Another one bites the dust.
News yesterday that the Gaucho restaurant group looks to be heading into administration, putting 1500 jobs at risk, was both shocking and also, weirdly, not shocking at all.
All around the country, restaurants are quietly closing their doors every week. So it’s perhaps no surprise that another looks like joining the roll-call of destitution.
The reasons for this economic collapse are many and varied.
In the short term, while the hot summer and World Cup might have helped trade in bars and pubs, they’ve killed sales at restaurants that don’t have outside space. After a winter so cold and wet that people didn't go out at all has come a summer so hot and diverting that people don't want to sit down and eat.
Higher rent and the notoriously Draconian business rates review have also conspired to make life tough. In a business with notoriously slim margins, large unwavering increases to the bottom line can push ‘just about managing’ restaurants into ‘slowly sinking’.
But as much as anything – for the larger groups at least – this is about financial miscalculation; about a willingness for equity funds ten years ago to throw money at successful small or mid-sized businesses, on the assumption that they will be even more profitable when they’re larger.
But as one industry insider put it, ‘Money is invested on projected future earnings, not past proved performance. And just because one [venue] works, it doesn’t mean that ten will. You can’t just scale up and up unless you’re McDonalds.’
In fact, wiser heads have been predicting this miserable scenario for a while. Eighteen months ago it was obvious that there were too many eateries in the country and that not all would survive; that the huge increase in venues was not being matched by an equally huge increase in the number of people actually eating out.
In that situation, there can only be one outcome – and we’re seeing it now.
The apparent demise of Gaucho is representative of an industry that, nationwide, has grown too far too fast on the back of often ill-advised investment capital.
We can expect, sadly, to see more eateries going to the wall this year. It’s success stories (like Hawksmoor’s) not failures that will be as rare as one of Gaucho’s famous steaks…