'People are opening too many restaurants'

When asked to draw a key conclusion from his guide’s latest annual report, Peter Harden is pithy in his summary: “People are opening too many restaurants.”

While the number of net openings has gone back to a “more sustainable level”, Harden points out this is happening because the number of closures is rising, while demand is flat.

“In that context, one would expect for every new restaurant that opens, another has to close – but that’s not really the mind-set that people have been adopting,” Harden says.

The publisher, whose guide concentrates on independent concepts with less than four sites, takes an agnostic view on the merits of independents verses branded restaurants.

But he is pragmatic in pointing that rafts of new openings, in developments such as the new Coal Drops Yard, while providing great choice for consumers, inevitably shift what limited demand there is in the market.

“If demand’s not rising, what’s going to close to supplement that? I’m sure Coal Drops Yard is attractive enough to become a destination, but it will suck the life out of something else.

“Bloomberg Arcade, Westfield, St James Market - new capacity is coming in, but there are only so many restaurants the market can bear.

“They are very carefully curated, the quality is very good, and there’s a lot of choice for the consumer- but it does mean the market is ever more competitive for everybody.”

“What’s important is quality – it doesn’t matter if you’re branded or unbranded”, he adds.

“One feature has been the small chains which almost feel like indies, but have enough backing to have serious money behind them. They have a track record so someone trusts them with a lease and has put money behind them, but they’ve still got that indie feel.”

On bigger brands, Harden believes the same quality criteria applies, as well as a clear sense of what the brand’s offer is, and a warm sense of hospitality.

“There’s still a place for branded restaurants, but it’s more and more important they have a good solid offering. If you look at Nando’s, it does very well in our survey – people know what what they’re going to get, expectations are set realistically.

“Whereas with Pizza Express, people no longer get what they expect. It used to be a solid offering, but it feels like its run ever more for profit and increasingly feels like its run by bean-counters.”

The Ivy did not fare well in the guide, in part because of survey respondents’ expectations from the original, he said.

“When The Ivy was at height of fame, it was always seen as being great for comfort food, not gastronomic fireworks. But there’s a danger there - it needs a spark or it gets ordinary very quickly.”

With closures at a record high, Harden expects more to shut their doors over the next 12 months.

“Our stats show the level of openings has slowed somewhat in the London market. If we’ve read the numbers right, we would expect to see fewer closures, because there wouldn’t be the same amount of supply being chucked in.

“Equally, everyone in private equity is much more realistic about what is and isn’t possible. There will be a much more cautious climate. I would predict the action would be outside of London in places like Manchester and high growth cities.”

Taking a wider view, how does Harden assess the febrile operating climate of recent years.

“Between 2010-2016 there was an element of a gold rush. It was partly driven by a demographic shift, and lots of other factors coming together - private equity had only just discovered restaurants; lots of property developments; wider shifts like boosts to immigration; millennials spending more on eating out; media buzz around restaurants.

“These factors that created those gold rush conditions haven’t stopped, but they’re not growing anymore.

“A period of readjustment is going on, where people reset their expectations about what’s possible.”