The fish and chip shop market is undergoing a period of contraction and business transfer agents are warning that the number of outlets will continue to fall over the coming years.
Already the market is seeing a steady increase in the number of shops closing while new and existing operators are proceeding with caution before investing in sites, with rising costs - in particular raw materials, wages and rents - being the main reasons.
Robert Eggleton, managing director of Mandens, which has been selling fish and chip shops for over 50 years, believes some existing operators are being squeezed so tightly on margins that many are struggling to make a worthwhile profit for the long hours worked while others are making very little profit at all. Fears are that it will probably be the smaller turnover shops that are at the biggest risk.
Robert comments: “One advantage of having been in involved in the trade for such a long period of time is the wide perspective it gives. We have seen the good times and the more difficult times. There is little doubt that the trade is partway through some major changes.
“These changes started some 18 months ago and will play out over the next two to four years and the outcome will be a reduction in the number of fish and chip shops, but those that remain will be the higher turnover, higher quality shops.
“The hard reality is that smaller turnover shops are finding it increasingly difficult to return a profit. For many shops, turnover has been flat and for some, it has contracted, not badly, but with increased costs even to hold turnover is, in real terms, to go backwards. With the higher cost of fish, potatoes, wages and other overheads, most shops have had to increase prices which would normally result in increased turnover.”
"The hard reality is that smaller turnover shops are finding it increasingly difficult to return a profit."
Despite witnessing a steady rise in shops closing, many agents are not necessarily seeing a correlating rise in the number of shops for sale, perhaps offset somewhat by a reluctance to sell.
Harvey Rosen, director at transfer agent Rosens, comments: “There’s a lot of uncertainty at the moment and a lot of people are sitting on the fence. I would say we’ve got a shortage of shops for sale, especially good fish and chip shops. Usually, Rosens holds in the region of about 250-265 shops, but our present ratio is 210. Whether that’s because shops are doing fantastically well and they don’t want to sell, or because they are doing so badly that they are scared to sell because they won’t get the price, is hard to determine.”
Whilst Mandens also reports no significant change in the number of shops for sale, it says buyers are proceeding with more caution and targeting the higher turnover shops.
Robert adds: “From our perspective as valuers and selling agents we know that a very high proportion of buyers of fish and chip businesses are people already in the trade. If, as has often been the case in the past, the trade has been doing well and making good profits, buyers are confident and want to buy a better, or perhaps a second, shop. At the moment, many are finding trade challenging and are being very careful when choosing which business to buy. Fish and chips is still a very good business but, and there is a big but, you have to have more turnover.”
Despite the current situation, it is predicted that the challenging conditions will ease, with Robert adding: “The uncertainty in the economy and the weak pound, which is one reason for the higher price of fish, caused by the protracted Brexit negotiations, will, at some point, be behind us.”