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Hospitality businesses more likely to fail
23 April, 2007
New report reveals they are three times more likely to go bust.
Hospitality businesses are three times more likely to go bust than other UK businesses, says a new report by a leading accountancy firm.
UHY Hacker Young revealed that 15.5 per cent of businesses in the UK hospitality and catering sector (restaurants, pubs and hotels) fail every year, compared to just 5.2 per cent for the economy as a whole. The company reviewed 150,000 business failures over the last year.
Difficulty in financing, poor market research and financial planning and the challenge of building a loyal client base are all cited as major reasons for the business failures. It also says that pubs have been hit by the minimum wage and alcohol duty – which they have not passed onto the customer.
Peter Kubik, partner at UHY Hacker Young, said: “Bars and pubs have the same vanity dimension as restaurants. Often inexperienced entrepreneurs decide to try their hand at running a bar, but when they find out that there is a lot of hard work and very little glamour involved, their enthusiasm wanes.”
Kubik also points out that the smoking ban, which takes effect in England in July 2007, may add to the financial pressure on businesses.
Readers' comments
This is not surprising at all: from my experience on both sides of the fence. > Licensees have poor business plans (if any at all) > PubCos often don't care as long as they've got someone to open the doors and buy the beer. However, the real tragedy is that this is happening in an industry where eating and drinking out is growing at almost 10% per year. When pubs go right, they can make a LOT of money. If the pubcos got this right, and avoided these hideously high financial and personal costs, imagine how well they could do!!! Why aren't any doing it??
Ah, there seem to be a few factors that have been missed here. No mention of rents going up 5-6k a year on review. No reference to inflation busting price rises from the brewers and pubco's every year. No mention of BDM's etc. putting their own interests first. Are these guys in the loop with the brewers on compulsary use of nominated accountants, stocktakers and book keepers I wonder.
This article proves exactly why qualifications such as the BIIAB Profitable Business Portfolio should be seriously considered by those operating licensed businesses. For a small investment people can take this qualification and learn all that is essential about finance, business planning, market research and much much more. I don't wish to be accused of being a training provider jumping on the band wagon to take away people's hard earned cash - it is about making people aware of a sensible route to assist them develop and run a successful and profitable business. There is hard evidence to prove that many people have profited from this well structured programme which focuses on putting learning into practice. I had a refreshing call from a debt collector recently who spoke of this qualification as being a sensible and positive suggestion to those in serious trouble as opposed to sending the heavies round!