The restaurant sector has coped with the recession a lot better than many industry-watchers had thought it would. It seems eating out has become more deeply ingrained in the consumer psyche, and less of a discretionary item, than it was during previous downturns. At the same time, many of the UK’s biggest restaurant chains have used their scale to cut costs and their marketing nouse to attract customers. But does that mean that cylicality is off the menu for good? We doubt it.

Meal or no meal

One of the reasons for the resilience of big restaurant chains last year is that they were quick to enter into aggressive promotional activity. For most of 2009, the branded dining-out market was awash with meal deals, such as voucher code promotions, two-for-one deals and meals for a tenner, as restaurants battled it out with pub groups to get diners through the door. This has kept trading robust, although at some cost to profit margins.

“The reality of 2009 was better than feared for many in the leisure sector and particularly restaurant operators,” says Greg Feehely, head of research at broker Altium Securities. “The industry starts 2010 in a much better position than it started 2009, but it’s still pretty brutal in terms of getting people through the door.”

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