He may be the nearest thing Britain’s food scene has to an alchemist but that cannot shield Heston Blumenthal from the cold winds blowing across the country’s restaurant business.
Accounts filed last week for Snail Porridge Limited, parent company of the chef’s flagship restaurant The Fat Duck, his gastro pub The Hind’s Head, his TV programming arm and several other businesses showed losses more than doubling last year.
In the year to 31 May 2018, turnover at the company dropped only marginally, to £12.4m, but post-tax losses increased, from £700,000 to £1.7m.
The accounts reveal the threats that the restaurant trade faces as costs rise and expansion plans are reined in. A £500,000 investment in a new project was written off by the company’s directors, who do not believe the money can be recovered.
In a statement, the company told the Observer: “Our results in the past couple of years have reflected the decline in profitability of some of our restaurants, but we believe that we are now through the bottom of that cycle and are starting to see the impact of our efficiencies.”
Blumenthal is not alone in finding the going tough. Jamie Oliver’s business empire reported a loss of nearly £20m last year and has been forced to close outlets. And Kavalake, Gordon Ramsay’s holding company, which manages several of London’s most famous restaurants, including Pétrus and the Savoy Grill, reported a pre-tax loss of £3.8m in the year to the end of August 2017.
The number of restaurants filing for insolvency has nearly doubled in the past eight years, according to a report published last December by the accountants Moore Stephens.
“It’s tough out there for everybody,” said Stefan Chomka, editor of Restaurant magazine. “It’s well-documented that [the] mid-market has probably suffered the most, with the likes of Jamie and Byron Burger closing restaurants. But the problems they’ve got are happening across the board. The higher-end restaurants are having to cope with the same rising costs of ingredients, staff, rent and rates.”
Among the risk factors cited in Snail Porridge’s accounts are Brexit, national living wage increases and rising food prices.
“To keep standards high, Heston’s place has to employ a huge amount of staff, [and] their wage bill is growing and growing,” Chomka said. “These sort of businesses use the best-quality ingredients. Butter is now almost six times the price it used to be – expensive butter probably 10 times the price; fish and meat are more expensive. Restaurants operating at these high levels can’t cut back on the quality, so they are having to suck it up.”
Snail Porridge, whose parent company, Cape Proprietary Inc, is incorporated in Nevis, a tax haven, says it is working through an “efficiency and development programme” to increase its profitability.
“To provide a fine-dining experience at a realistic price for the diner, but which is also profitable, is not easy and it requires careful management of costs, principally relating to ingredients and labour,” the company said. “The Fat Duck has always been profitable, as its business model is established and its appeal as a special dining destination is undiminished.”
Accounts released earlier this year show that the Fat Duck reported pre-tax profits of £297,788, down from £533,145 the previous year.
Chomka said it was encouraging to hear that the company believed it was at the bottom of the cycle. “But what we are seeing is restaurants continuing to open, especially in London,” he said. “So I can’t see things getting easier in the near future.”