the fabric of the high street. According to Osmond, it’s up to landlords to set rent at a rate where it's possible for operators to make a reasonable return, something he says has been ignored for more than a decade. Let’s hope the landlords are listening; if casual restaurants do disappear, they will leave behind a void that will be very difficult to fill.