Restaurants falling into the red
Restaurants in Bermuda on average are not just breaking even - they’re suffering large losses.
New figures from the Chamber of Commerce restaurant division showed just how much the eating out sector has been hurting in this economy, and as international businesses downsize.
While they managed to do okay as a whole last year this year has seen the public slam the brakes on dining out.
In 2010 the restaurant industry on average managed to achieve a net profit of 1.8 percent of sales, according to the COC figures.
But in the first six months of the year, based on sales and cost of sales, restaurants were deep in the red, showing a net loss on average of 2.5 percent of sales.
COC restaurant division head Phil Barnett said a number of restaurateurs are just hanging on, not wanting to close because they would for sure lose their livelihoods.
Mr Barnett’s Island Restaurant Group Ltd (IRG), of which he is president, owns Barracuda Grill, Pickled Onion, Hog Penny and the recently rebranded Victoria Grill.
He said he was very pleased with the lunch trade now at Victoria Grill since the rebranding from Latin to a city bistro-style eatery based on customer feedback.
“Survival is all about making sure you stay relevant and keep on offering what people want,” he said.
The Fresco’s group of restaurants was also affected by challenging economic times; Aqua at Surf Side was closed, while Opus Café and Lounge was rebranded and Silk and 64° Bar & Grill at Port Royal changed ownership.
A spokesperson for Little Venice Group said there were no plans to close any of its seven restaurants but restaurant manager Costanzo DiMeglio said two months ago there were definitely fewer business executives out dining and those that were, were spending far less.
He said he has had to “drastically” change his wine list to include more lower priced choices.
“What isn’t in trouble in Bermuda right now?” Mr. Barnett said. “But the recession and decrease in customers due to work permit losses has had a real knock-on effect in the industry.
“It started happening in early 2009 when recession first hit. And then the type of people who left Bermuda were very much high-spending people with lot of disposable income.
“That loss of disposable income is having an affect across the economy.”
Mr Barnett said in order for the economy to be revived and his industry to be able to return to profit as a whole, he felt “term limits need to be completely and utterly shelved so that business is confident again they can have the staff they need here.”
“Those restaurants that are breaking even will be patting themselves on the back!” he said.
He said the cost of sales on average is 25 to 30 percent of revenue, showing how tough the restaurant business is and how razor-thin the margins are.
“In this industry if you get a three percent profit margin it means you have done amazingly well,” he said.
He said the industry profit average in North America is four percent before tax.
He said Christmas was three weeks of brisk business. “Then we roll into the slowest months of the year - January, February, March.”
Mr Barnett said some restaurants had bank loans but many are using supplier debt, where they pay food and drinks wholesalers only 30 days after receipt of goods.
He estimated there may as much as hundreds of thousands of dollars in debt owed by restaurants to suppliers.
Mr Barnett said he would not be surprised if a number of restaurants and retail establishments closed down in the New Year.