Overview
The accommodation and food services industry within the U.K. approximately employed circa 2.4 million people at the end of 2021. Despite the industry understandably seeing a large downturn in people eating out, there was a positive uptake in delivery services. As a result, the sector now has a market value of £11.4bn and is forecasted to reach 11m users in 2022.
With this fast pace industry M&A can offer multiple opportunities, continue reading the below key areas when buying a UK company within this sector to assist conversations when speaking with business owners and their businesses for sale.
SECTOR SPECIFIC CATEGORIES
Location... Location... Location
Outside of key business documentation, physically seeing where the building is will be a key factor to take into consideration. You may want to consider carrying out research with local people and or counting how many people pass the shop over a given period of time. However, make sure you have the right permits in place before carrying out this work. Either way gather as much information as possible because this location analysis is going to help in the m&a decision process.
Alternatively, if the businesses for sale are more based around takeaways, look at the local infrastructure, is it in a densely populated area and does it have good connecting roads for deliveries to take place. Specifically looking at a restaurant or a cafe on the high-street, you may want to consider the below before buying a UK company :
- Is the building a leasehold or freehold?
- Where is the building located and what towns are nearby?
- What is the demographics of the local area?
- If inside a shopping mall, where is the customer flow of traffic?
- What is the footfall like where the restaurant is located?
Franchise
A franchise is favoured by many because it brings instant brand recognition and reputation. The pre-built menus are tailored to the target audience and invariably have high standards on the ingredients used and staff training.
However, this level of branding and support comes at a cost where owners will have obligations in place with the franchise. If you are considering a franchise when buying a uk company, seeking legal advice is strongly advised. Nevertheless, some immediate questions you might like to consider in order to build up a m&a business case could be:
- What are the terms of the franchise?
- What is the cost of ingredients and required inventory?
- What support is receive on a day-to-day basis?
- Are there obligations for refurbishments within the franchise?
- How many other franchise locations are there?
Competitor analysis
When looking at buying a uk company, especially within the food and hospitality sector, carrying out a detailed competitor review would be vital. Understanding the strengths and weaknesses on businesses for sale, ensures investors are clearly aware of what is going to make an opportunity successful.
As a side point, there are some very famous business models (e.g. SWOT analysis) that help guide an m&a review like this. However, some questions that might be considered during this process would be:
- How many restaurants are there within a 5 - 10 mile radius?
- Are there direct competitors and what do they do differently?
- What other cuisines are within the area?
- Do they offer takeaway service?
- How long have restaurants in the area been in operation for?
Service
Reputation and customer feedback is critical to the success for any business, especially when considering businesses for sale in this sector. There are various tools that you will want to use in order to gain an insight on public perception, some examples include; trip advisor, open table, yelp, google analytics or any social media platform.
Before buying a UK company, when carrying out your research you may want to consider the following questions as a guide on what feedback is being received:
- What is the overall rating?
- Are there comments on the ambience, decor or food?
- Has the restaurant featured in any local or national newspapers?
- What is overall rating on price of the food?
- What is ratio of takeaways vs. dining out?
Licences
Offering any food and hospitality within the UK, does require the relevant documentation to be in place from local councils. When carrying out your m&a due diligence this would be an important area to check and make sure documents are up to date. Before buying a UK company consider reviewing some of the key documentation listed below:
- Food hygiene certificates
- Alcohol licences
- Food business registration
- Pavement license
- Music License