Open and shut case

For the first time since records began, the rate of closure of businesses exceeded the opening rate

It is surprising how many people have commented about the number of new restaurant openings this year, when the statistics show, for the first time, the numbers are going backwards. Most would see a rash of high-profile openings, not feeling the large number of traditional, small, strip-shop businesses that have closed. This masks an important sign of the times.

The closures are generally of single unit operators with eight-to-10 staff that cannot afford to stay open. They are not getting the revenue increases necessary to cover the increased cost of wages and occupancy costs. The openings are professional operators on their third or fourth business, able to generate some economy of scale back-of-house and have established systems.

There are some upsides to this trend. The industry is professionalising and larger business units may drive higher returns. The danger is that the small ‘mum-and-dad’ operation may no longer be viable at all. This is a case of the legislature changing our business forever. Ridiculously high wage and penalty rates, in particular, mean that an industry that has survived through thick and thin will look very different in the future. It will be very interesting to see where things settle.

John Hart
CEO, Restaurant & Catering

 

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