A new survey of sector leaders has shown signs of confidence returning to the market but concerns remain about the key cost of people, property and food.
CGA Peach’s Business Leaders’ echoes the messages of MCA’s Top of Mind poll that optimism in trading conditions has fallen sharply since Brexit. Last February 83% of operators were confident about their own business and 74% in the market in general. Now the figures stand at 68% and 47% respectively. However, both have edged up from the level of 24% and 15% seen directly after June’s EU referendum.
The picture painted by the CGA survey matches the Top of Mind report, which saw the proportion of operators who see the landscape as challenging rising from 20% to 47% year-on-year.
Both CGA Peach’s Business Leaders’ Survey and MCA’s data shows reasons to be cheerful, with agile operators predicted to thrive and new opportunities being sought.
In particular, the CGA Peach survey shows 29% of operators have grown their business internationally over the past year with three quarters of those expecting more overseas expansion this year.
It shows 21% of operators planning to open at least ten new sites in 2017, rising to 60% of those with more than 200sites.
Just under a third (29%) are looking at a business acquisition in the next 12 months, with 27% possibly interested in an opportunity if it becomes available.
The poll shows that 48% expect to see fewer new entrants to the market this year – against 23% who predict more. Of those polled, 79% think there will be more business failures this year.
While Brexit fears have eased a little, alarm about mounting costs is clear—and it is most evident in business rates. This tops the survey’s list of the most significant financial challenges facing operators in 2017, with 55% very concerned by the issue and another 24% concerned.
The other key areas are food – with 41% very concerned and 39% concerned by rising costs here, led by lower availability and rises in the cost of items including vegetable. More than half of leaders are now either very concerned (31%) or concerned (23%) by property costs. Meanwhile, the introduction of the National Living Wage has raised many operators’ wage bills, and three in five are very concerned (24%) or concerned (35%) about it at the start of 2017.
Other challenges identified by leaders include drinks supplier prices and the threat of saturation triggered by the over-supply of sites. On the operational side, businesses’ biggest challenges are around engaging and motivating staff, providing a high quality customer experience and building loyalty.
The survey shows 57% of businesses that are predominantly based within the M25 are optimistic about the market, much higher than the figure among businesses with a national spread (42%).
Smaller and more nimble businesses in eating and drinking out meanwhile tend to be more confident than their larger counterparts. A quarter of businesses established for less than five years are very optimistic about their prospects for 2017—way more than among mature businesses that have been running for more than ten years (7%).
Two in five leaders think customers’ spend per visit will increase slightly in 2017, with another third anticipating no change.
CGA Peach vice president Peter Martin says: “Our fascinating Business Leaders’ Survey reveals a sector facing a barrage of input costs in property, food and people, with rates the issue at the top of execs’ in-trays. But this is a positive industry that is very much on the front foot rather than in retreat, and that deserves government support to ease its burden of expenses. Operators will have to ride out some big challenges in 2017, but strong, differentiated operators that can deliver a compelling offer while keeping a tight rein on their costs are well placed to thrive, both this year and well beyond.”
