Article from Propel Hospitality, for more visit www.propelhospitality.com

The rise of delivery during the pandemic and its associated costs means the VAT rate for the hospitality sector can never return to 20%, Deep Blue Restaurants founder and chief executive James Low has argued.

The VAT rate has now risen to 12.5% for the hospitality and tourism sector and is due to return to the 20% rate in April.

But Low told Propel the dynamics of the takeaway market “have changed considerably” with the Deep Blue and Harry Ramsden’s operator now doing double the number of deliveries it was a year ago.

He said: “That comes with an increase in costs in terms of labour as well as fees. The changes in consumer behaviour means a lot of takeaways have seen a shift from collection to delivery and, as a result, their overall profitability has reduced.

For this reason and for those very clearly explained by UKHospitality and its VATsEnough campaign, it is absolutely vital the rate remains at 12.5% – 20% VAT is just no longer appropriate for the sector.”

Low said Deep Blue Restaurants expects sales to be up 20% for the year ending September 2021 compared with the previous year.

The company is set to add further to its estate with Deep Blue openings in Sunninghill in Berkshire and at the Extra MSA service station in Baldock, Hertfordshire, by the end of 2021.

This will take the company’s estate to 37 Deep Blue sites along with ten Harry Ramsden’s.

The company is also set to refurbish its flagship Harry Ramsden’s site, in Bournemouth, in a £1.2m project.

The site has 400 covers and is the biggest fish and chip restaurant in the world. Further refurbishments of the Deep Blue and Harry Ramsden’s estate are also planned with the company rolling out kiosk technology and as a result has seen an increase in average transaction value.

Low said the business planned a further “controlled” expansion of the Deep Blue brand in local communities and Harry Ramsden’s in coastal resorts.

The group has seen growth in its franchising and licensing business and expects to see further growth of about 40% in the next financial year as it continues to develop this part of the business.

Low spoke to Propel as Deep Blue Restaurants reported turnover rose 28% to £20.4m for the year ending 29 September 2020, compared with £15.7m the year before. Ebitda including central costs was up 71.2% to £2.7m, compared with £1.6m the previous year.