Rising costs, intense competition and a squeeze on disposable income is a toxic combination for restaurants chains, but we believe an acceleration of restaurant closures is good for the sector’s health in the future, helping to resolve previous oversupply issues.

Thirty five of the UK’s top 100 restaurant groups are now loss making, up from 20 last year, according to accountant UHY Hacker Young.

Byron, Jamie’s Italian and Prezzo are just some of the well-known chains closing restaurants.

UK-listed restaurateurs are also experiencing problems, although much of the bad news has already been factored into their share prices. They include Frankie & Benny’s owner Restaurant Group (RTN) and Franco Manco owner Fulham Shore (FUL:AIM).

Fulham Shore warned in September that earnings before interest, tax, depreciation and amortisation (EBITDA) in 2018 will be less than expected and it has delayed planned openings by up to six months.

Restaurant Group has been cutting prices and re-engineering its menu after losing custom to more trendy rivals.

Overall the industry has been too aggressive with expansion plans and further site closures will be required to help return the sector to better health. The journey has already begun but we’re not there yet. (LMJ)

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