Retail figures show tough times for restaurants

November 12, 2009
For Immediate Release

Retail figures indicate tough times continue for restaurants

Top end restaurants will have to adapt or possibly close their doors if retail figures released today continue at present levels.

In the September quarter, sales for cafes and restaurants were down 2.6 per cent or $26 million.

Eugene Sparrow, Director Business Advisory Services for Chartered Accountants Grant Thornton, said with many restaurants and cafes in the middle and lower end of the market thriving, losses incurred at the top end must be even greater than shown in the September figures.

“Diners are definitely voting with their wallets. Most of my clients in the takeaway and lower end are booming as people opt for takeaways rather than dining out, or choosing more price conscious restaurants rather than top fare.

“Some top-end restaurants have changed and possibly need to adapt more, while others have been slow to move. With the golden months of November, December and January already upon us, it is almost too late for some to make the necessary changes.

“For these restaurants there is both the short-term and long-term picture. Short term they need to attract the clientele that are now in the market, be it for casual dining, Christmas parties, end-of-year functions and the like, while for the longer term it is during these summer months that many outlets in the hospitality industry squirrel away for the tougher trading conditions of winter.

“Many restaurants missed out on building this buffer last Christmas, so their finances are close to running on empty,” he said.

Sparrow said that there are many things restaurant owners should be considering, if they have not already done so:

Actions that restaurants/bars need to take:
• Loyalty programmes – get the regulars coming in.
• Happy Hours – everyone is looking for a bargain, but keep an eye on your margins
• Smarter menus – different fare at a lower price, again maintaining margins. For example, lunches with nothing over $15 or a set menu evening meal with three courses for $35.
• Review the drinks menu, what is not selling? Where are margins being squeezed? Take advantage of some great wine prices to offer more profitable selections.
• Work with your bank, keep them informed and provide them with timely and accurate information. Banks hate surprises.
• There has never been a better time to take your banker out to lunch.
• Renegotiate rent terms, especially where rent is linked to turnover and you are looking to maintain turnover at tighter margins.
• Don’t stop advertising & marketing. “Stopping advertising to save money is like throwing a clock out the window to save time“. But take the time to ensure you are targeting your audience, a scattergun approach will not get the desired outcome.
• As it is unlikely, or at the very least difficult, for you to get a lot of new customers at this time, it is imperative that you (& more particularly your staff) love the ones you already have.
“Look to improve the quality of your service, take the opportunity to employ high quality staff at good rates.

“It’s all about preserving margins. People are still eating and drinking, but being smart about it. Instead of two $35 mains and a bottle of wine, it might be a shared pizza with wine – and a saving of $50 to boot.

“Nobody is too sure how fast New Zealand is going to lift out of this present slump. What we do know is that many companies have already cancelled or down-sized their Christmas parties. And we also know that wages in New Zealand have hardly moved over the last year and in some cases have declined.

“Every dollar that a restaurant can save now could be particularly valuable if we are still battling our way out of recession and into prosperity when winter arrives next year,” he said.

ENDS

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