Are consumers growing tired of major high-street hospitality chains?
Given the travails over recent months of TGI Fridays and Revolution Bars, which between them operate scores of branded outlets up and down the UK, it is tempting to think so.
Shares in Hostmore, the UK-listed hospitality company which operates around 90 TGI Fridays outlets, are now worth next to nothing after plans by management to secure its future went up in smoke.
Hostmore revealed on Monday that not only has it been forced to scrap plans to take over the global master franchise owner of TGI Fridays in the US – a move held out as a major opportunity to add scale to the business and create shareholder value when it was announced in April – its efforts to sell its UK properties to cut debt and move to a capital-light model was “unlikely” to “recover any meaningful value for its ownership”.
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Shares in Hostmore crashed as the company also said it would duly be wound down once the outlets are sold to new owners, which will take up the mantle of running the TGI Fridays brand in the UK. It is a hugely disappointing outcome for Hostmore investors and the top brass at the company, which will soon cease to exist less than four years after floating on the London stock market.
“It’s effectively game over for Hostmore as a listed business,” was the brutal verdict of Russ Mould, investment director at AJ Bell.
Meanwhile, fellow UK hospitality company Revolution Bars has also been weighed down by a litany of challenges in recent months, although its prospects now seem to to be looking a little brighter.
The high-street cocktail bar chain, which operates outlets across the UK under the Revolution, Revolucion de Cuba, and Peach Pubs brands, is hoping to emerge from a tumultuous year that has seen the company pursue various options to put itself on a more solid financial footing. Those options included an ultimately unsuccessful attempt to find a new owner for the chain.
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Last month, Revolution secured High Court approval for a restructuring plan which the company said would provide a “more secure financial base”. However, the plan will see the company exit the leases of several loss-making venues, leaving it with fewer bars across the UK. Further to the overhaul, the company has 65 outlets in total, down from the 89 it had at the end of its 2023 financial year.
This week, Revolution heralded the appointment of high-profile hospitality veteran Luke Johnson, a former chairman and major investor in Pizza Express, to its board as a key development for the company’s fortunes. Mr Johnson first moved into the frame for Revolution back in March, when the company revealed the entrepreneur was among the stakeholders and investors it had engaged over a potential fundraiser.
Mr Johnson, who succeeds Keith Edelman as chairman, now has a 20% stake in Revolution after taking part in the group’s recent fundraise.
“We are excited to be working with Luke who is vastly experienced in the hospitality sector and brings a wealth of knowledge to enable the next phase of the group’s development,” said Rob Pitcher, chief executive of Revolution Bars.
While Revolution is now looking to a brighter, more secure future, and the TGI Fridays name will continue under new ownership, there is no doubt the trading backdrop for both companies continues to be difficult.
Amid their struggles over recent months, Revolution and Hostmore have justifiably highlighted the significant changes which have taken place in the leisure and late-night sectors in the wake of the pandemic, as businesses have faced steep rises in operating costs and consumers have altered habits when inflation has surged, and interest rates increased.
And even though the rate of inflation has slowed over recent months, and there has been one reduction in interest rates by the Bank of England, the pressure on the hospitality industry has remained.
READ MORE: Shares in TGI Fridays chain collapse as major deal aborted
The latest snap survey carried out, and published late last month, by the Scottish Licensed Trade Association, which represents independent operators, found trading in August was down for 62% of businesses compared with the same month last year, despite the boost brought to some by the Euro 2024 football tournament.
The survey, of more than 400 pubs, bars, restaurants and hotels, underlined the pressure being exerted on the industry by changing consumer habits, amid ongoing concerns over the cost of living. Businesses reported that 19% of patrons are leaving premises earlier and 16% are only attending for events, while 64% said customers were spending less, not visiting as often, and staying for shorter periods.
These findings hint at broader societal shifts which may be hard for the industry to reverse, and that is before one considers the potential impact of an extension of the smoking ban in areas immediately outside bars and restaurants, as recently mooted by the UK Government for England.
The broader environment for the hospitality industry, therefore, is far from forgiving, which is why many in the industry will be looking to the UK Government for a bit of help in its Budget at the end of October.
Calls are once more being made for the level of value-added tax applied to the industry to be cut, while south of the Border the industry is urging Chancellor Rachel Reeves to address the “business rates cliff edge” operators will face when the current relief comes to an end in April.
However, given the repeated warnings from Ms Reeves and Prime Minister Sir Keir Starmer over the state of the public finances, the industry would be wise to not hold its breath.
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