Restaurateurs facing rising costs pressure

More than 80% of restaurant operators identify rising costs as a major challenge in running their business according to an American Express survey.

The survey reveals restaurant owners are becoming increasingly concerned about food prices, exacerbated up by the Queensland floods and Cyclone Yasi, in addition to rising power and water costs. Reduced consumer spending, staff wages and the skills shortage are also major concerns.

John Hart, chief executive of Restaurant and Catering Australia, says the floods will compromise restaurant owners’ ability to source quality produce and manage escalating costs.

Michael Fingland, managing director of turnaround specialist Vantage Performance, says restaurant owners were facing price rises long before the Queensland floods.

Fingland says the restaurant industry has few options with regard to alleviating cost pressure, unlike manufacturers who can often review their supply chain to make savings and protect their profit margin.

“There isn’t much scope for restaurateurs to alter their costs – there’s only three options. They have to absorb the food price rises, pass them on or create a point of difference for their restaurant,” Fingland says.

According to Fingland absorbing food price rises can hurt already narrow profit margins and leads customers to question the sustainability of the business.

But passing the rises onto consumers might not be possible either, particularly for restaurants that are struggling.

“We recommend to do what you can to make the business different from its competitors but that can also be hard for restaurant owners,” Fingland says.

Fingland identifies ways restaurant owners can create points of difference:

• Focus on creating a unique atmosphere, whether that’s with a theme or a high-end feel.
• Look at your local vicinity and try to choose something that will be unique. For example there’s no point establishing an all-you-can-eat bar if there are already three in your immediate area.
• Don’t use price as your point of difference because it’s not sustainable.
• Invest in good quality training for your staff; very few venues can claim their staff have been professionally trained and it makes a huge difference.