Restaurants battle for survival amid cost-of-living pressures
Good Food recently reported on the turmoil and angst within the hospitality industry as restaurants battle for survival.
Cornersmith owner Alex Elliott-Howery’s announcement that she would be closing her popular Sydney venue in February opened the floodgates for others in the industry to vent their frustrations.
Elliott-Howery told Good Food, “People were so thankful that we explained the struggle. They felt just like we did: that they were the only losers who couldn’t figure it out, that the margins are getting tighter, and it’s so hard to make it work.”
Margins are getting tighter and tighter.
According to the Restaurant and Catering Industry Association, while profit margins have traditionally sat at around 10 per cent, only 19 per cent of venues hit that mark in 2021.
Today, restaurants are just trying to break even, crippled by inflation and the cost-of-living crunch which has seen operating costs skyrocket, but customer spending decline.
“We’re at a pivotal point where the solo groundbreakers just can’t survive anymore, and it could ruin what everyone loves about hospitality,” Alex Prichard, Icebergs Dining Room & Bar culinary director said.
“Unless you’re a tiny little shop with barely any staff or you are part of a bigger restaurant group, I don’t know how anyone survives,” Elliott-Howery told Good Food.
Pritchard said, “Everyone is facing similar pressures. We are lucky that we have 21 years of reputation and a client base to keep us going, but the more you talk to people in the industry, the more you hear it.”
Icebergs has changed its menu to bring in smaller paying customers.
According to the Australian Securities and Investments Commission (ASIC), insolvency claims in the accommodation and food services sector rose by 92 per cent in the December quarter compared to the same period in 2022.
Interest rate hikes have caused enormous pressure.
Kazuki co-owner Saori Tsuya told Good Food after the 13th rate hike, “We got calls for cancellations straight away. People are switched on to economic changes and they make decisions accordingly.”
The two-hatted restaurant owner said she understands the situation.
“Dining out is one of the first things people let go as they become more conscious of their budget. I would be doing the same.”
As stated, restaurants are not only dealing with the same cost hikes in rent, power, insurance, interest rates and produce price hikes that all Australians are facing, they must also deal with dwindling numbers.
Add payroll, taxes and increased labour costs and the difficulties become evident.
Co-owner of 90-seat Melbourne restaurant Al Dente Enoteca Andrea Vignali said survival is partly based on being attentive.
“We can’t really charge the customer too much more, but our costs are increasing all the time,” Vignali said.
“There’s no quick fix … it’s always hard to repair the car while you’re driving down the freeway,” Ben Liebmann, who was chief operating officer at Copenhagen high-flyer Noma told Good Food.
“But why aren’t we having a conversation around GST relief on hospitality? Why aren’t we having a conversation about fringe benefits tax, about rebates and offsets to future-proof the industry around ESG [environmental, social and governance pillars] or technology?
“Hospitality adds tens of billions of dollars to the economy and employs thousands of people.
“It’s important as an industry, even if you don’t love it like I do. The film industry gets offsets and tax breaks but I would argue hospitality is far more impactful in terms of employment, a sense of community, and a place for changemakers. This industry is vital, more important than ever.”
Good Food gave its five restaurant survival tips. They are:
- Consider technology (including AI)
- Look at menu structure
- Go direct (with suppliers etc…)
- Don’t compromise on training and development
- Comb through expenses
Jonathan Jackson, 27th February 2024
