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How can restaurants survive a tough economic climate?

Retail Capital chief executive Karl Westvig. Photo: Supplied

Retail Capital chief executive Karl Westvig. Photo: Supplied

Published Nov 15, 2018


CAPE TOWN – Businesses in South Africa are grappling against the rising cost of living and the state of the economy. Even the country’s thriving foodie scene is taking a hit.  

Retail Capital, which provides funding to small and medium-sized enterprises (SMEs) across South Africa, has noted that many restaurants are taking loans to see them through trying times. 

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It might seem easiest to increase prices to cover cost increases associated with petrol and VAT, but Retail Capital chief executive Karl Westvig says that this would be the wrong move. As with any business, raising prices only pushes the local customer base away, making for an unsustainable business model outside of a busy tourist season. 

“In these tough times, consumers are either reducing their restaurant visits or scaling down to just main courses and drinks ‒ avoiding starters and desserts to reduce the overall spend,” says Westvig. 

“If you want to attract business, then you need to show value. Benchmark your price points with your competitors and see how you compare. Many great locations outprice themselves, which may be acceptable to foreign tourists but erodes the local, regular support base.”

Westvig says that restaurants can take a cue from retailers in this regard. Retailers frequently develop promotions to get feet through the door, and then use the opportunity to upsell by offering additional value in-store. 

“The restaurants that are busy right now are bundling burgers with drinks or running other attractive specials. And they’re letting people know about these specials through social media platforms or flyers and adverts. If the special and the quality of the product is good, this leads to more referrals,” says Westvig. 

Last year’s Eat Out Retail Capital New Restaurant of the Year, La Petite Colombe, has navigated this balance successfully. 

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“They had the benefit of being in a recognised location and the backing of a larger brand, having the La Colombe and Foxcroft credentials behind them,” Westvig explains. 

“But they have also been very active in promoting themselves. The high quality of food and service in turn leads to word-of-mouth and more social media sharing.”

Scot Kirton, chef proprietor for the La Colombe Group, says that the key to adding value is to never compromise on quality. 

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“There are many other ways to cut costs, but opting for sub-standard produce is your first step to failure,” says Kirton, adding that importing less, and instead supporting local producers, has helped keep costs down to enable the restaurant to offer affordable dining options.

“Restaurants have had a tough time in Cape Town of late and we have needed to adapt to keep our restaurants running. At La Petite Colombe, we offer amazing value-for-money winter specials which showcase local South African produce.”

Westvig believes that restaurants will continue to succeed, despite turbulent economic times, if they are experiences more than simply places to eat. They must offer value, excellent service, and ambience. 

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“To be a top restaurant in South Africa, it takes an exceptional talent who executes well consistently. We have world-class chefs and restaurateurs and to break into the top echelon requires experience and great dedication to the trade,” he says. 

Restaurants must also be cautious of unnecessary spending, consider their location wisely, develop a compelling theme and menu and, most importantly, the owner must be directly involved in managing service and delivery.  

Kirton adds: “This is a hard industry. You need to be hands-on every day in your establishment. You need to have the passion for it and put in the hours to make it work. New restaurants need to be original and offer something unique, ensuring that the kitchen concentrates on flavours that will excite diners.”

But it is also important to acknowledge the service side of the restaurant, which is too often forgotten because “like the kitchen, the front-of-house needs a presence as well”.

Content supplied by Retail Capital.


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