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January 30, 2018

Staying in is the new going out

Five years ago, the casual dining sector was booming. Private equity houses were investing large amounts of money into new chains of restaurants which quickly expanded their outlets, for example Byron, the burger chain, was bought for £100m.

Today, the sector is, to say the least, struggling. Byron is going through a restructuring, Jamie’s Italian has entered into a company voluntary arrangement and Strada is implementing a large closure programme.

What has happened to bring about this sudden reversal of fortunes? The usual reasons put forward are over-expansion, higher labour costs, higher business rates, increased food costs resulting from a weaker pound, introduction of the apprenticeship levy, inflation, sluggish wage growth, squeeze on disposable incomes and, of course, a general decline in consumer confidence brought about by the uncertainties over Brexit.

Whilst all of these are perfectly valid reasons, perhaps there is a more fundamental and long-lasting reason which should start alarm bells ringing for the casual dining sector – a seismic change in consumer habits!

Surely, it cannot be a pure co-incidence that Netflix, a leading subscription channel for TV programmes and movies, has recently been valued at over $100bn at the same time as the casual dining sector is getting into trouble. People now are able to stay in and catch up on their Christmas-gifted box sets and TV series they missed when originally shown. They can get a takeaway – the number of takeaway restaurants has soared over the last few years – or they can order high quality takeaways from top restaurants and have them delivered to their couch. On-line food order and delivery companies such as Just Eat and Deliveroo are enjoying great success.

So perhaps casual dining restaurants should take a leaf out of their fast dining competitors and make sure that they achieve a balance between in-house dining and takeaways. Some restaurants like Wagamama’s already do this. Or perhaps they should have a mix of restaurants and purely takeaway outlets?

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