Melbourne restaurateur dishes on industry wide crisis

The owner of a once-popular restaurant in Melbourne says that business is so bad he has just 48 hours to decide whether he should liquidate.

EXCLUSIVE

The owner of a once-popular restaurant in Melbourne says that business is so bad across the industry that he is considering throwing in the towel for good.

“I’m deciding in the next 48 hours if I liquidate,” the restaurateur, James*, who wished to remain anonymous so as not to impede the possible sale of his business, told news.com.au.

“I’m going to try and sell the business to make as much as I can, to pay as many people as I can.

“I’ve not taken a wage for two years. I’ve had to pump money into the business.”

It’s not an issue unique to James. Across Australia, hospitality venues are struggling and dozens have gone under in the past year.

Only one industry is in more dire straits than hospitality, and that’s the construction sector, according to numbers released from the corporate regulator, ASIC.

“We are talking 30 to 50 per cent down in an industry with margins of two to five per cent,” the hospitality insider added.

“I know restaurant groups that are down 30 per cent (in revenue) across their company, it’s not survivable in this industry.

“There’s places that are empty and are down 60 per cent revenue.”

James is in the process of trying to sell his business. He said before Covid he would have listed it for around $900,000 but now he will be lucky to get $295,000 for it.

That “will leave me with nothing and personal losses of approximately $300,000”.

Botswana Butchery, which went bust earlier this month, charged up to $500 for steak.

For James, who has run his restaurant for 19 years, the outlook is bleak.

“You just have to walk down a strip on a Thursday night to see why,” he lamented.

Where once diners were in abundance, now restaurants are scrapping over what few remain to try to stay in business, according to James.

“There’s less customers going out so there’s more competition,” he said.

“If I spend a dollar on marketing, all of a sudden, I need to get $30 or $40 back to break even.”

The rising cost of everything is driving him to his knees too.

“Look at a bowl of chips, the simple potato,” he explained. “We had a drought of potato last year (and) it went from $35 a box to $80-$90 a box.”

From his own anecdotal experience, “there’s probably a small segment (of customers) that will spend $100 on a Saturday night, a lot of their friends won’t come out anymore because they don’t have any money”.

Speaking to his friends in the hospitality industry, he said they’ve been noticing “that someone who came in twice a week is (now) coming in once a week”.

Do you have a similar story? Get in touch | [e-mail]

Food from Legacy Hospitality Group, which went bust last year.

Hospitality venues need to charge more, but they can’t, James said, because then they’ll drive what remains of their customer base out the door.

Instead, many have pushed their discounts higher in hopes of attracting customers.

“You’re looking at a 30 per cent drop in what we’re charging for happy hour to try to get people into the business,” he said.

But at the same time, the price of a keg of beer has risen by 30 per cent.

That means venues like James’ restaurant are just losing money at happy hour.

“It’s just an exercise in loss making,” he said.

It comes as earlier this month, after 18 years in business, Asian fusion restaurant Gingerboy shut down blaming “market pressures since Covid lockdowns”.

Top Melbourne chef Teage Ezard, who was behind Gingerboy, said in order for restaurants to be viable customers may need to pay as much as $60 per plate.

“Wages have increased, power and gas, amenities have all increased – and the menus have not,” Mr Ezard he told Nine News.

“You pay for what you get … and I think … that’s what it costs,” he added.

News.com.au has also reported that fine dining restaurant chain Botswana Butchery, which sold steak for as much as $500 a piece has gone bust, but is still currently trading as administrators try and turn its fortunes around.

A number of other restaurants have joined the growing pile of corpses, including Japanese chain Sushi Bay, Elements Bar and Grill and three stores in Sydney restaurant franchise Bondi Pizza.

Late last year, arm of major Victorian catering business, Legacy Hospitality Group, went bust with debts in excess of $1.7 million.

[e-mail]

Originally published as Melbourne restaurateur dishes on industry wide crisis