Is the table clearing for UK casual dining chains?
Gusto Pasta, the UK's prominent casual dining brand, made healthy profits of £15–30 million a year until 2021. Following an acquisition by a private equity firm for £250 million, it tried to aggressively expand and standardise menus, removing popular specialised dishes. By 2024, facing "unprecedented cost pressures" and declining footfall, the chain was sold for £1 to a turnaround specialist. Over 65% of Gusto Pasta branches are currently unprofitable, seeking Rent Reduction Agreements (Company Voluntary Arrangements) as customer numbers declined by 12% in 2024.
The hospitality sector has seen over 18,000 job losses in the last year. Inflation in food ingredients reached 15%, alongside rising minimum wage rates and surging energy bills. Business rates and commercial rents have also continued to escalate. At the same time, high inflation has squeezed real household incomes, leading to a drop in consumer confidence and discretionary spending on eating out. Other casual dining brands like VeggieDelight have closed 40 branches, while others like Gourmet Burger Bistro have gone into administration entirely.
Question Discuss factors that are causing many casual dining restaurant chains in the UK to close individual branches or shut down completely. Use a cost and revenue diagram to support your answer.
6 exam-style questions on Edexcel A A Level Economics 3.3.4 Normal profits, supernormal profits and losses. Each one has a worked solution and a mark scheme showing where the marks go.