I remember when I grew up, farmers used to say that if in your lifetime, you manage to double the land you own, you know you are farming successfully. Nowadays, I think they’ll all agree that you can be seen as a success if you can just retain and maintain what you started with! But this sentiment is true for other industries too. While those producing food are struggling, so does those who prepare and serve food.
Remember MasterChef Australia? We loved watching this reality cooking show and even once hosted one of the famous hosts, Gary Mehigan, on La Motte. The show painted a very vibrant and exciting Australian food scene and I’ve been lucky to experience some of that when I visited the Barossa Valley and McLaren Vale in 2014. I recently read this article though, ‘Groundbreakers can’t survive any more’: Is Australia’s restaurant industry on the brink? by Dani Valent. Running a profitable restaurant is a challenge for many reasons, but according to the article, even those who successfully manage food and labour costs, cut wastage and build a following, now find it difficult to break even. Covid was an easy scapegoat, but perhaps it was just a final nail in the coffin for many businesses that have not been very healthy.
But of course, there is more to the restaurant struggle. People might have rediscovered home entertaining during the various stages of lockdown, but inflation and an ever-increasing cost of living in the last couple of years have people pinching their pennies. It is certainly true in South Africa, but we have poor governance, corruption and an energy crisis to blame. If even the energetic Australian food scene with supposedly less of these challenges, is struggling, perhaps there is more to making a restaurant profitable today.
As interest rates and inflation increase, consumers might be reluctant to spend on luxuries, but having four customers ordering one plate of pasta is not the only challenge for restaurants. They face the same increases when it comes to rent and resources. Add to that the payroll and rising food costs and it makes sense. According to Valent, Australian restaurant profit margins were traditionally around 10% and while eateries at the low or fine-dining end or those who are part of a chain, might have a better chance of turning a profit, mid-range, independent restaurants are not. “We’re at a pivotal point where the solo groundbreakers just can’t survive any more, and it could ruin what everyone loves about hospitality.”
While South Africans experience the same economic challenges, the restaurant and hospitality industry have always benefitted from our popularity as a tourism destination. Are local restaurants experiencing the same struggles as in Australia? According to a 2022 Food Service Market Analysis: “The South African foodservice profit sector recorded sales of ZAR532.5 billion ($32.5 billion) in 2022 and is forecast to record a strong CAGR of more than 7% during 2022-2027.” Quick-Service Restaurants accounted for over 61% of this revenue (2022) due to their popularity among budget-conscious consumers. (Read more)
Despite this growth forecast, restaurant closures are unfortunately also happening in South Africa. Debt, dwindling spending power and rising input costs are also the main reasons for the struggle. International tourists help, but their support is predominantly seasonal and restaurants must be creative to survive the slower months when they depend on local pockets. Mikesaidwhat.co.za has some insights into how the restaurant business can do that. (Read more) Similar to many other enterprises, the focus is on diversification, creating experience-focused offerings and keeping a tight leash on costs. But there are also the soft touches that are essential to hospitality and cover both modern-day marketing and traditional values. Create an effective online presence, ensure a strong digital marketing strategy and get help if this is not your expertise. Stay authentic and memorable when it comes to your offering and hospitality – it is the best way to build a customer base and to ensure loyalty. I recently wrote about collaborations (read more) and they are also important for restaurants. Find ways to collaborate with suppliers, delivery services and even influencers.
Does information like this kill your dream of owning a little bistro where you share authentic dishes while making a decent living? I wish it wasn’t true, but in the current climate, there’s no denying the profitability struggle for restaurants. Perhaps the satisfaction of people enjoying your food and leaving with smiling faces is enough, but regardless, prepare yourself to be flexible, creative, open-minded, frugal with spending and ready to go without a salary from time to time. Having said that, I get excited every time I eat in a restaurant – whether it is my local, an old favourite or an enticing new offering – so, I hope there are still many brave restaurateurs!