(Last updated September 2024)
What has been happening in the cafe sector
The cafe and restaurant sector has been hit by a series of circumstances that have made trading very difficult.
The cost of living crisis experienced post-pandemic has caused consumers to become more cost conscious, prioritising price over brand. As a result supermarket cafes saw a 3% growth in their market share in 2023. While still being a popular choice, in store coffee purchases fell by 6% in 2023. There as been an increase in 'convenience-led' choices with delivery and mobile kiosks growing in popularity.
Eating out remains a popular choice but consumers are looking for better value for money. The Mintel 2023 cafe and coffee shop report reveals that almost three quarters of people believe that coffee shops should offer more deals. Meal deals, loyalty cards and offers, such as children eat free when an adult meal is purchased are popular.
There are thousands of places to eat in Britain offering a wide range of different types of food at prices to suit all pockets. People have become much more adventurous and knowledgeable, and cuisine from many different countries is widely available.
A trend towards healthy eating has led many restaurants to add healthy options, such as low fat and low salt dishes, to their menus. Consumers routinely expect coffee shops and cafes to offer non-dairy alternatives such as soy, oat and coconut milk.
Allergy information regulations introduced ten years ago mean that caterers like cafes and restaurants must by law provide their customers with information about any of 14 specified food allergens if these are used as ingredients. You could do this by including the information on your menus, or you could provide the information verbally. The legislation has been extended so that pre-packed foods for direct sale also have to list all the ingredients and contain allergen information. There's more information about this on the Food Standards Agency website.
Concerns about the origin of foods and the impact of carbon emissions caused by 'food miles' have led more and more people to consider how their food purchases effect the environment. This has generally increased demand for locally sourced, sustainable and organic foods, and led to a rise in the number of people choosing to avoid foods containing palm oil.
The biggest influences in the immediate future are:
- the high street is continuing to struggle with many well-known high street chains reducing the number of stores they have or moving them into supermarket stores as in the case of Argos. This means that there are fewer shoppers in many town centres
- the Pandemic had a devastating impact on the amount spent per person on food and drink consumed outside the home (down to just £8.94 per person per week)
- the COVID-19 closures and cost of living crisis impacted many familiar high street restaurant chains with many closing outlets or disappearing from the high street for good
- the demand for healthy eating continues, including vegetarian and vegan options and healthy menu options for children. 4% of the UK population identify as vegan, 7% as vegetarian and 4% as pescatarian
- the UK market for meat substitutes is the largest in Europe
- the increasing importance of breakfasts, particularly healthy, take-away breakfasts
- the trend amongst younger people to give up alcohol, making it important to be able to offer a range of alcohol-free drinks
- the trend amongst younger people for drinking coffee - especially cold and nitro brews, custom flavours and blends and coffee treats (containing ice cream, syrups or candy)
- the increase in photo-sharing and video social media accounts driving a requirement for striking and interesting looking dishes, often including unusual colours
The industry is very competitive as barriers to entry are relatively low. When demand is strong, many new cafes and restaurants open up. Recent years have seen many restaurant chains (such as pizza and pasta outlets) close reducing the 'bricks and mortar' competition for the independent cafe and restaurant in some areas. However, competition has increased from the enormous range of ready meals and 'dine out in your own home' deals now offered by the major supermarkets and meal delivery subscriptions such as Hello Fresh, Gousto and The Mindful Chef. Pubs have got in on the act, too, improving their food operations and targeting the growing market for family and casual dining.
The war in Ukraine and inflation drove food and fuel prices up sharply between 2021 and October 2022 and reduced consumers' disposable income. Many cafes and restaurants found it very hard to increase their menu prices, but needed to do something to safeguard their profit margins. Some were forced to cut their portion sizes, while others sought out less expensive ingredients.
As the economy started to improve, wages began to increase and people felt more secure in their jobs. UK consumer spending on recreational and cultural services increased by roughly 3.5% in 2023 over the previous year.
To improve profitability some cafes and restaurants have introduced menu items which use more vegetables and less meat. To cut down on waste some restaurants have moved away from a la carte, instead offering set menus with more limited choice. Other challenges to the profitability in the sector include:
- increased wages costs due to the minimum and the living wage
- the high cost of rent, rates and energy
- lower footfall on the high street
Some cafes and restaurants have struggled to find good and experienced staff. The government and industry have made efforts in recent years to improve skills training in the catering trade and attract high quality workers. The restriction on immigrants from the EU has further reduced the number of good staff in the service industry.
It is illegal to use tips and service charges to make up staff wages to the level of the National Minimum Wage. The Department for Business and Trade has produced a code practice on the distribution of tips. The new rules, which aim to make tipping fairer and to clamp down on unfair practices, come into force on 1 October 2024.
The Food Standards Agency introduced the food hygiene rating scheme for food businesses like cafes and restaurants. Food businesses are given a hygiene rating from zero to five stars when they're inspected by a participating local authority. Under the scheme, businesses are encouraged to display the results of their latest food hygiene inspection at their premises (and in Wales and Northern Ireland it's a legal requirement for food businesses to display them).
Technology and the web are becoming more and more important within the catering industry. Many people now choose where to eat based on reviews left on websites like TripAdvisor, while others use apps like Google Maps to help them locate a suitable eating place. A good feedback profile and rating on TripAdvisor is now more or less essential for cafe and restaurant businesses. Restaurateurs themselves use social media like Facebook and Twitter to publicise their businesses and stay in touch with customers, as well as using 'daily deal' websites like Groupon to market special promotions.
Technology has also led to the launch of a number of online ordering services, such as Just Eat and Deliveroo, which enable people to choose and order take-aways through the internet for local collection or delivery. Participating businesses receive order details and payments though the online service provider. Although the business pays commission for this service, they have generally increased sales significantly. It is estimated that online orders now account for about 40% of food delivery orders in the UK. Buying take-aways is one of the most popular ways to eat out and the biggest selling food category is pizzas. Web-based table booking systems are growing in popularity too.
Many cafes and restaurants have also adopted technology that allow customers to book tables online, place food and drink orders using an app and point-of-sale technology that automates ordering, payment and stock management.
Keeping up to date with developments
Joining a trade association is an excellent way of staying up to date with developments in your sector.
The catering industry is well represented by different associations, including UKHospitality. You can contact UKH through their website.
The Institute of Hospitality is another trade association representing businesses in the catering industry - visit their website to find out more about the services and support they provide to their members.
Subscribing to a trade journal is another good way to keep in touch with the latest developments. The weekly journal The Caterer contains a wealth of articles and features of interest to those working in the restaurant and food industry.
Trade shows
You can get a lot of useful information by visiting a trade show or exhibition for the catering industry. Visit the Exhibitions website for details of trade shows that may be of interest to you.
