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Date
7 June 2017

Managing the margin - the challenge for all catering operators

The recent sudden surge in food & beverage prices is having an impact on everyone, however recent figures show that restaurants, pubs and hotels are among the worst hit by inflation and the uncertainty arising from Brexit.

According to research conducted by accounting firm Moore Stephens, ‘a total of 5,570 restaurant companies have at least a 30% chance of going insolvent within the next three years’.

As the UK relies on imports for 48% of its food, the falling value of the pound is considered the main cause for pressure on foodservice operators, due to the rise in import costs after Brexit. Now food service operators face paying 2% more for supplies*, and for certain products, such as prawns, even up to 15% more. This is as a result of pressure on supply and also ramifications of extreme weather conditions, such as the floods and cold weather in Spain and Italy which caused a huge shortage of fruit and vegetables.

As if this was not enough for foodservice operators to navigate, these challenges come at a time when disposable incomes are inert and consumers are extremely price conscious, business rates are higher, labour costs are increasing due to the rise in the national minimum wage, and competition is fierce as new restaurants offering different and exciting dishes are introduced on a frequent basis. With all these factors to consider, it is no wonder that many foodservice operators are being hit head on by the rising food prices.

It is not only small and medium businesses taking a hit in these turbulent times. The 33 restaurant closures announced by The Restaurant Group last year were due to a ‘challenging trading period’. Sales slumped, which the firm explained was due to "substantial price and proposition changes". As summarised by Mike Finch, restructuring partner at Moore Stephens; “It’s been a tough year for many restaurants in the face of rising costs and fierce competition.”

“Restaurants have to make tough decisions as to how much they try to pass on to consumers; too much and they risk losing business, too little and they lose margin.”

“The high number of potential insolvencies over the next year shows just how fragile finances can be in this sector and demonstrates the importance of careful financial management.”

Fluctuating food costs and the need to reduce wastage means that Food and Beverage Controllers need to ensure that every aspect of the purchasing cycle and the costing process is designed to maintain profitability.

At arena4finance our experienced team can help with consultancy and also training. Our course ‘Cost Control for F&B Operations’ has the purpose of assisting businesses in the effective management and control of food costs. Designed for all types of catering operations, this one day course provides the opportunity to review your purchasing cycle in depth, as well as ensuring selling prices are correct and gross profit margins maximised.

To find out more information about the course and how we can help your business carefully navigate the many issues currently impacting the food supply chain, please contact us at hello@arena4finance.co.uk.

*According to figures from Prestige Purchasing, read more at:

http://www.bighospitality.co.uk/Trends-Reports/Res...