It's a worrying time for the UK's 'casual dining' sector with high street chains falling left, right and centre. Following the monumental topple of Jamie's Italian earlier in the year (the restaurant had debts in the region on £71.5m) it looks like another high street Italian might be following suit.
Latest reports indicate that Pizza Express, one of the UK's biggest restaurant chains and which has been trading for 54 years looks set to go the same way as Jamie Oliver's high street Italian eats venture and other big names such as Strada, Prezzo, Carluccio’s and Gourmet Burger. Pizza Express' creditors – who are owed £650 million - have reportedly brought in advisers for crisis talks as they fear they will not get their money back; The restaurant chain also owes a staggering £1.12bn to various lenders and if it goes, will take 14,000 jobs with it.
Unfortunately, this financial distress for the sector is now commonplace. Figures from July 2019 forecast a PMI of 50.2. Riddled with too much debt, rising staff costs due to minimum wage increases, as well as a weakened pound – which makes supplier and operating costs more expensive – has contributed to the downturn in finances in the industry. Other contributing factors to the downturn are that consumers are increasingly using online delivery services such as Just Eat and Deliveroo, expensive business rates and a general trend towards less traditional tastes (Italian, Chinese) to Middle Eastern or specialist fare, such as vegan).
The report from Credit Benchmark states that oversupply/under demand has also been an issue due to 4,000 new restaurant openings across the UK in the past four years – with many of these in areas of low footfall. A report from accounting firm Moore Stephens reported insolvency figures of 1,219 in 2018, up significantly from 2017’s total of 985.
Pizza Express needs to move quickly if it is to steady itself in a vulnerable market, with its priority focused on restructuring the debt (which has left the business facing such a huge annual interest bill that it needs to hand over 17.5% of every pizza sold).
Whether creditors get their money back remains to be seen but with many of Pizza Express' supply chain being smaller UK businesses, the outlook looks bleak for the UK economy. The domino effect of Pizza Express folding could be catastrophic for smaller businesses.
In the current climate it is more vital than ever that SMEs and suppliers to vulnerable sectors understand the importance of keeping on top of cash flow. If your business is experiencing late payment from your customers you need to act quickly and recover that debt. The longer you leave it, the harder it is to recover.
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