The company behind the restaurant chains Frankie & Benny’s, Chiquito and Garfunkel’s has warned of a decline in annual profits after it was hit by falling customer numbers in retail parks – the first profit drop in more than a decade.
The Restaurant Group’s woes have worsened since the turn of the year, with like-for-like sales down 2.7% in the 17 weeks to 24 April. The company, which has more than 500 restaurants, now expects sales to be down by between 2.5% and 5% this year.
It would translate into a profit before tax of £74m to £80m, down from nearly £87m in 2015. The last time the firm suffered a fall in annual profits was in the early 2000s. It also announced the departure of its chief financial officer, Stephen Critoph, who will leave after 11 years at the business.
The Restaurant Group said customers had become more wary about spending money and, due to the growing popularity of online shopping, fewer people were visiting retail parks, where nearly 40% of Frankie & Benny’s restaurants are located. Competition from rival restaurant chains had also increased, it said.
Frankie & Benny’s has been worst hit, with pub restaurants and concessions at UK airports doing well.
The group said it would review its strategy, including its property portfolio, new openings, brands and costs, and will announce the outcome in August alongside its first-half results. The company has already scaled back new openings to just over 30 this year, from 44 last year.
It also hopes new menus will pull in more customers. It has introduced a new breakfast menu and an app at Frankie & Benny’s, a street food section on the Chiquito menu and fresher and lighter options at its Coast to Coast chain. To mitigate the impact of the “national living wage”, it is looking at implementing better rostering and “improved labour productivity”.
Ali Naqvi, an analyst at Peel Hunt, said: “The review is unlikely to find any silver bullets in the short term but shows management focusing on fixing the existing estate rather than rolling out new sites.”
Wyn Ellis, at Numis, said: “The current priority for management is to reduce exposure to retail-only outlets and the Frankie’s brand. Over 50% of the portfolio is Frankie’s and the aim is to reduce this, over time, to 40% to better balance the portfolio – with greater focus on other brands, pubs and concessions. At Frankie’s the management is being refreshed, menus updated, digital marketing increased and covers in busier cinema sites increased by trimming bar space.”
