The online delivery service Just Eat served up strong revenues in the first three months of the year, while Pizza Express profits dropped due to higher costs and Britain’s casual dining crunch.
While takeaway food has become very popular, many restaurant chains are struggling, faced with rising costs and worsening consumer confidence.
Higher costs
Business rates and wages are up, as is the cost of imported food. Wages are up partly because of the rise in the legal minimum but also because finding workers is more tricky. High employment means there are fewer Brits available while the Brexit vote is putting off some EU workers who are already less keen because of the lower value of the pound.
The rise of delivery
Deliveroo, UberEats and Just Eat are driving a rise in demand for home delivery, cutting the number of customers eating out.
Over-expansion
Until 2015/16, dining out was growing strongly. Private equity firms helped mid-market chains expand, which increased competition just as the market was feeling the squeeze.
Spending shifts
Takeaway breakfasts and lunches are also diverting money away from sit-down restaurants.
Strong order growth and a bigger proportion of higher value delivery orders propelled revenues at Just Eat 49% to £177.4m. UK orders climbed 24% to 29.7m, after the firm gobbled up the rival Hungryhouse.
Just Eat was the top riser on the FTSE 100 index, with its shares up more than 4%. The firm stuck to its guidance of £660m to £700m of annual revenues, which analysts said was too conservative.
Just Eat has traditionally collected orders on behalf of independent restaurants which deliver the food themselves, but has started delivering for chains such as KFC and Burger King.
Pizza Express, the chain founded in London in 1965 that has been owned by Chinese investment group Hony Capital since 2014, reported an 8.9% drop in underlying profits to £94.6m last year. Its chief executive, Jinlong Wang, blamed higher food prices and wage increases as well as the rise in business rates and commercial rents.
However, Pizza Express, which opened 13 new restaurants and modernised 25 others last year, has fared better than rivals, many of which are in closing outlets. Like-for-like sales in the UK and Ireland edged up by 0.4% and overall turnover rose by 6.3% to £534.2m.
One in three of the UK’s top 100 restaurant groups are loss making, a recent study showed. Many mid-market chains such as Jamie’s Italian, Prezzo, and Strada have been shutting restaurants.
