The ‘Unmanageable’ Costs Crippling Central London Restaurants

Central London’s embattled restaurateurs are close to reaching crisis point, with a shocking majority revealing that their costs will soon become so “unmanageable” that they could be forced out of the city.

Some 600 owners were surveyed by London property specialists Cedar Dean Group for its annual Restaurant Rents Report — 90% expressed the fear that running costs would soon cripple their businesses, and 84% said they worried that financial insecurity meant they would have to choose between closing down altogether or leaving the centre.

Rents have risen stratospherically in recent years, with those surveyed spending an average of 21% of turnover on it — 12% is generally considered to be the maximum affordable percentage for a restaurant. Leisure operators’ rent bills in central London are continuing to rise well in excess of inflation, with some in W1, WC2 and E1 more than doubling in the past year.

“It is plain and simple: the numbers just don’t add up,” says David Abramson, CEO of Cedar Dean Group. “Without intervention, the restaurants will be forced to close their doors and by the time landlords wake up it will be too late.”

“One thing the last few months has shown is that high rent and rates are not just affecting businesses that need to improve but also operators that invest substantial sums in the capital city.”

The first five months of 2018 have already seen a slew of high-profile closures being announced, with casualties including Typing Room in Bethnal Green (set to shut in June), taqueria Bad Sports, and 16 branches of Byron, among others. Jamie Oliver, whose restaurant group has shut 12 of its 37 Jamie’s Italian branches since the start of the year, as well as one of two Barbecoa sites, has just fallen off the Sunday Times Rich List for the first time in eight years.

Under the terms of the Landlord & Tenant Act 1954, tenants are entitled to a renewable lease on the same terms as their original one. However, more than a quarter of operators surveyed said that their leases aren’t actually covered by the Act. Bob Bob Ricard’s owner Leonid Shutov has blasted what he sees as the lack of transparency in the system, with landlords not playing fair:

Leases within the act shouldn’t be optional or at the discretion of the landlord. The average leaseholder today has no protection whatsoever; they can’t rely on the Act. If landlords are unwilling to offer a lease within the Act, they have no choice. Restaurants are small organisations; many of them are one-off independents. It is much more difficult for them to have the inside knowledge to find this information and not having a transparent system sets them up for failure.

Back in January Bob Bob Ricard announced that it would be operating a “three-tier” pricing system, with meals during traditionally slow times such as Monday lunchtime and Sunday evening discounted by as much as 25% — an example of restaurants having to operate ever-more creatively in order to stay afloat.

Cedar Dean Group predicts that the market’s current trajectory could lead to an increase in “remote central kitchens” like Deliveroo’s Editions sites and reverse premiums, as landlords struggle to fill vacant spaces.