Special report: Why are restaurants struggling in Norfolk?
PUBLISHED: 10:17 12 February 2018 | UPDATED: 12:49 12 February 2018
The early months of the year are traditionally lean times for the restaurant industry, but a swathe of closures since Christmas – including the E Street Smokehouse, the Reindeer and Woolf & Bird – has prompted concern about the pressures on the sector.
A melting pot of rising costs, staff shortages and culinary competition has become a recipe for tension in Norfolk’s restaurant trade.
In recent weeks the casualties have included The Reindeer on Dereham Road, the E Street Smokehouse on Exchange Street, and fried chicken restaurant Woolf & Bird, while city centre eatery The Library was relaunched in September after going into liquidation.
And it is not just independent hospitality businesses finding times tough: chains including the Jamie Oliver Restaurant Group and burger group Byron have struck deals with creditors to close sites and reduce the debts they will pay.
But why are so many in the hospitality industry struggling – and what are the factors that have turned up the heat?
Richard Hughes, chef and director of the Assembly House, runs a consultancy which advises food and drink businesses. In recent years it has averaged two or three enquiries a year – in 2018 it has had seven enquiries in the first month.
He believes restaurants’ increasing struggles can be traced back to rising food prices, the growth in home delivery services, the battle for staff and a marketplace that has never been more crowded.
“The competition in Norwich and Norfolk is higher than it has ever been,” said Mr Hughes.
“Norwich has transformed itself in the last five or six years, which is fantastic.
“The chains have come in, which I personally don’t think is a bad thing because the quality has to rise to compete, but if you are a small business it is very difficult.”
With margins in the industry tight, a chain with deeper pockets can write off a bad month in a way that independent businesses may not be able to, said Mr Hughes.
“When I sold my restaurant, the Lavender House [in Brundall] I’d had it for 14 years. But if I had a couple of bad weeks, I was up against it and losing sleep,” he said.
The rise in home delivery apps such as Deliveroo and JustEat has also had a mixed impact. While many restaurants benefit from the exposure and new business, others miss out on customers no longer ordering in person or buying drinks which can add to the bottom line.
Costs of all kinds are increasing within the industry – business rates rose for many locations last year, while food costs are on the up – nearly 4pc year-on-year in October 2017, according to the Office for National Statistics (ONS). And with the industry chronically short of skilled staff, chefs are almost able to name their price.
“Norwich doesn’t traditionally attract people in from other areas,” Mr Hughes said. “If you get the right people you have to keep them. You have to give people a raft of other benefits now: that could be a clear career progression or, as we do, sending them out on work placements and giving them extra skills.”
Exacerbating the staffing difficulties has been a reduction in the number of European workers coming to the UK. With a weaker pound making wages less attractive and a perception of being unwelcome, the number of EU nationals immigrating to the UK has fell by 54,000 (to 230,000) in the year to June 2017. That has an impact on all sectors, but with around 43% of its workers hailing from abroad, the hospitality industry is being hit especially hard.
Food prices rose at the highest rate for more than a decade in October 2017 with vegetables rising 5.7pc, coffee, tea and cocoa up 8.5pc and meat up 3.5pc, according to the ONS.
One of the side-effects of the booming interest in the food industry in the past decade has been the number of food-lovers setting up on their own, perhaps without understanding the business knowledge required – which is why Mr Hughes says a head for figures is as important as a good palate for a successful restaurateur.
Part of the recent spate of closures is likely to be seasonal, he says, with restaurants pinning survival on the key festive season before deciding if they can continue for another year.
Mr Hughes said: “We had a very good Christmas, the best we have ever had. But we will do 25pc of the trade in January that we did in December.
“You know it is coming, but [the drop-off] is still a shock. For some people there is nothing they can do to deal with it.”
Changing pub culture
Cut-price alcohol from supermarkets has long been blamed for the demise of the pub – but restaurants are now being hit too by customers choosing a night in over a night out.
Services such as Deliveroo and JustEast allow them to sell more food, but also mean customers are not on-site to buy alcohol, which can often yield a higher margin.
Business restructuring expert Jamie Playford, of Leading Corporate Recovery, said restaurants, pubs and cafes had made up the largest proportion of the insolvency cases he handled in 2017.
He said 19 clients had worked in the sector, with most of those based in the Norfolk area.
“The businesses I have spoken to feel that they are competing with national chains which can get their supplies for much less,” he said. “It has been an industry on the edge for some time now and there seems to have been a change in drinking culture with fewer people drinking out.”
The cost of food is on the up, with the price of dairy products seeing a particularly steep increase.
A developing taste for cakes and baking in Asia, particularly among China’s growing middle classes, has driven the rise – though the popularity of TV shows such as the Great British Bake Off in this country have also whetted appetites, said Mr Hughes.
“Bake Off has had an impact as suddenly now everyone is baking at home which has sent demand for dairy through the roof,” he said.
“We used to import a lot of it but now there is a lot going to China and Japan because those countries have discovered baking and cakes.”
The joy of entertaining and cooking is one of the major reasons people enter the catering trade, Mr Hughes said, but that does not always mean they are prepared
for the difficulties – with about 50pc of the people taking his cookery courses deciding the industry is “not for them”.
Rates and rents
The Norfolk branch of the Campaign for Real Ale (Camra) believes around 25 pubs have permanently closed their doors since January 2017.
Business rates and VAT, as well as rising rents, are issues the group feel are behind the increase.
Ian Stamp, chairman of Norfolk and Norwich Camra, said: “I would say the main challenges facing pubs are changes in society, duty and rates, and the [brewery] tie.
“People have far more choice as to what to do with their leisure time nowadays, with sports activities, restaurants, home entertainment and social media all being alternatives to the pub.
“And because of the combined effect of beer duty – one of the highest in Europe, at 50p+ per pint – and business rates, levied in a very unfair way on pubs, pub visits are a relatively expensive option.
“This is exacerbated for ‘tied’ pubs, who have to buy their beer at much higher prices than non-tied pubs.”
Challenges for the independents
The challenge of competing with major international chains in a tough trading environment has been blamed for the demise of three independent eateries in Norwich in January.
After the demise of fried chicken restaurant Woolf and Bird, which opened on Exchange Street in March 2017, owner Francis Woolf said: “We found ourselves competing with chain restaurants, whose corporate structure and funding mean they can weather the tough times, while some independent outlets suffer and die.”
Just a week later, Kate and Dan Searle announced that the Reindeer Pub and Kitchen, on Dereham Road, would close because the business had become “unworkable”.
And January also saw the closure of the E Street Smokehouse on Exchange Street after just seven months of trading. A spokesman said: “Like others before us, we have attempted to bring locally-owned and independent eateries into the city centre – and like others before us, we have found the tough economic climate, and the relentless march of corporate chain restaurants with deeper pockets than we can ever hope for, impossible to compete with.”
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