/ 22 July 2008

Eating on the up, up, up

Though many South African restaurants are feeling the pinch of escalating food and fuel prices and interest rates, others are biting the bullet and cutting back on profits to keep their food affordable.

”Regular customers, who normally came three or four times a month, now come once or twice,” says Mark Sarrilly, deputy managing director of Spur, one of the country’s most popular steakhouse chains. He says Spur is ”still doing fine” but, as in other industries, restaurants are feeling the effects of tough economic times.

Going out for dinner has become too expensive for many South Africans. ”On average people go out less [frequently] and go to restaurants that are less expensive,” says Wendy Alberts, chief executive of the Restaurant Association of South Africa (Rasa).

Since the beginning of this year the association has seen a 24% decline in spending on restaurants.

Tony Twine, analyst and director of Econometrix, says the effects of the difficult economic climate have been ”extremely intense” for South African restaurants.

”There is less and less spending power in households to choose where you want to spend your money,” he says. People therefore cut personal expenses, including dining out.

It’s not only South African restaurants that are suffering from the economic slowdown. Those in Europe and the United States also feel the pinch of global price increases. In a slowdown economists expect the squeeze to affect the middle market greatly.

Twine thinks that burger outlets, such as Wimpy, must be feeling the pinch the most. ”Mike’s Kitchen … is not suffering at all. It’s an upper-middle-class family restaurant and it still seems to be doing nicely. I think this is because it appeals to a clientele with a little more money than people at the lower end.”

The popular takeaway chain, Nando’s, famous for its flame-grilled peri-peri chicken, is feeling the effects of price inflation but, says Kevin Utian, managing director of Nando’s South Africa, the chain is better off than most restaurants.

”Despite the fact that food prices are being pushed … we believe we are in a slightly better position as people swap fine dining for the more casual dining experience which Nando’s offers,” he says.

Nando’s — as with other restaurants — is trying hard to curtail the effect of food prices on its customers.

Rasa’s Alberts says the increase in costs for restaurants ”is terrible”. Higher labour costs, food prices and rentals force these establishments to push up their prices.

She says: ”Every week the prices go up. A year ago a coffee was about R2,50, now it’s R6. A cappuccino was R8, now it’s R12 or R13. Restaurants cannot ensure stability on their menus. Even to renew the menu all the time is expensive.”

She believes all types of restaurants eventually will suffer. ”In higher-income areas you may see a delay, but in the end all restaurants feel the pinch.” Middle-class people also frequent higher-class restaurants and this clientele is drying up as spending money disappears.

At Auberge Michel — one of South Africa’s finest French restaurants and the first in the country to attain a five-star rating — times are not so tough yet. Michel Morand, the restaurant’s chef, says: ”We don’t feel the pinch at all. People have become more conservative, but we are very privileged, we are focused on a niche market. There is still of lot of money in our market.”

Though the prices of ingredients go up, Morand doesn’t want to increase his restaurant’s prices every week or two. ”Especially with certain items that are already expensive, like caviar. We decided to accept a small knock on our margins and sell it for the same price.”

A three-course meal — starter, main and dessert — at Morand’s restaurant costs between R350 and R400 a person.

For those who can afford it, bon appetit.