Restaurants, Fast Food & Eating Sector UK
The food sector in the UK is the largest employer by industry sector, if you add in connected suppliers and linked services then the size of the UK sector increases significantly.
This page is about providing resources from independent sources to enable businesses operating in the food sector to more easily access borrowing and growth finance. Lime Consultancy work with specialist food sector lenders and have access to funding schemes not available directly. However, we also believe that providing resources directly that operators in this sector can better put together funding proposals.
The information given here is taken from publicly available resources. Please use this information sensibly and take it for what it is. Hope it helps, if it generates any questions then please get in touch.
Changing Attitudes To Eating
One of the biggest questions lenders have is about the changing attitude of customers to eating. This refers to takeaway, fast food and restaurants. We often see this as one of the main objections to lending to this sector. The following research is provided by Government National Archive research, so it is a respectable source to quote. Some of the highlight details are;
- Food has become more affordable and our food culture is becoming more aspirational
- Consumers are increasingly wanting food to be healthier, more convenient and more ethical as well as to taste good
- There is a gap between what people do and what they say. The intention-action gap is manifest in the positive
attitudes to healthy eating and the environment not being matched by spending patterns
- The gap is also evident in the rituals around food. People aspire to culturally desirable activities such as cooking a meal from basic ingredients and controlling children’s eating habits, but good intentions are not always put into practice
- A resurgence of interest in cooking at home is shown in the TV schedules, cookbook sales and consumer
surveys. At the same time food, is a key part of our leisure time and we are eating out more often, and
claiming to want to and be able to cook from scratch. It is no longer unfashionable to cook or want to learn how
to cook. But this trend can be at odds with desires for convenience, or intentions to make ethical or healthy
choices or indeed an ability to cook
The key points here are that whilst there is a public conception of health and cooking being important, it is not actually being seen through actions. Convenience, choice and ease appear to remain the priority for most consumers. It is well worth quoting this as a mitigating factor when your lender raises the issue. Our experience shows that most lenders will raise this as a negative industry issue.
Size of UK Food Sector
This is very regional and quoting national statistics is largely irrelevant. We see a lot of businesses in the food sector quote national growth and industry size statistics. To a lender this is largely irrelevant. A lender will look at location and local market.
If you are going to quote market size and talk positively about the opportunity then by all means quote national statistics but take this a step further and use local demographics and local market size. This information is available from various sources, one of the most respectable is the ONS. Follow this link and search for what is appropriate to you.
Cash Not Profits
The biggest change in lender appraisal of the food sector has been a move from measuring affordability against profits to measuring affordability against cash generation. This is an important move that is in favour of this sector, however it means that company operators need to have a slightly better understanding of their accounts & forecasts. Lenders will quote different acronyms, if you want to know what they mean then follow this link for our glossary.
There has been a misconception for years that profits mean that loan repayments are affordable, it is wrong. Cash is what will make the loan repayments affordable. For most businesses in the food sector cashflow is a positive thing, sales are made in cash (read paid for at point of sale) and most suppliers are paid at least weekly in arrears. What this means is that cash generation will always be greater than profitability.
Lenders are now starting to realise that cash generation in the food sector is a real positive, this has driven a greater willingness to lend. Food sector operators need to understand their cash generation to at least an equal level. Follow this link for an article on this subject.
Change In Market Size
The table below gives an indication to how the UK food sector is changing. The figures here relate to 2010 versus 2011. Bear in mind that at this time the UK economy was still in recovery then the growth in turnover of these companies is, in real terms, even further above GDP.
|Rank||Chain||2011 UK Turnover(£MM)||% Turnover Change||% Unit Change|
|8||Domino’s Pizza Nando’s||496||9.5||8.9|
There is additional research from ‘Companies & Markets.com’ which supports sales growth of the restaurant and takeaway sector, the following comment is taken verbatim from their site. Follow this link for the full article;
“Figures from 2012 suggest that, rather than cutting back on eating out, consumers have reduced spend in other areas in order to make sure they can still regularly dine at restaurants and pubs. According to Allegra’s Eating out in the UK report, published in August, consumer confidence remains fragile with 45 per cent of people stating they do not feel confident about their future income levels. But despite this, one in three say they make sure they have enough money every month to eat out”
All the resources below and third party publications, they are available publicly but please use them with respect. There is content here that can be used to support borrowing applications, business plans and to appeal against declined loan applications.
Remember that lenders work from headline statistics, using these resources should enable you to differentiate your business from the norm and provide enough credible research to support your business plan and forecasts.