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Restaurants: serving up a menu for growth

Restaurant owners expect their sector to grow over the next 12 months, according to a survey by TLT and The Caterer magazine. 

An overwhelming majority (78%) forecast an increase in the number of UK restaurants, with a fifth predicting the increase would mean a 'significant' number of new sites. 

Towns and prime city centre locations are likely to benefit most from the expected growth in new restaurants, with owners citing these as the most favoured locations for new ventures. The picture for city shopping centres is gloomier, with only 11% citing them as target locations for new sites. Out of town shopping centres were even less popular (3%).   

Restaurateurs cited finding a suitable site and the cost of new sites as two of the three biggest challenges to expansion alongside finding suitable staff. 

Julian Mant, real estate partner at law firm TLT said, "Our mid year snapshot of restaurateurs' views shows a growing sector in a confident mood. This is good news given the sector's status as a bellwether for the health of the wider economy. 

"However, there are some hurdles to jump for those looking to open new restaurants. Securing the site is, as ever, near the top of the list. Increasing competition for space in popular locations is pushing up rents, both for new lettings and those in situ whose rent is being reviewed. In addition, for the first time in some years, landlords are securing significant  tenant premiums in prime locations on the grant of new leases". 

Unsurprisingly, London (43%) and the South East (28%) were the regions that restaurant owners felt offered the greatest potential for growth. The South West was the third most popular region (18%). 

Most restaurant owners expected to fund any expansion with bank loans (52.73%). But, a significant proportion will look to venture capital or private equity sources (32.73%).

Andrew Webber, corporate partner at TLT said, "Venture Capital and Private Equity investors remain active in this sector, looking to back new brands with the potential for fast-growth and with proven management teams to lead a roll-out. Tax incentives and access to increased board support mean that angel investors are often available to help early-stage ventures develop scale and brand."

Having a social media presence, positive feedback on online review sites and price promotion emails were cited as the three most effective ways to get diners through the door. 

About the survey: the survey findings are based on responses from 110 UK restaurant owners covering multi-site and single site operations and ranging from fine dining to fast food. The survey was carried during August 2015 by The Caterer magazine.

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