'Many restaurants to go bust'

Cape Town - The combination of economic conditions and wage and rental hikes make survival in the restaurant industry a fine balancing act, reckon players.

Nevertheless they remain positive. René Jordaan, operations manager of the Dros Group, says his group is doing well and continuing to grow. But the worst is still to come, he believes.

Ben Filmalter, chief executive of Quantum International Franchising, the restaurant franchise group that owns Mugg & Bean, says the pressure consumers are putting on the industry, because they refuse to pay more while costs are rising, is one of the biggest problems.

He says all franchises are suffering somewhat and predicts that many restaurants will go under this year.

Mugg & Bean, with its 100 outlets, is however still experiencing double-digit growth (more than 20%), especially in Gauteng, but Filmalter observes that conditions are more difficult in the Western Cape.

Dros Group chief executive Hein Krugmann, with 56 restaurants, says frankly: "This is the year of the landlord - landlords will simply have two start lending a hand."

Filmalter agrees and adds that avaricious shopping centres are sometimes "unreasonable" and even "unapproachable", especially in these economic times.

"Normally, when the economy is not so weak, about 10% of your turnover goes to rental, but when rental costs climb to 12% and the restaurant's turnover does not increase accordingly, this is not a manageable percentage," says Dros's Jordaan.

Filmalter stresses that the wage increases for the hospitality industry that come into effect on July 1 will impose even more pressure on the sector.

- Sake24.com

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