Restaurant Survival

Restaurants Are on the Ropes Because Supply Has Outstripped Demand - The Guardian

Excerpt from The Guardian

Business agony uncle, Sir John Timpson, on why struggling chains must go back to basics, and what makes a great salesperson.

Q With Jamie's Italian, Prezzo, Byron, Carluccio's and more announcing closures this year, the restaurant business seems to be on the ropes. Why do you think these chains are suffering and what would you do to turn things around?A It doesn't seem long ago that you had to queue to get into the latest Italian eatery. These busy restaurants seemed assured of long-term success, but nothing is forever in business and most major strategic mistakes are made when things are going well.

Successful chains expanded rapidly, so others entered the market hoping to benefit from the latest trend. But their enthusiasm created too many restaurants at a time when lots of pubs realised that they had to attract more diners to survive.

Even in the 21st century, the law of supply and demand continues to apply. There's a limit to how many times customers will dine out, and the supply of eating options has outstripped the nation's appetite.

Restaurants start each day with significant fixed costs – not just the rent and rates, but the cost of employing colleagues in the kitchen and front of house. If the tables are filled twice every night, a restaurant can make big money, but on quiet days, it makes a loss. Over the past 12 months, matters have been made worse by costs going up faster than inflation.

Most growing businesses take on too many overheads and some lose sight of the vision that created their initial success

I saw plenty of the industry's problems when we opened two Anglesey pubs, The White Eagle and The Oyster Catcher – in particular, the difficulty of attracting talented chefs to work unsocial hours. As a result, I'm reluctant to offer any advice to those who have created restaurant chains with a past record of success.

What I will say is that most growing businesses take on too many overheads and some lose sight of the vision that created their initial success. So faced with their current problems, I would expect these chains to carry out a cost-cutting exercise and relaunch the core values that formed the basis of their very first restaurant.

As far as I can see, that's exactly what some are doing.

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