Capital Cuisine: What's killing Wellington's restaurants?

Monday, 15 April 2019

Martin Bosley is adamant he's not heading back into the restaurant game any time soon.

'I'm done,' he says simply.

One of the country's top chefs, Bosley retired from restaurants after his Wellington eatery Martin Bosley's Yacht Club went into liquidation in 2014.

He said the experience had left him with no desire to start again.

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'I had 35 amazing years, I don't regret one minute of it,' he said.

'I saw some extraordinary things, went to some extraordinary places, but I've got my life back now.'

The numbers show Bosley is not alone in wanting out of the restaurant game.

'If you're a diner right now, this is the best time to be dining,' says chef Martin Bosley.

According to Wellington City Council data 340 food businesses have either changed hands or opened in the last year.

The constant churn of restaurants in the capital is symptomatic of a business model that runs on small margins, making it especially sensitive to a run of bad luck.

Exactly what the profit margin is depends on the business - and which restaurateur you ask.

With a restaurant's typical profit margin under 5 per cent, it's unlikely owners are in it just for the money.

Restaurant Association president Mike Egan estimated the average margin was between three and five per cent for most restaurants.

Wellington Hospitality Group general manager Jamie Williams said they typically got seven to eight per cent, but their model was aided by its size, which allowed for larger wholesale contracts and a larger pool of staff.

Bosley said he would expect about four per cent, less than the typical return on a termed deposit at the bank.

'There's a lot of restaurants and cafes that I would suspect are only a broken dishwasher away from bankruptcy.'

Bosley said three things were hurting restaurants, high rents, increased wages, and the rising cost of food.

National Restaurant Association president Mike Egan said minimum wage hikes could come out of restaurants' already small profit margins.

'When I opened my restaurant my main courses were $35, I sat 60 people and my rent was just over $40,000.

'When I closed it 13 years later, I still sat 60 people, my main courses were now $45 but my rent was now over $100,000 a year.'

With rents so high, Bosley said meals were essentially being 'subsidised' by restaurant owners.

'If you're a diner right now, this is the best time to be dining.'

Egan said the recent minimum wage rise had left businesses scrambling to cut costs before it hit their bottom line.

As of April 1, the minimum wage was $17.70 an hour.

'We've been advising people to look at their purchasing from suppliers, and rostering,' Egan said.

ANZ analysts in a recent report suggested that a typical hospitality business could see an overall wages and salaries increase of 20 per cent between March 2018 and April 2021.

Sales would need to increase by 7 per cent, or other costs decrease to compensate.

But Egan said he hoped restaurants would avoid putting up prices.

'The worst thing you could do to your business is be out of step with what the customers are expecting to spend.'