Chef says city's soul in peril, fears 'zombies' after Calombaris' fall

Raymond Capaldi remembers a time when Melbourne was, plate for plate, the world’s most vibrant and creative culinary city.

It was 20 years ago and the Scottish-born Capaldi, already a globetrotting chef of international acclaim, could have worked anywhere. That he came here said as much about the rude health of Melbourne’s restaurant scene as Capaldi’s desire to introduce a new audience to his gastronomic talents.

Not long after he arrived, he took on a teenage apprentice named George Calombaris.

The Age caught apprentice chef George Calombaris learning how to flambe salmon at the Sofitel in 1997.Credit: Sandy Scheltema

Today, Capaldi no longer works in restaurants. His kitchen is in an industrial precinct in Bulleen, where he cooks pies for a living. He misses the restaurant scene but fears what it is becoming, with Calombaris' ignominious exit and the closure of a dozen eateries which traded off his name.

He says the city hasn’t just lost some good restaurants; it is losing a part of its soul.

“I came to Melbourne because of my love for food,’’ he says. “Melbourne taught me that you need to make it better and challenge yourself. Now, it feels like everyone is zombies, thinking ‘what is going to happen next?’ ”

It is likely that most of Calombaris' eateries will not be closed for long. The KordaMentha team handling the liquidation of Made Establishment, the cash-stricken company which owned Calombaris’ flagship Press Club restaurant, his Hellenic Republic Greek tavernas and the Jimmy Grants souvlaki joints has received expressions of interest from about 80 potential buyers.

As of Friday, the parties were close to reaching in-principle agreements for the sale of some of the Jimmy Grants outlets and three restaurants.

But beneath the public opprobrium and bitter industrial politics of the wage scandal which engulfed Calombaris and the company he part-owned, an industry essential to Melbourne’s cultural identity and the national economy is in deep trouble.

Angie Giannakodakis worked with George Calombaris at the Press Club.Credit: Gary Medlicott

For many years, Angie Giannakodakis gave the Press Club its human touch. While Calombaris, by then a young chef on the rise, ran the kitchen, Giannakodakis deftly worked the front of house, putting at ease diners forking out two-hat prices for Calombaris’ Greek-inspired creations.

Giannakodakis is now back at university studying an MBA. She too thinks the city’s celebrated dining culture is under threat. People have less money to spend on food and the convenience of home delivery means they are more likely to match their main course to a Netflix selection than a bottle carefully chosen from a restaurant cellar.

She says the industry is also to blame, noting the lack of regulation which allows anyone willing to stump up the cash to get the keys to their own eatery. Part of her motivation for going back to school is to be part of the solution.

“I love this industry,’’ she says. “I wanted to arm myself to fix this. I’m not talking about my shop, I’m talking about the bigger picture.”

The morning after Made was placed into voluntary administration, prominent restaurateur and business owner Chris Lucas called for a fundamental rethink of how the industry operates.

In an interview with Triple M radio, Lucas decried the “lynch-mob mentality” which saw patronage to plummet at restaurants associated with Calombaris, despite Made Establishment reporting its own underpayments to the Fair Work Ombudsman and making good on the $7.8 million it owed employees. He called for an Accord-style summit between government, unions and restaurant owners to address a looming crisis within the hospitality industry.

George Calombaris eyes the future at Reserve in 2003.Credit: Nicole Emmanuel

The essential problem facing restaurants is that their costs are rising and customers are not willing to pay more for food. It is a classic case of being stuck between an unstoppable force and an immovable object and according to Restaurant & Catering Association chief Wes Lambert, when combined with extraordinary events including the drought, the bushfires and coronavirus, it is driving the industry to the wall.

Lambert says that a decade ago, restaurants reported an average profit margin of between 10 and 15 per cent. Since then, wages under the Restaurant Industry Award have risen 36 per cent, rents are up between 35 to 60 per cent, food and beverage costs have doubled, electricity costs are up 150 per cent and gas is up 50 per cent.

Over the same period, prices charged by restaurants have hardly budged. When Calombaris opened his original Hellenic Republic restaurant 12 years ago in Brunswick East, the set menu was $58. When he worked his final shift before this week’s closure of the Hellenic Republic in Brighton, a comparable set menu was priced at $65. The increase is well below the current, anaemic rate of inflation.

The reason for this can be found in the latest RCA survey of its members, in which 55 per cent of respondents cited their inability to raise prices as the single biggest issue facing an industry that has swelled from 15,000 eateries at the start of this century to more than 50,000.

“There is only one place for the pressure to be relieved and that is your profit margin,’’ Lambert says. The bottom line, according to the most recent IBISWorld report, is that Australian restaurants are operating on an average profit margin of 4.5 per cent. This makes today’s restaurant at best a marginal proposition.

We have lost soul and there is going to be more. Prices have to go up. There is just going to be carnage all over.

Raymond Capaldi

Lambert offers two solutions, each unpalatable to a market that craves cheap, diverse food; restaurants need to charge more and there needs to be “consolidation” in the industry. He is also pushing for an overhaul of the Restaurant Industry Award to simplify the labour classifications, pay and penalty rate provisions at the heart of the wage issues which hurled Calombaris from the frypan into the fire.

“There will certainly be some consolidations in the industry because many of these external forces can’t be changed,’’ he says. “We are not advocating the award rate goes down. We are telling restaurants they need to increase their prices.” The message for diners is clear: it’s been a long, long lunch and now, we need to settle the bill.

Raymond Capaldi fears for the health of Melbourne's renowned dining scene.Credit: Simon Schluter

“It’s the consumer, they don’t get it, they want everything for nothing,’’ says Capaldi, who says the price for a main course at Fenix, the Richmond restaurant where he worked alongside Calombaris, is little changed from what it was 20 years ago. “We have lost soul and there is going to be more. Prices have to go up. There is just going to be carnage all over.”

Stevan Premutico, a technology entrepreneur who made his fortune through Dimmi, an online reservation system for restaurants, is another with serious concerns about where things are heading. “Never have I experienced a time where the industry was this fragile, this uncertain,’’ he says. “Restaurateurs should not have to decide between paying fair and going bust.” Premutico hopes that his current project, an app that enables restaurant diners to order and pay for their meals on their phones, will help restaurant owners reduce their wages bills.

None of this provides an alibi for any restaurant owner who underpays their staff. The collapse of Made Enterprises represents a stunning denunciation of Calombaris, Australia’s first celebrity chef to be cancelled by his own customers. The death knell for the company came after New Year, when the twin impact of the fires and coronavirus wrecked what remained of bookings and sales. There is no question however, that if not for the wage scandal, the restaurants would be open today. Made chairman Radek Sali describes the damage as "irreparable''.

The Fair Work Ombudsman assessed that between 2011 and 2017, Made underpaid each of its employees, on average, about $2000 every year. The repeated breaches flowed from a miscalculation of overtime owed to salaried workers. The ombudsman accepted the underpayments were unintentional.

A former Made host describes a hard-bitten management culture which, at the time, was typical for the hospitality industry. “George was nothing but lovely to me when I was there but the direct management culture was not as kind,’’ the former host says. “We were blatantly told to clock off at certain times even though we were still expected to work.

Major investors Calombaris and Radek Sali at Jimmy Grants in Fitzroy in 2016.Credit: Paul Jeffers

“Most of us had only ever known working in hospitality so thought being overworked, underpaid and constantly abused by managers and the public was just what work was. I don’t know what the answers are but I'm glad there’s finally a dialogue happening.”

The irony is that, unlike most wage scandals, Calombaris and Sali, initiated the conversation.

In 2015, a Made staff member complained to the ombudsman about being underpaid. Yet it was Sali and Calombaris’ decision two years later to open their books to the ombudsman which unleashed the forces which have now cost Calombaris his TV career, his business, his Toorak home and now, about 500 staff their jobs. It has also cost Sali a fortune.

After financing Calombaris’s buy-out of his old business partners and taking a 50 per cent share in Made, Sali footed the bill for the unpaid wages. Since late last year, he has loaned the business an estimated $2.5 million to keep it afloat. As late as Monday, just before Made went under, he tipped in a further $340,000 to pay staff and suppliers. All up, he has sunk $25-$30 million into his three-year partnership with Calombaris. He is unlikely to get any of it back.

Sali, a former chief executive of Swisse, describes the past few weeks as his saddest and most challenging time in business.

"This has been deeply felt,'' he says. "We did everything in our power to try to avoid this result. Sadly, my good friend George has carried a huge amount of the burden and things have not been much better for our extraordinary team at Made, made of whom are friends, whom I am forever thankful to for doing everything possible to turn the business around."

Any money raised from the sale of Made's restaurants and recovered from plant and equipment is unlikely to be enough to discharge the company's $10 million debt owed to the Commonwealth Bank. Made has no other assets to speak of beyond healthy wine cellars at Elektra – the rebranded Press Club – and its Kew and Brighton restaurants.

Staff have been paid their salaries and superannuation but it is expected that about 100 full-time employees will need to go to the federal government’s Fair Entitlement Guarantee scheme to recoup unpaid leave provisions. The company’s greatest asset, until the wages scandal, was the Calombaris name.

In the months leading up to the collapse, Calombaris was back in the kitchen at Hellenic Republic in Brighton, turning out slow-roasted lamb shoulder, dips and pan fried saganaki. All the other restaurants had been stripped of the overt Hellenic theme which speaks to Calombaris’ Cypriot roots. Among those who shared a stove with Calombaris, there is anger and disappointment it has come to this.

Capaldi (centre) in the Fenix kitchen in 2000. The young chef on the left is Calombaris' MasterChef colleague Gary Mehigan.Credit: Gerry Angelos

Capaldi took on Calombaris at the Sofitel, promoted him through the ranks at Fenix and retains a personal connection to him through his partner, who until this week worked for Made. “He was a little, shaking young kid, someone who had goals, someone who had vision and someone you could teach and who listened,’’ he says.

“We are chefs, not accountants. If we were accountants there would be more successful businesses but chefs are like artists; we can paint the most beautiful pictures but we’ve got no business sense.”

Reuben Davis, the head chef at Elektra, was working on his own canvas right up until the night the restaurant closed. “It was my food by the end of the Press Club,’’ he says. “I wanted to do him proud and do the team proud and be confident with it. I was super excited as a young chef and I’m very grateful to George.”