Restaurateurs risk becoming main course: Receivership is the dominant trend in the restaurant business, Emily Green reports

THE WORD 'closed' is stamped across half a dozen entries in Egon Ronay's Cellnet Guide 1993 Hotels and Restaurants, published today. This is hardly the final count.

Andrew Eliel, editor of the guide, said: 'There will be quite possibly another half a dozen that don't have 'closed' stamps that may not be around when we're actually in the bookshops.'

However, doom merchants stalking the catering industry should brace themselves for the unthinkable: good, or at least promising, news. Mr Eliel finds the number of closures relatively low and points to a healthy crop of openings, mainly in London.

Figures from Sheffield appear to bear out the optimism. The statisticians who keep track of VAT registrations for the Department of Trade and Industry say that while de-registrations finally outstripped registrations in 1991, the growth was relatively modest in boom-time and the swing is minimal compared with many other sectors.

And the restaurant business appears to have become even livelier since the Ronay guide went to press in August. Star newcomers in London in the last month include Ransome's Dock in Battersea and the Lexington in Soho. Tomorrow, we will finally see the reincarnation of Chez Max, in the new form of Le Petit Max, run by the identical-twin hedonists, Max and Marc Renzland in Richmond.

Yet this healthy crop is born of an extremely unhealthy situation. VAT registrations will not reflect the number of restaurants trading in receivership.

The accountancy firm Touche Ross reports 304 receiverships and administration for good-sized caterers in 1991, compared with 144 in 1990.

In short, young restaurateurs are snapping up expensive properties cheaply from receivers.

The Lexington was put together by Martin Saxon, a veteran restaurant manager, for a mere pounds 75,000. He said: 'The banks were very unhelpful. Restaurants used to be deeply sexy in the Eighties. They're not now.' He raised the finance through friends and family. He did not need a massive bank loan because taking over the property was unnaturally cheap. He inherited the premises of Sutherlands, which opened in Soho in 1988. Almost immediately, it shot to a top rating in the Good Food Guide and was starred by the Michelin guide. It closed this summer when the bank abruptly called in its overdraft.

Compared to Waterloo Place in Edinburgh, Sutherlands was lucky. Waterloo Place was arguably the most popular restaurant in Edinburgh. Two people could eat and drink well for pounds 50 in its vaulted Georgian dining room, sometimes having to book three weeks in advance. Yet nine months after it opened in July 1991, it was closed at the behest of its greatest creditor, Allied Irish Bank.

According to the owner of Waterloo Place, David Baird, the bank promised a loan to purchase the freehold in October 1990, but procrastinated for nine months before turning over the funds. Locked into the deal through commitments to the leaseholders, Mr Baird proceeded with pounds 100,000 of refurbishment work. When Waterloo Place opened in July 1991, he was left with pounds 60,000 extra in legal fees and interest payments.

'After three quarters, we were heading for pounds 420,000 a year turnover, so we decided to go back to the bank to reschedule the loan to take in the pounds 60,000,' Mr Baird said. 'Another survey was commissioned using the bank's surveyor, the same one who had originally valued the property. After valuing it at pounds 350,000 before we purchased it, when it was in terrible shape and trading badly, he valued it at pounds 340,000 after we had spent pounds 100,000 on it and were trading at pounds 10,000 a week.

'I was told that if I carried on trading, I would be fraudulent, because I was trading insolvently,' he said.

Mr Baird calculates his personal loss at pounds 100,000: 'I've lost my house. And after 20 years of work in catering, I lost my business.'