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influence of Recession on Restaurant Trade

Complete Research on Restaurant Trade

Study of influence of Recession on Restaurant Trade


The restaurant industry in London has suffered a major setback after the financial crisis of 2008. The customer spending has reduced as there is a constant pressure on the incomes of households as a result of which the businesses operating in London, UK has suffered badly. Restaurant business is one such area which will witness long lasting impacts of recession and a major restructuring is required for this sector in order to provide a strong foundation for future growth.
The needs and preferences of customers have changed after their incomes were adversely affected by the economic downturn and hence, the customers made reductions in their expenditures. Eating out, being an optional expenditure, witnessed a major cut off and the dining trade in London suffered due to this because customers are now more price conscious and are looking for cheaper options which can reduce their overall expenses. Thus, restaurants sector in London, UK needs to be innovative so that customers are attracted towards their services which will in turn help them to survive and sustain in economically tough times.

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Recession in UK has made survival tough for many industries but the restaurants sector is reported to be the worst hit. In comparison to the other parts of the hospitality sector, restaurant trade has suffered the most and this has accounted for 45% of the insolvencies in the industry in the year 2009 (Thomas, 2009). A large number of studies that were conducted revealed that when UK consumers were asked about the activities which they would target in order to reduce their expenditures, a majority of them revealed that they would cut their spending on take aways, fast food and eating out (Millward, 2006). There is a necessity for the restaurants to provide value for money and a unique dining experience if they wish to continue in business for long (Stickler, 2011). The restaurant owners and managers need to work hard in order to attract more and more customers when the situation is that that people are mindful of their expenditures in terms of eating out.

1.2 Literature Review

It has been observed in the context of UK that restaurant owners and managers are finding it difficult to sustain themselves in the market. The industry experts have quite often stated that London has high quality food at all levels which are not to be seen in other cities of the world (Ruddick, 2012). The restaurant industry of UK was constantly growing over the years when it was observed that the spending on eating out reached a level of £30 billion in the year 2007. But with the creeping in of the financial crisis which took Britain into the most dangerous financial crisis ever, the restaurant owners are faced with the challenge of sustaining their business when the demands are the lowest (Millward, 2006).

As Britain has still not been able to recover from the effects of the financial turmoil, there is a constant increase in the overheads such as cost of staff, compliance cost, rise in the food prices and so on which is exerting an ever increasing pressure on the margins of the restaurant owners because the demand side of the market is still not strong (O’Neill and Carlback, 2011). The consumers have reduced their overall expenditure on eating out by choosing lower end restaurants and cutting their per head expenditure by the type of outlet that they visit (Ruddick, 2012). People now prefer to do home cooking as even home deliveries are becoming costly as a result of increase in fuel prices. However, the big events that happened in UK like the Queen’s Diamond Jubilee and London Olympics, 2012 gave London an opportunity to showcase itself to the world including its restaurant sector (Thompson, 2012).

The hospitality industry experts still have a pessimistic view about the overall position of the sector. Factors such as weakening of the household budgets, unemployment and financial crisis have deeply affected the restaurant business in London (Paskin, 2009). It has also been observed in terms of post- recession period, that big retail chains have been able to snatch the business from restaurants by providing cheaper options to the customers and also providing an array of additional services which are not generally available in a restaurant. The restaurants in UK are battling on two different fronts as on one hand they have to deal with the constant decline in demand and on the other hand they have to fight the price war where their margins are constantly declining because of the rise in prices of raw material and the pressure on restaurant owners to have cheap offerings on the menu for the customers in order to attract them (Hampson and McGoldrick, 2011).

1.3 Research Aims and Objectives

The aim of the research is to study the influence of recession on the restaurant trade in London. Certain objectives will help the researcher to achieve the above stated aims and are as follows:

  • To analyse the impact of recession that has lead to a change in the needs and preferences of consumers.
  • To study the changes in the trade practices followed by the restaurants as a result of recession.
  • To study the comparative effect of recession on restaurant trade and other sectors of the hospitality industry.

1.4 Research Methodology

Research methodology can be termed as a systematic process by which a research problem is being solved (Taylor and et. al., 2006). In the present study, both primary and secondary data collection methods will be used. The information will be collected through various articles, books, journals and consumer forums. It is also important to use the primary information as it will give a firsthand experience about the current thoughts and ideas of the customers and will help in understanding the current situation and present trends. It will also be ensured that the study is completed within the time limit specified and the ethical issues will be taken care of. The information that will be collected will be kept confidential and it will be ensured that it is used for the research purpose only and not for any other use or the personal use of the researcher (Gelling and Munn- Giddings, 2011).

1.5 Research Question

It is very important to form research questions in any study as it gives a direction to the research and helps in keeping the research on the right track. The research questions will assist the researcher by helping him to channelize his resources and time in an appropriate direction. For the present study, following main questions will be addressed which are:

  • How has the restaurant owners in London and UK managed to cope up with the decline in demand after recession?
  • Have the restaurant owners made any changes in their offerings which can help them to survive in the tough economic times?
  • Has the business scenario for restaurants improved or declined since recession?

1.6 Research Rationale

A research is basically a value addition to the existing knowledge base and an objective investigation of the facts in relation to a particular problem. The present study aims to analyse the effects of recession on the restaurant trade in London as restaurant operators in London are facing a major challenge to cope with a decline in demand and constant rising of the costs. The research is of great significance in the present context as the restaurant sector of London needs to revive back and this report will try to explore the areas working on which can be very beneficial for the restaurant operators (Bhattacharyya, Reeves and Zwarenstein, 2009). The report will analyse as to what opportunities are available for the restaurants and what strategies they can implement in order to survive and to further bring about a sustainable development.

1.7 Structure of the research

In order to ensure that the research study is conducted in a proper manner, a proper chronological order is followed. The research report should also be prepared in an appropriate format so that it facilitates a clear understanding for the reader. The order of chapters for this report will be as follows:

  • Chapter 1: Introduction – This chapter explains the subject of the research and the background in which the entire study can be conducted. It gives a brief about methodology which is being used in the research, research rationale and an overview about the entire structure of the report (Ogbonna and Harris, 2002).
  • Chapter 2: Literature Review – This is the second section of the research report and it explores all the theories related to the problem statement. Also a discussion on the literature of the previous research on the problem is done. The present study will explain the situation before and after the recession and will try to explore the current situation of restaurants in London UK. It will also explore the future prospects of this sector and will try to analyse if there are any growth opportunities available for this sector.
  • Chapter 3: Research Methodology – This section explains the various techniques and tool used by the researcher to conduct the study. It is an important chapter as appropriate methods selected at this stage will make the entire study more valid and reliable (Blessing and Chakrabarti, 2009). It should be kept in mind that every study requires a different methodology and this chapter will provide an idea as to what is the logic behind choosing a particular methodology for this research and how will it help in getting accurate and reliable results.
  • Chapter 4: Findings and Analysis – This part provides a brief about the findings which have been obtained after careful processing of the information that is obtained from the primary sources of information. For the present report, thematic analysis will be done where themes will be prepared for the data collected and the related information will be clubbed under the themes and interpretations and inferences will be drawn. The findings that have been discussed will be further evaluated in this section and a link would be established between the information that is obtained from the literature review and the findings that have been obtained from the primary research.
  • Chapter 5: Conclusion and Recommendations – The last chapter of the report will conclude the entire study done so far and will try to provide recommendations on the basis of these conclusions. This section also sometimes contains the suggestions for future research.

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1.8 Conclusion

The restaurant industry of London is facing challenges in order to sustain in business as the needs and preferences of people has changed due to the financial crisis that shook the economy and there are several problems that the consumers are facing like unemployment, reduced incomes, reduced savings etc (Wood, 2000).. Restaurant sector has been the worst hit among all the sectors of the hospitality industry and thus, it is required that this industry comes up with strategies and ways in which they can attract large number of customers and bring about sustainable development.

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  • Alleyne, R., 2009. Restaurant industry remains buoyant despite recession. The Telegraph. 20th August.
  • Andrews, D. and Turner, S., 2012. Is the pub still the hub? International Journal of Contemporary Hospitality Management. 24 (4). pp. 542 – 552.
  • Babbie, R. E., 2010. The Practice of Social Research. 12th ed. Cengage Learning.
  • Bagliano, C.F. and Morana, C., 2012. The Great Recession: US dynamics and spillovers to the world economy. Journal of Banking & Finance. 36(1). pp. 1-13.
  • Beaver, G. and Ross, C., 2000. Enterprise in recession: The role and context of strategy. The International Journal of Entrepreneurship and Innovation. 1(1). pp. 23-23(1).
  • Bhattacharyya, O., Reeves, S. and Zwarenstein, M., 2009. What is Implementation Research? Rationale, Concepts, and Practices. SAGE Journals. 19(5). pp. 491-502.
  • Blessing, M. T. L., and Chakrabarti, A., 2009. DRM, a Design Research Methodology. Springer.
  • Bloxham, A., 2011. Biscuit sales soar as recession drives people to ‘comfort food’. The Telegraph. 18th May.
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