Delivery Apps, Market Saturation Push UK Restaurants Into Bankruptcies

British restaurants hit a milestone in 2018 — the number of insolvent ones hit an all-time high, and has even doubled since 2010, according to report by Reuters.

According to a study by the accountant firm Price Bailey, restaurants are struggling because of the proliferation of delivery apps, and also the saturation of the market.

In 2018, there were 1,442 restaurant insolvencies, which is an increase of 40 percent from a year before. That means as many as four restaurants a day are going bankrupt —an increase from less than two a day in 2010. 

Paul Pittman, a partner at Price Bailey, said that 2018 was by far the toughest year for restaurants in the U.K.

“The challenging trading conditions facing the restaurant sector show no signs of improving,” he said. “Chain restaurants are particularly vulnerable to changing consumer fads. What was once flavor of the month can quickly go out of fashion.”

For example, Argentinian Steak outfit Gaucho, Italian eateries Prezzo, Carluccio’s and Jamie’s Italian and burger chain Byron all used a British procedure called a company voluntary arrangement (CVA), which is a restructuring procedure for dealing with insolvency.

Many middle-market eateries expanded too quickly, Price Bailey said, and that meant too many restaurants were fighting for the same customers.

Another factor is the large number of delivery apps, like Just Eat and Deliveroo, which means more competition from the takeout sector.

“Restaurants are capital-intensive businesses,” Pittman said. “Many are perpetually walking a balance-sheet tightrope, and it often only takes a few months of poor takings to send them over the edge.”

Earlier this month, Deliveroo felt the repercussions of the the General Data Protection Regulation in regard to customer data. The U.K. data protection watchdog looked into the company after it reported “limited fraudulent activity” on some customers’ accounts.

Some customers complained that they’d been charged for orders they didn’t make, including one case in particular worth almost £1,000.