Fish and chips are a staple of the British food industry and with around 10,500 outlets all over the country; the shops outnumber popular fast food chains such as McDonald’s and KFC. The British public consumes around 382 million portions of fish and chips per year, spending a staggering £1.2 billion.
It is of little surprise then that so many business owners are attracted by the prospect of owning their own chippy. But with the rising cost of raw ingredients and competition from other fast food outlets, finding a successful formula can be challenging.
One of the reasons for fish and chips’ enduring popularity, especially in the United Kingdom, is their affordability. Whilst dwindling fish stocks and other economic factors have pushed up the cost of the raw ingredients, there’s still a decent profit per portion on fish and chips.
Owing to that, it is still best not to cut corners when it comes to accessing these ingredients. Cheap ingredients make a low-quality product. A lower quality product means fewer punters. Setting a price point for your fish and chips will depend on a number of factors including how much you’re spending on your lease/rent, the demographics of the area, and how much you can get ingredients for.
The HMRC report on the fish and chip industry states that businesses in the industry should expect gross profits of around 50 percent – where some achieve more, others less. This comes down to certain factors, and they include;
6 Factors That Determine the Profitability of a Fish and Chip Shop
The location of the fish and chips shop will definitely dictate the amount of income and profit the shop generates. Here is what you should consider when choosing a location for your shop:
- Low-income areas – as an affordable but delicious meal, fish and chips have always found success in low income areas. Provided there is a ready supply of local punters and not too much competition, a low-income area can represent a good location
- High-income areas – though people will have more disposable income, they are more likely to cook at home or go to restaurants. Owing to that, a high-quality fish and chip shop could still succeed.
- Mixed income/high footfall areas such as town centers or busy high streets are going to give you the highest footfall but also cost the most in rent and rates. You may also have more competition.
- Proximity to the competition – being relatively close to competitors can actually be advantageous to a small business. Hungry customers like options, and if yours is the best of the choices, that is where they will spend their pennies. Use nearby competitors strategically to show off your superior offering
- Cleanliness/ maintenance – check for signs of damp or vermin and that the property is maintained. Although things can be cleaned, there msy be some recurring issues that can be expensive and difficult to deal with
- Reputation – research customer reviews of the fish and chip shop you intend to buy before committing. If it is got a poor local reputation, you’re going to have to put a lot of time and effort into swinging that around
Number of Customers
Fish and chips shops are established for people and these people are what dictates the amount of profit a shop makes. To estimate the level or passing trade of any location, count the number of people walking past the proposed location of the shop at lunch time (say between 12.00 pm and 2.00 pm).
Do the same in the evening. Try to repeat this exercise on several different days. What type of people walk past or near your shop? Are they mainly office workers, tourists or people doing their shopping? Does this vary at different times of the day? All these factors will affect the level of income and profit the shop generates.
One important decision that will affect the income of the shop is whether you will sell meals to eat in as well as to take away. Space is an issue here – you will need more space if you want to offer eat-in. You’ll probably need extra staff as well, and all these equate to more overhead costs.
You may also decide, like some traditional chip shops, to focus heavily on fish and chips, with a range of side dishes such as mushy peas and a few alternatives to fish like pies and sausages. You might offer a choice of fish – favorites include Cod, Hake, Plaice, and Haddock, etc. Note that the more encompassing your menu, the more people your shop attracts, and that equals more income and profits.
The Average ‘Spend’
To properly analyze the amount of money a shop can make, you have to also make an estimate of how many items each customer might typically buy. As part of the research, notice and compare it with what happens in other fish and chip shops. For example, you may estimate that, for every 20 customers who buy a portion of chips at £1.95*:
- 4 will have fish or a similarly priced item @ £4.50 each = £18.00
- 6 will have a pie or a similarly priced item @ £2.75 each = £16.50
- 11 will have a soft drink @ £1.00 each = £11.00
- 4 will have a hot drink @ £1.50 each = £6.00
- 5 will have curry sauce @ £1.45 each = £7.25
- 2 will have mushy peas @ £1.45 each = £2.90
- 2 will have a buttered roll @ £0.65 each = £1.30
Based on the above estimates and prices, you would receive £39.00 from these 20 customers for the chips sold plus £62.95 for the other items, giving a total of £101.95. £101.95 divided by 20 customers = £$5.10 average ‘spend’ per customer.
The time a shop starts and stays open will dictate the customers the shop attracts and its income. Lunch time and the early evening are the busiest times for most fish and chip shops.
For shops located in a tourist region, or in an area where there is a constant flow of people (for example a busy shopping center), they may find that there is a steady trickle of demand throughout the day. If, however, most of the customers are nearby office or factory workers, there may be little or no demand between traditional meal times.
Not everyone wants mammoth portions, but then again not everyone will enjoy smaller sizes. A lot of fish and chips shops offer several different portions sizes and ensure they have the fish and chip packaging to match so that it always looks well presented. Also, note that these are priced differently so that customers always feel like they’re getting the best deal without you losing out on profits. All these also influence the profits a shop can generate.
Pros and Cons of Owning a Fish and Chip Shop
If you’re looking to start up a takeaway food business, then you’ve probably already thought about starting up a chip shop. This isn’t always the easiest business to get into, but with enough know-how and perseverance, you can become a real success! Below are some pros and cons of starting a fish and chip shop:
Pros of Owning a Fish and Chip Shop
If you’re within the shores of the UK, you are never more than 70 miles from the sea (the furthest possible inland distance). This means fresh fish can be ferried from the coast to anywhere in less than a day. It is no wonder then that fish and chips have endured as one of the nation’s favorite dishes, and fish and chip shops can be found in every town from Land’s End to John o’ Groats.
Today, Brits eat a staggering 382 million fish and chip meals every year, with 167 million of that figure accounted for by portions of fish and chips. Owing to that, owning a fish and chip shop seems a sure-fire way to capitalize on our bountiful coastal waters and ravenous appetites.
Low Operating Cost
Menus of fish and Chip shops are quite similar and smaller, and operating costs are lower. Opening a Fish and Chip Shop requires less upfront capital. The maintenance cost of the rented space is shared equally amongst all the restaurants operating in the same area. The costs involved in opening a Fish and Chip Shop are lower than brick and mortar restaurants.
Without any additional marketing efforts, Fish and Chip shops engage and attract customers. If you are unsure about entering into the standalone restaurant business but have an ardent desire to test your restaurant concept, starting a Fish and Chip Shop is a better bet. It is an excellent platform for standalone restaurants with low-profit margins for captivating heavy footfall and boosting overall sales.
Lower Labour Costs
Since the space needed for a Fish and Chip Shop is generally smaller than standalone restaurants, the requirement of staff is also less. Takeaway services reduce the manpower requirement for operators.
With fewer servers and minimal interaction, service in Fish and Chip Shops only requires swift order management and faster delivery. When compared to a full-service restaurant, the number of staff in fish and Chip shop reduces to only the ones taking the orders and preparing the food items.
Cons of Owning a Fish and Chip Shop
You may find your profitability is affected by the weather. Most static fish and chips businesses in well-chosen locations benefit from a steady income stream all year. This is demonstrated by the fact that over 20 percent of people visit their local chippy every week.
But, if it is tipping down with rain, for example, consumers may be unwilling to walk in for you to prepare their order. However, you should be able to make up profits in the summer and at busy events, when you can encourage people to make spontaneous impulse purchases with the smell of your delicious offering.
According to reports, there are over 10,500 fish and chips outlets all over the country; they outnumber popular fast food chains, such as McDonald’s and KFC. Businesses serving the same audience a variety of similar products may be in constant fear of cannibalizing their businesses, due to competitors’ presence.
Customers have a variety of options to choose from, and they might choose a different brand based on either the product or the value pricing. This significantly impacts the overall sales of a shop in the industry. The restaurants serving exclusive food options also need to cope by adapting to the latest trends, evolving customer tastes, and offering value-based pricing in order to stand out and shut the competition.
There is a limit to the amount of stock you can purchase and transport, and the number of staff members you can employ to work alongside you. This could mean you have to stop trading on a particular day while demand is still high.
The profit margins in this business are higher due to low operating costs, but there are possibilities that your business would get overlooked. However, it also depends on the goals you have for your business and the risk-to-reward calculations you are prepared for.
People love eating fish and chips served from the many thousands of takeaway and eat-in fish and chip shops in the UK. As with any business, you should write a thorough and detailed business plan for your fish and chip shop before committing to anything.
Once everything is up and running, you may find that there are areas that you could improve, things you can do better, and other products you could sell. Do not be afraid of change, in fact, this could be the one tip that ensures your business’ success. Be willing to make key adjustments in order to cater to your customers and ensure that your company continues to thrive.