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4 big predictions for the restaurant sector in 2023

Restaurants

Specialist business property adviser Christie & Co has revealed its four biggest predictions for the restaurant sector in 2023 following the “upheaval” wreaked on it by the Covid pandemic.

The company said the UK restaurant sector had been “fundamentally re-shaped” from both a consumer behaviour and operational point of view due to the turbulence of the last two years.

In its latest market report, entitled ‘Business Outlook 2023: Finding Clarity’, it noted that customers and operators are now placing a significant emphasis on convenience, consistency and value.

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This enabled certain markets, such as delivery, quick service restaurants (QSR) franchising and drive-through, to forge ahead and see growth in 2022 despite the challenging trading conditions.

According to Christie & Co data, there is still an appetite for well-priced sites and while it observed some individual asset sales throughout 2022, the transactional market was largely subdued due to declining consumer sentiment.

Despite the headwinds, freehold restaurant sales held up well, showing a 30% increase in transactional volumes, with prices achieved within 10% of the final asking price.

This resulted in a marginal drop (0.4%) in its restaurant price index for 2022 although it remains challenging to achieve historical premium values.

Several key market trends were revealed in the report, such as half of our buyers live within 20 miles of the business that they buy and 85% of transactions are cash funded as lenders read the headlines and get nervous.

This has caused the offer levels to drop and meant that the number of leasehold restaurant transactions with a premium in 2022 was at an all-time low.

Surprisingly, distressed transactions remained at a low level due to the fact that, with no value to be gained, many keys went direct to landlords.

Looking to the year ahead, Christie & Co outlined its four top market predictions:

1. Increased roll out of new, more cost-effective models and brands

2. More CVAs as tired and over leveraged businesses feel the heat

3. Good property deals as landlords offer concessions and rent deals

4. Continuing popularity of QSR, franchising and drive-through

Simon Chaplin, senior director of pubs, restaurants and franchise at Christie & Co, said: “In a sector which has historically been dominated by leasehold asset sales, it is good to see freehold restaurants make up a large part of the current market.

“This is driven in part by the work-from-home revolution, whereby customers are now more regularly able to frequent neighbourhood venues in their market town or village, which are more likely to be an owner operated freehold business.

“Where consumers are looking for consistency and value, the franchised brands are taking advantage and this is an area of the transactional market we see developing further in 2023.”

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Tags : analysisChristie & CoReportsrestaurants
Andrew Seymour

The author Andrew Seymour

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