American-themed eatery TGI Friday’s has suffered a sales dip after new entrants flooded the casual dining market.
The chain, which began in New York in 1965 and came to Britain in 1986, has been opening new sites but acknowledged the restaurant market had “proved attractive to numerous new entrants”, with a 13.5pc growth in food-led licensed venues in the past three years.
This meant that excluding the five new sites it opened in 2016, like-for-like sales dropped 2.7pc – a marked decline given the 1.1pc rise in 2015 – although total sales rose 7.7pc to £211m.
The disparity between the two sets of sales figures echoes that of the wider casual dining industry. A survey by industry monitor Peach Coffer showed the sector’s like-for-like sales for the 12 months to the end of January this year were only up 0.8pc but total sales rose 4.4pc because of new openings.
But management said actions taken to stimulate demand for its offering had started to work with like-for-like sales in recent months rising once again.
In spite of the rise in turnover, the company still suffered a £12.5m pre-tax loss – broadly flat on the prior year – largely because of interest payable on loans it has taken out.
Management also acknowledged the “significant” pressures on the restaurant sector since the Brexit vote, which pushed down the value of sterling making imported food and drink more expensive to buy in pounds. The sector has also been under pressure from various Government initiatives, such as the rise in business rates, the national living wage and the apprenticeship levy.
The company said it had mitigated this inflationary pressure by cutting the cost of running the business and trying to make its brand standout more against the larger number of competitors it now faces through promotions such as unlimited starters and ultimate shakes.
Management also said it was actively seeking new sites and expected the core estate to produce a strong performance in 2017.
Under the helm of UK chief Karen Forrester, the business here has been revamped, scrapping outdated policies such as fancy dress for staff and party balloons in all its restaurants.
But the weak performance in 2016 meant the highest paid director – likely to be Ms Forrester – was paid £260,000, a drop of 43pc compared to the £456,665 paid in 2015.
TGI Friday’s in the UK is owned by British private equity investors Electra Partners, which snapped up the business in 2014 for £225m from the owners of the American parent Sentinel Capital and TriArtisan Partners.
That duo bought the US business in 2014 from Carlson, the hospitality giant which also owns the Radisson hotel chain, which had owned TGI for nearly 40 years.