Nimrod103 wrote:GeoffF100 wrote:Nimrod103 wrote:Severe financial difficulty that is (
https://www.bbc.co.uk/news/uk-england-45707529). A lot of councils (as well as pension funds, British Land etc) are rather too dependent on income from shops, and some councils (mine included) are taking big financial gambles in building more themselves. Time will tell whether this is a mistake which council tax payers will end up by bearing the cost of.
Also restaurants. AIUI the various chains of eateries which have closed or are under threat, are in that state due to the rise in the minimum wage. Apart from the odd pub lunch, I cannot remember the last time I ate out in the UK.
For now the displaced workers are being absorbed in the rest of the economy, but that cannot continue for ever.
That is the risk you take when you invest in businesses. Do not do it if you cannot stand the loss.
Restaurants appear to be opening all over the place where I live, and I cannot move for the fast food ads pushed through my door.
Which restaurants are they?
Not Prezzo:
https://www.telegraph.co.uk/business/20 ... ring-loss/
Here is what Prezzo said about the reasons for their failure:
"The casual dining trading environment in the UK is challenging due to a combination of factors,
including a deterioration in the consumer environment. The Group’s core brand, Prezzo, has
competition from other brand names such Pizza Express, Franco Manca, ASK Italian, Zizzi and
Bella Italia. In addition, Prezzo seeks to keep pace with other competitors’ discounting methods
to avoid declining consumer footfall. Prezzo’s revenue dipped 3.3 % (three point three per cent.)
year-on-year for the twelve months to December 2017. Like-for like sales have dropped in this
period by 8.1 % (eight point one per cent.) year-on-year. These factors have had a significant
adverse impact on Prezzo’s trading performance and financial position.
2.3 A significant fixed cost of Prezzo’s business is the rent payable to Landlords under the leases
of premises from which it operates in the UK. In addition, there has been significant increases
in a number of other costs incurred by the business. Increases have been experienced in the
following categories: employees, input costs and business rates. The Directors have concluded,
for a number of reasons, that Prezzo’s current business model and associated cost structure is
no longer viable in a number of cases, particularly locations with low revenue levels. Rental
costs associated with underperforming restaurants are unsustainable. Many restaurants are loss
making at an operating level and sales per square foot are significantly below other casual
dining chains. The Directors have noted that consumer preferences favour restaurants with
strong brand identification and an efficient food and restaurant layout. "
ie, while rising employee costs are one factor, they are by no means the only factor, and the implication of the statement is that rents is themost significant factor.
Given that some of Prezzo's restaurants (pre CVA) were so poorly performing that they could not hope to make a profit even if the rental cost of the premises was reduced to zero, it is easy to suggest that they were overly growth oriented and took some very poor investment decisions as a result.
DM