Why London's Restaurants Are Failing

The first thing Dominik Prosser tells me about his failed restaurant is that he and the other four partners are still on good terms. The second is that this is pretty unusual.

“We’re still all friends, which is nice and quite rare,” he says.

Bad Sports was a bar and taqueria on Hackney Road, a busy stretch of East London that’s home to a small but growing number of nicely upholstered pubs and restaurants serving interesting small plates. Conceived by Prosser and fellow partner David Herod over drinks one night, the aim was to open an easygoing bar that did Mexican food.

“We thought there was a spot for the kind of bar that we liked to go to, which was somewhere between a club and a bar that didn’t really exist, that had a late license and there wasn’t going to be any queues on the door or guest list,” explains William McBean, who came on board as another partner in the business after working in the Miami hotel industry.

“There weren’t any tacos in London at the time, so there was a nice little gap in the market,” adds Prosser.

When the team found the Hackney Road site, they were so pleased with the location that they agreed to a lease, despite the extensive repair work needed to the building’s floor and kitchen. They began a renovation project that ended up lasting for several months.

“The problem with building works is that they always cost money, and then it costs three times as much [as you think it will],” says Prosser, who had experience running clubs and bars in London before opening Bad Sports. “That really screws you over.”

“We were also just so excited about the potential of the spot that we were like, ‘Yeah, yeah, we’ll sort it out,’” remembers McBean. “We kind of got the site and we were finding lumps of money as we were going.”

In November 2016, after six months of building work, Bad Sports opened.

And everyone loved it. Time Out raved about the margaritas and semi-ironic American sports bar theme. The tacos were lauded as some of the best in London—at a time when London was in the grip of a Mexican food craze. All the right people Instagrammed its signature gingham-print serving trays, and chefs like Josh Katz and Andrew Clarke contributed guest tacos to the menu. The Bad Sports Buckfast negroni quickly became legendary.

But the business model had problems. Prosser, McBean, and the other partners had aimed to open a bar with a casual taco offering, but now found themselves running a Mexican restaurant with a bar that couldn’t quite offset the food costs. They made their tortillas from scratch and used quality ingredients, but didn’t want to switch to cheaper alternatives and risk losing customers. At the same time, they felt uncomfortable charging more than nine quid for two tacos in an area of London that is notoriously divided by wealth. In short, Bad Sports wasn’t sustainable, and they didn’t have enough money left in the bank after the building work and initial opening costs to experiment until they got it right.

The stress of managing a struggling restaurant soon began to take its toll.

“I was working the entire time on loads of other stuff and it just required an incredible amount of physical and mental effort to get it open,” says Prosser. “We literally dragged it into existence.”

“It becomes like your living room, doesn’t it?” Will explains. “Because I would get texts when I wasn’t there from people, like, ‘I’m in your bar, why aren’t you here?’ Everyone expected to see us there all the time, which gets tiring.”

After a quiet January, not helped by the freezing temperatures that swept London and kept customers indoors, the partners gathered for their weekly meeting. The decision was made to close Bad Sports.

“It’s kind of like going through a break-up, but with five people with differing ideas of what went wrong in the relationship,” says McBean. “We successively had to come round to the idea that we weren’t going to make it, which is quite a difficult thing to do.”

“I was in Guatemala in a valley with my girlfriend with no phone access, just trying to get a break because it was such a heavy, hectic, painful, hardcore year,” remembers Prosser. “I got Wi-Fi signal somewhere and my phone went brrrp and unfortunately, I picked up and they just told me that it was done. It was a very weird feeling, being halfway across the world and not being able to do anything physically to help. Feeling bad for them, but feeling relief, in a way.”

Will notes, only half jokingly: “The fact it’s closed does mean that we’re both alive right now.”

Bad Sports’ story is not unique. Running a successful eatery has always been hard—we’ve all heard the possibly exaggerated stat about 90 percent failing in their first year—but the British restaurant industry is particularly tough right now. Due to rising food costs and staff shortages, UK restaurant closures increased by 20 percent last year. In London, property consultants Cedar Dean Group found that 90 percent of restaurant owners feared that running costs would soon end their businesses. Eater London updates its weirdly gleeful “All of 2018’s London Restaurant Closures” article almost every week.

The strange thing is, most of the London restaurants I hear about failing aren’t ones I expected to go broke—I can’t ever remember seeing Bad Sports empty. Which is slightly worrying; if the places with good food and bustling dining rooms and Buckfast negronis can’t survive, what does this say about the future of the London food scene?

I spoke to a number of London restaurateurs forced to close businesses in the last two years. They all talk about their shuttered restaurants with the same mixture of sadness and hard-won acceptance. They detail everything they would do differently if they had another chance, but swear they don’t regret a thing. A restaurant is the ultimate dream-big, quit-your-job-to-pursue-it, throw-everything-at-it passion project, so when it fails, it’s hard not to want all the gory details. Case in point: that viral Toronto Life story about the “foodie with a boring day job who figured he could run a restaurant” and ends up bankrupting himself and almost destroying his marriage.

But tales of failed restaurants are more than just car crash entertainment. They’re people’s livelihoods and careers; they’re also huge blows to the cultural and economic life of a city when we lose them.

“It is a very wealthy area, so there were a lot of changes already in terms of new places opening,” Enria tells me. “I thought it was the right area for us to consider.”

At first, things went well. It was summer when Burro e Salvia opened, and the tables outside the restaurant were always full. Passersby loved to watch the staff making pasta by hand through the windows. But as the colder months approached, Enria noticed worrying differences between her customer base in Shoreditch (mainly creative types grabbing dinner after work) and East Dulwich, a largely residential area popular for young families.

“Lots of parents would ask for dishes off the menu like simpler pasta… which, of course, we do when we have a child which is part of a table,” Enria explains. “But if we end up having all the busy times filled with children and we have to make pasta with tomato sauce—first of all, it’s not rewarding from a financial perspective, but also, it’s not rewarding because it’s not the concept we put together.”

Despite East Dulwich being a wealthy area (in 2017, a one-bedroom flat there costs an average of £393,000), it wasn’t the right location for a high-end Italian restaurant. Enria tried to adapt her offerings to what locals wanted, introducing an all-day menu for families dining in the afternoon and offering food delivery via Deliveroo, but it wasn’t enough. In the the winter of 2017, a year and a half after opening, Burro e Salvia’s East Dulwich location was quiet almost every evening. Around this time, Enria received an offer on the site from a neighbouring business. She decided to accept, and Burro e Salvia East Dulwich closed in January 2018.

“I just told myself I have to be very rational and do what entrepreneurs should do: Look at the numbers and be very cynical and say, ‘Hey, if the numbers are not telling me what they should tell, then I have to picture a different scenario,’” explains Enria.

Happily for Enria, the Shoreditch outpost of Burro e Salvia is still operational, and many staff from the East Dulwich restaurant were able to relocate here after its closure. When I ask how she feels about her failed business, Enria says that she “looks at the bright side of things,” but notes the importance of location for the success of a restaurant

“I think, ‘OK, the location was wrong,’ but this doesn’t mean that in the future, we can’t think again of opening a new location,” she says. “But I think for what’s happening to London and the industry, if I had to think of another location, I’d probably rather think of opening somewhere else and not in London, necessary.”

Indeed, in a city the size of London and with as many dining options, location can make or break a restaurant. This was the case for Ellory, a modern European restaurant that opened in Hackney in 2015, and closed at the beginning of this year. Despite winning a Michelin star, the restaurant struggled to make a profit—in part due to its slightly out-of-the-way location in a warehouse-style building off Mare Street.

Ed Thaw joined head chef Sam Kamienko and sommelier Jack Lewens as a partner in the restaurant six months after it opened.

“Frankly, we made a fuck-tonne of mistakes in our first year,” he says.

Not only did Ellory lack foot traffic, its interior was less than inviting: an austere room with sparsely decorated tables and concrete floors.

“It had that feeling of sitting in a corridor,” says Thaw. “I think initially, that was the vibe and I kind of like the provocative vibe, but I think it just ultimately didn’t help the restaurant. The way that Sam [Kamienko] cooks is a lot more warm and nourishing anyway.”

In February 2016, a Marina O’Loughlin restaurant review picked up on the chilly vibe, describing Ellory as “a restaurant très sérieux” and giving it a lukewarm 6/10 for atmosphere. For Thaw and the team, this was another nail in the coffin. “You’re stuck with press reviews that basically hang around forever,” he says. By this point, Ellory wasn’t making any money.

“To lose money month after month after month, or to get to the end of every week as we were and say, ‘Are we gonna make money? Ah, we almost made money, maybe next week.’ It’s exhausting,” Thaw remembers. Even being awarded a Michelin star in October that year didn’t help rescue Ellory’s finances.

“I think [the Michelin star] took us from really not good to almost a viable business, so it kind of gave us enough to keep going,” Thaw says. “But what I’m proudest about is that we didn’t change the way we did stuff. Waiters were walking around the dining room in trainers. We deliberately made a point of not doing things that really fuck us off about those type of restaurants.”

The partners managed to keep Ellory going for a few more months until, Thaw says, “we were just looking at the money and going, ‘This is just not interesting in this location.’” They found a new site in nearby Shoreditch with rent that was around £4,000 cheaper than their current location. With large windows and a prominent position on a street corner, the space was also a complete aesthetic departure.

“We thought, ‘If we do this restaurant as well as the other one, then the other one will die and we’ve actually got a really good restaurant here.’ So therefore, we had to move it,” says Thaw.

Thaw, Kamienko, and Lewens used Ellory’s remaining cash—plus money Thaw had from a house sale—to pull together something not many restaurants get: a second chance. They closed Ellory and opened a new restaurant in the Shoreditch location, christening it “Leroy” as a pseudo-anagram of their fallen restaurant’s name. On the day I visit, the dining room is filled with morning light, and Thaw points out the illustrations of people enjoying wine that decorate the walls.

“It was almost like you’ve gone all in, but then no—you’ve got to go even further in,” he says, of closing one restaurant and starting again with another. “But it’s worth it because there’s nothing else we’d rather be doing and so far, the reaction has been really positive.”

Leroy received a glowing review from Guardian restaurant critic Grace Dent shortly after opening and posted its best ever week of sales in August. Earlier this month, it regained its Michelin star.

“It locked in that first service after two soft launches,” says Thaw. “It just clicked, and the people that were there on that night were amazing.”

While Thaw and his team seem to have nailed their restaurant’s location the second time round, the commercial property market in London is by no means easy to navigate. When I ask Thaw what he thinks is the biggest threat to independent restaurants, he answers right away.

“It’s property, isn't it? This building is owned by a pension fund,” he says, referring to Leroy, “Our old building was owned by a pension fund—those are the only people that can afford to own these buildings.”

Indeed, commercial property values have risen across the UK, with transactions doubling in London in the last three years. In its research on restaurants in the capital, Cedar Dean Group found that restaurateurs are spending an average of 21 percent of their turnover on rent, up from 16 percent last year, and far beyond the recommended 12 percent that enables a business to make a profit.

Prosser also sees rent as an issue for restaurant owners, but thinks that local authorities should do more to help, such as by stopping property developers from hiking the rents of small business owners who add value to an area. This has been particularly bad in Soho, with rents rising as much as 50 percent in recent years and forcing many historic bars and restaurants to close. Earlier this month, Scandinavian-influenced restaurant Rök abandoned plans to open a Soho location, citing “rising rents and operational costs.”

“In London, there needs to be zoning,” Prosser says, “so that there’s zoning rent controls that developing land owners can’t change. ACV [Asset of Community Value, a building protected by the council for its services to the local area] is a big part of that. One of our partners, Andy Bird, had the first ACV on a pub, and it prevents the pub from being changed from use.”

Figures from the Office of National Statistics also show signs of EU workers leaving Britain in the wake of the Brexit vote, resulting in staff shortages in hospitality—an industry that has long relied on migrant workers.

“Brexit started something, because last year, I feel, is when the whole industry really started suffering for the lack of staff,” says Enria.

Harneet Baweja has also had problems with finding staff. He and partner Devina Seth opened Gunpowder, a modern Indian restaurant, in East London three years ago. It was a huge success and two additional restaurants, Madame D’s and Gul & Sepoy, followed in 2017. They both closed in July of this year. At the time, Baweja said that this was so that he could “concentrate his energies” on the original Gunpowder restaurant, and a new site that opened in London Bridge this summer. But when I speak with him about the closures now, he also mentions staffing issues.

“The London Bridge restaurant was a big step up in terms of size. It worked out as such with staff shortages—Devina [Seth] and myself, we were pretty much doing everything, we’re an independent business—we found that we were being really, really stretched,” Baweja tells me. “The industry is not new to staff shortages, but whatever has been happening has been putting even more pressure on, and there are multiple reasons for it.”

Even for restaurants that are able to find staff, sourcing the capital to get their business started is harder than ever. Due to the financial uncertainty that would follow a no-deal Brexit, investors are reluctant to part with their money—particularly to a venture as risky as a restaurant.

“I think the London restaurant scene and the small business scene is in stasis at the moment because of Brexit,” says Prosser. “Everybody is kind of waiting to see what’s going to happen.”

Baweja has a similar view: “Investments are changing. Earlier on, you could make an effort as a husband and wife or a couple of friends; you could put up a nice bar or a restaurant. But it’s quite different now. You need to be backed by someone.”

It’s easy to feel gloomy about the future of the UK restaurant industry, but the difficulties faced by restaurateurs have also pushed them to think even more creatively. Since closing its bricks-and-mortar location, Bad Sports has worked on collaborations with London Cocktail Week and The London EDITION hotel. Ellory became Leroy. Baweja says he may reopen Madame D’s as a pop-up. The closure of a restaurant doesn’t have to be the end.

“It’s like music,” says Prosser. “Good music doesn’t come from easy places. Good music comes from hard places and because it’s so hard, it does make the things that work really, really good.”

It’s always been hard to run a restaurant, even more so when battling Brexit, London rents, and an oversaturated market. But if we want to live in a place with an exciting food scene, we need people who will take the risk.

“I hope that Bad Sports made something that was relevant and that people connected with and really enjoyed. We seem to have really overwhelmingly positive memories of the place,” says McBean. “I think that that’s super important.”