Private equity in hospitality: a lifeline or a looming takeover?
What makes the industry so attractive to private equity firms has a lot to do with its resilience, according to UHY Hacker Young
French restaurant group Bistrot Pierre was the latest British chain to be acquired out of administration by a private equity firm, ensuring that 10 sites will continue to trade with exactly 394 jobs saved. Private equity investment in hospitality has become a growing force that offers a financial lifeline to struggling businesses. But could it also be concerning that investor priorities are increasingly shaping the landscape of this industry?
According to the latest FutureFoodservice report, it is projected that the out-of-home dining market will grow by 2.4% in 2025 to reach a total value of £105.3bn. Despite rising costs, the report expects growth to be driven primarily by consumer spending and operators’ ability to adapt with new concepts. Simon Stenning, founder of FutureFoodservice, warned that while there are opportunities for innovation, in the current climate many businesses face an uncertain future. He said, “We have to be cautious with our positive message in this report, as we recognise that not all businesses will survive the challenging conditions.”
What makes the industry so attractive to private equity firms has a lot to do with its resilience, according to UHY Hacker Young, as well as the many opportunities it offers in the form of fast-casual dining, delivery-first concepts, and experience-driven leisure options. This also aligns with findings from Grant Thornton UK’s Private Equity Pulse report, which revealed that 67% of private equity firms internationally plan to increase investment levels in 2025, despite concerns over finance availability and geopolitical instability. That said, UK-based firms are more divided, with only half expecting to increase their investments – pointing to a need to not count on private equity to swoop in on every occasion.
At the same time, insolvency remains a persistent issue in hospitality. The latest Buchler Phillips Hospitality Index, released this February, found that 3,465 businesses closed in 2024 – a slight improvement from 2023 but still historically high. Jo Milner, managing director of Buchler Phillips, warned that financial pressures remain severe: “A chill wind is still blowing out there. Hospitality will remain near the top of the insolvency table for the foreseeable future, certainly while budget changes continue to kick in and the sector adapts.” With the sector facing £3.4bn in additional costs in April 2025, the index revealed that businesses may be forced to raise prices by 6% to 8% to survive.
Furthermore, a joint industry survey from UKH, BBPA, BII, and Hospitality Ulster indicates that over a fifth of hospitality businesses will be forced to shut at least one site due to these cost increases.
Recent high profile private equity takeovers show the prevalence of such deals in the industry. In August 2024, Stonegate Pub Company refinanced its £2.2bn debt with a £250m investment from private equity firm TDR Capital; in October 2024, TGI Fridays’ UK franchise was acquired by Breal Capital and Calveton; and just this February, Fortress Investment Group acquired Loungers for £354.4m. Then there’s Bistrot Pierre’s acquisition by Cherry Equity Partners.
Eddy Massaad, CEO of Swiss Butter, offered a perspective on growth outside of private equity. “Growing an independent restaurant group without franchising presents unique challenges and advantages. The main challenge is disciplined capital management, requiring careful planning and strategic funding solutions to sustain growth. The advantage, however, is maintaining complete operational control, allowing us to consistently prioritise quality, brand authenticity, and customer experience.” While Massaad believes private equity can enable growth, he warned against rapid expansion at the cost of operational integrity. “Private equity can offer significant growth opportunities, but at Swiss Butter, we have taken a measured approach – expanding only when we are operationally ready and confident in maintaining our high standards.”
Massaad has credited Swiss Butter’s financial discipline to its success. “There is no denying that rising costs such as wages, supply chain inflation, and operational expenses are putting significant pressure on the restaurant industry, particularly mid-sized chains. We have navigated these challenges by maintaining a streamlined, high-efficiency model.” He contrasted his approach with franchising, which he believes can lead to diluted quality. “Franchising is often seen as the easiest way to scale, but it comes at a cost. Many brands struggle with inconsistencies in quality and service because franchisees operate with different financial incentives.”
Katie Deem, director and head of hospitality, leisure and travel at 4C Associates, acknowledged private equity’s crucial role in the sector, saying: “Private equity has, and continues, to play a crucial role in the survival and growth of mid-sized foodservice businesses in the UK. With ever-continuing rising costs, many brands have turned to PE for capital and strategic support.” Citing several recent acquisitions, which included the ones already mentioned as well as Apollo Global Management’s £701m takeover of The Restaurant Group, she believes procurement and supply chain efficiency will be key factors in the sector’s financial resilience. “Procurement and supply chain efficiency are critical factors in the success of hospitality businesses through giving focus to optimising supplier contracts, reducing food waste, and leveraging economies of scale to drive profitability.”
Meanwhile, founder of culinary and operational consultancy VP7, Vanina Principi, emphasised both the benefits and risks of private equity in hospitality. “Private equity is playing an increasingly crucial role in supporting mid-sized restaurant chains as they recover from the impacts of the pandemic and contend with rising operational costs. These firms provide much-needed capital, along with operational expertise and strategic restructuring, which can help struggling restaurant brands stay afloat. However, the involvement of PE often comes with a focus on cost-cutting and efficiency measures that may compromise a brand’s identity and the overall customer experience.” She noted that franchises are more attractive to private equity firms due to their scalability, but independent brands with strong market positioning can also attract investment.
“Looking ahead, as economic uncertainty persists, more restaurant brands will likely turn to private equity as a funding source to survive and expand,” Principi added. “The market will probably see a mix of consolidation under PE ownership and independent innovation, with larger groups growing under the backing of PE, while independent concepts with strong identities continue to attract niche investments.”
To conclude, private equity has undeniably become a lifeline for many hospitality businesses grappling with rising costs and financial strain. However, while these investments can provide crucial capital, they also raise a critical question: at what cost? As private equity increasingly shapes the future of the sector, there’s a risk that the very qualities that define hospitality—quality, service, and experience – could be sacrificed in favour of profit-driven strategies. The challenge is clear: how can the industry balance financial efficiency with the preservation of its core values?