Business Outlook 2025 | Restaurants

It has been a while, but it looks like we are starting to see a recovery in the casual dining sector. It may have been a long and painful decline for many, but at last brands are looking for new sites and reporting an uptick in margins.

Like pubs, the number of full-service restaurants has fallen from 32,000 to 26,000, but, as profitability has started to stabilise it is predicted that we will see outlet growth in 2025.

In addition, a particular success story is the Quick Service Restaurant (QSR) sector.  With over 100,000 take-aways and cafes in the UK, it may seem surprising that less than 20% are operated by the ‘big brands’. The rapid expansion of the likes of German Doner Kebab and Slim Chickens, alongside the continued growth of McDonalds and Starbucks, is compelling.

We are seeing more proven international brands entering the UK with the likes of Carls Jr. teaming up with Boparan, to open in the UK early this year. Wendy’s has re-entered the UK, and Chick-fil-A, the legendary US brand which opened in Reading in 2019 but subsequently quickly closed, is trying again this year, such is the prize.

Those who used to go to the high street for family dining are dropping down in price to QSR. This has made operators improve their quality as they chase the customer, and the younger generation loves the speed and reliability. Such is the growth and demand for drive-thru sites, we are finding their rents are now higher than in key city centres.

This growth has been supported by the acceptance of the franchise model. At a time when businesses are being hit by financial pressures, it can be gratifying to know that you have a multi-national on your side offering support and advice.

Movement in the average price of sold assets, year-on-year.

A drop in the price index was expected and reflects continuing difficulties in the restaurant sector. At the start of 2024, food inflation was still at 7%, operating costs remained high, and consumers were dining out less as prices increased to compensate. With a reduction in profit margins and continuing closures of both high street branded sites and headline-grabbing fine-dining venues, investors were unwilling to take the risk. However, we have seen many landlord-incentivised deals, and food entrepreneurs coming back into the market at the end of the year. It remains to be seen whether this will stall once employers' National Insurance Contribution (NICs) increases hit, or if we will see a return to an upward trend in the price index.

We anonymously surveyed restaurant stakeholders across the country to gather their views on the year ahead.

• We will continue to see a gradual recovery in the casual dining sector
• There will be continued growth of Quick Service Restaurants (QSR)
• Fine dining will become more exclusive and expensive to customers
• We will see market integration for greater synergy benefits
• There will be an overheating of rents for QSR drive-thru sites outside of towns