Will Just Eat Gobble up the Restaurant Business?

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Will Just Eat Gobble up the Restaurant Business?

Author Mark Richards

The UK is falling ever more in love with takeaways, as Just Eat’s recent results show. But what does this mean for the restaurant trade – already under pressure from Brexit and business rate rises?

If you are as old as I am you will remember the Dark Ages. “Why don’t we watch a video tonight?” your wife would say as the Saturday night dinner was cleared away.

“Yes, Dad! Yes, Dad!” your lovely children would cry. What they meant was ‘Why don’t you drag yourself away from the fire, put your coat on, drive down to Blockbuster, rent a video – and a tub of ice-cream – and bring it home? And then tomorrow you can do exactly the same and take it back.’

…And as the rain lashed down I’d think, ‘There has to be a better way.’ And now there is. Amazon, Netflix, on demand… The idea of going out into the dark and the cold to rent a film is simply ludicrous. Blockbuster? At its peak in 2004, it employed 84,000 people worldwide in more than 9,000 stores. It filed for bankruptcy in 2010 and its last stores were sold the following year.

Until recently, I felt much the same about takeaways. “Oh, I can’t be bothered to cook. Why don’t we have a Chinese or an Indian?” But it was not a takeaway: it was a go-and-collect.

Technology Like Just Eat changes all that

Then the takeaway shops started to deliver – and technology and big business eventually came together in Just Eat, a company that started in Denmark in 2000, is now headquartered in London and operates in 13 countries around the world. Just Eat is listed on the stock exchange and in 2016 had total revenues of £375m. Its latest bout of expansion – in December of last year – was to acquire Hungryhouse for £200m, a deal which has just received preliminary approval from the Competition and Markets Authority.

Just Eat continues to go from strength to strength, with orders jumping by almost 30% in the third quarter of the year, with revenue for the period rising from £94m to £138m – up 44%, which would suggest that we are now spending more on our takeaways. Mind you, it is not just the UK: international orders were also up by 43%, helped in particular by Canadian company SkipTheDishes which Just Eat also acquired last year.

Just Eat are now forecasting revenues of £500-515m for the full year, significantly up on last year, with Chairman Peter Plumb promising further investment in technology and marketing (as anyone who has seen this year’s X-Factor will have noticed…)

Just how much do we spend on takeaways?

There are varying estimates – depending on whether you include ready-meals – but the consensus seems to be that we currently spend around £8bn on takeaways, meaning that Just Eat has around 6-7% of the market. According to research on the Voucher Code website, Coventry is the UK’s takeaway capital, with the average person there spending £2,400 a year on them and eating 156 takeaway and ready meals. Bottom of the league is Swansea, with the residents barely managing to stay alive as they spend just £677 on takeaways. Laziness is the most commonly cited reason for ordering a takeaway and – as you might expect – Chinese and Indian food dominate the league table, just ahead of good old fish n’ chips.

Clearly, takeaway food has been good news for Just Eat. Whether it is good news for the NHS as the nation gets steadily fatter is another matter: in the long term we may all pick up the bill for our addiction to takeaways in higher taxes.

But in the short term takeaways may well also be bad news for a very important sector of the economy – the restaurant trade.

Just eat

Photo by Gordon Joly

Bad news from the bean counters

Research conducted by accountants Moore Stephens and released this week suggests that up to 20% of the UK’s restaurants could go out of business.

Moore Stephens blame rising staff costs and the effects of Brexit. It is possible that the accountants have underestimated the problem, with restaurants facing not a double-whammy, but a double-double whammy. There is also the rise in business rates and – crucially – the UK’s increasing love affair with the takeaway.

More than half of our food is imported, with three-quarters of that coming from the EU. Since Brexit, the pound has fallen against the euro, which has made the price of those imports more expensive. In addition, Brexit has made the UK a less attractive place to the European staff on which so many restaurants depend. In fact, the whole hospitality sector is facing problems, as rising business rates (up to 42% higher in London) contribute to increased costs.

The Association of Licensed Multiple Retailers (ALMR) said that the eating and drinking out sector is facing a £213m tax hike through increases in rates and duty, and have appealed to Chancellor Philip Hammond for help in his forthcoming Budget. ALMR Chief Executive Kate Nicholls said,

“The Budget is absolutely crucial, with costs rising at a time of maximum uncertainty for employers.” Moore Stephens partner Jeremy Willmont added, “The industry looks to be facing a prolonged period of tough trading conditions.”

The real problem for restaurants

But what the industry is really facing is the rise and rise of the takeaway. ‘Go and collect it’ has become ‘tap the app and have it delivered.’ Eating out means getting changed, booking a table, going into town, one of you can’t drink because you have to drive… “Let’s just stay in, order a takeaway and watch a film” is quick, easy and convenient – and a lot less expensive.

With the number of takeaway shops having risen by 4,000 over the past three years – meaning there are now more than 56,000 takeaways in England – they simply have to be impacting the restaurant trade. Brexit and business rates are one thing: a fundamental shift in consumer behaviour is quite another.

Small wonder that restaurants – helped by companies like Deliveroo – are increasingly starting to offer takeaways themselves. It increases their revenue without increasing their costs: after all, the chef cooks the same meal whether the customer is at table 3 or half a mile away.

But it presents a very bleak picture of our future. Amazon drones flying overhead delivering everything we need and Just Eat and Deliveroo drivers knocking on the door with all our meals. Throw in the ability to work from home and we may never need to leave the house again…

By | 2017-11-01T09:49:08+00:00 November 1st, 2017|Business, Economy|0 Comments

About the Author:

A previous financial services business owner, Mark is an experienced Journalist Speaker, Speechwriter and Coach. He has written for a number of websites related to the financial sector and won numerous awards. Mark has also published a number of books.

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