The number of restaurants in England has increased by 13% since the recession – from 22,230 in 2009 to 25,070 in 2018, says peer-to-peer lending platform, Lendy.
Lendy says the sharp rise highlights just how intense competition in the UK restaurant market has become, as recent years have seen rapid nationwide expansion by high street brands and an explosion of new entrants.
Market saturation is a key reason why many leading chains as well as independents are struggling, according to the researchers. High-profile examples of restaurant chains that have been reported as being in trouble include burger brand Byron, Italian-style chains Jamie’s Italian, Prezzo, Strada and Carluccios and sandwich bar EAT.
Many are seeking to renegotiate rents or are closing restaurants altogether, in order to reduce debts or offload underperforming sites.
Lendy said for commercial property investors, the challenges currently facing the casual dining sector has reinforced the need to build a diverse portfolio of assets in a range of locations.
It also said it was important to invest in properties at low loan-to-value (LTV) ratios to reduce risk in case of default.
Liam Brooke, co-founder of Lendy, said: “In the last few years, appetite for new restaurant openings has seemed insatiable. Now we are seeing a period of adjustment where many well-known brands are restructuring their businesses and re-evaluating their strategies and many independents are struggling to compete.
“For property investors it’s a timely reminder not to put all your eggs in one basket, but to look for opportunities to create a diverse spread of investments across a range of commercial properties, with loans at sensible borrowing multiples.”
He added: “This approach can help investors take advantage of high growth sectors, while limiting their exposure to any market downturn in particular industries or locations.”