Huge Chains Cutting Prices Highlights the Restaurant Gulf Opened by COVID-19

VAT reduction means different things to different restaurants

As restaurant chain behemoths like Nando’s, Pret a Manger, McDonald’s, and Starbucks pass on the government’s VAT cut to customers by reducing food prices, the gulf between huge groups and small independents is growing.

The cut in VAT, from 20 percent to 5 percent, until 12 January, is designed to support businesses by reducing their outgoing costs. While fast food chains are able to pass this cut on to their customers because they have sufficient cashflow, or working capital, to absorb the costs, smaller businesses tend not to have this working capital. So, as Nando’s knocks money off its peri-peri chicken, and Pret a Manger eat-in customers can savour a cheaper sandwich, as reported in the Guardian, independents often, simply, do not have the option.

The money is the obvious effect; the more pernicious one is the perception of value that cutting prices brings. Chains are able to present something immediate to customers: a price cut, which should last several months. It’s much harder for an independent restaurant to present not cutting prices in the short-term as a means of actually existing in the long-term. [Guardian]

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• Good tweet: