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Tough times for dining sector

Scottish restaurant closures hit record levels

Mark Greenaway

Mark Greenaway is closing his flagship restaurant in Edinburgh to pursue a new venture in the capital


 

The number of restaurants in Scotland which have closed over the last decade has almost quadrupled, according to new analysis.

Analysis of official Insolvency Service statistics found that annual restaurant closures have risen from 19 in 2007 to 73 in 2017. Of greater concern is that the figure for the first six months of this year is already 76, three more than the whole of last year.

Over the last three years 234 Scottish restaurants have closed.

Eileen Blackburn, head of restructuring and debt advisory at French Duncan which carried out the analysis, said: “These figures highlight the difficulties that the restaurant sector in general, and specifically in Scotland, is experiencing.

“The high street is in trouble and the dining sector is encountering unprecedented issues.

“Of more concern is that these figures are likely to be the tip of the iceberg as far as restaurant closures are concerned. Far more restaurants close without entering into a formal insolvency process so the numbers struggling on a day-to-day basis must be huge. The numbers closing voluntarily at a financial loss must be enormous and show just how competitive this market is.

“Opening a restaurant has always been difficult but there are greater complications with high rents, high rates, increased staff costs, and, for those importing ingredients, higher supply costs.”

Those that have closed include: Nick Nairn’s pizza outlet in Aberdeen, Valvona & Crolla in Edinburgh’s Multrees Walk, No 8 Lister Square in Quartermile, Edinburgh, Ashton’s Bar and Kitchen in Glasgow and Macks cocktail bar and grill in Nairn.

Also in Edinburgh, restaurateur Mark Greenaway is closing his flagship outlet after five years in the capital, although he plans to open another venture in the city centre early next year.

The restaurant sector across the UK has been experiencing a very difficult time with many high-profile restaurant chains announcing partial or substantial closures this year including Gaucho, burger group Byron, Jamie’s Italian restaurants, the Strada Italian restaurant chain, Carluccio’s, and Prezzo.

Other companies, such as the Casual Dining Group, which owns Bella Italia and Café Rouge, saw their losses increase to £60.5 million despite increased revenues of £329m.

“There is an issue with over-capacity in the sector, and with rising costs resulting in many restaurants simply being unable to continue to operate,” said Ms Blackburn. “Some Scottish operators may also be operating on a model that is now outmoded.




“To compensate many restaurants have become slaves to the discount voucher market which can be a useful tool in the short term but can lead to a permanent lowering in revenue as savvy consumers shop around for the next deal rather than build long-term consumer loyalty.

“The growth of delivery services has opened an enormous new market from food outlets that never delivered before giving consumers the option of saving some money by eating takeaways at home. Equally the pub food market continues to grow both in the form of successful chains and individual outlets allowing for an evening out at less cost than most restaurants can manage.

“It is an unforgiving business where a brief downturn can result in closure as operating costs are so high.

“Restaurant owners need to be acutely aware of the issues involved in running a financially tight ship in this sector. It is all too easy to let costs over-run, over-staff your business, and not account for inevitable downturns in the market in the short and long term.

“Cash flow is king for this sector and understanding where your business is at any one time is essential to survival. Realising there is an issue is the first step in responding to it.”



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