There has to be something fundamentally wrong - restaurant closure

[Terroror]

A restaurant we go to quite often is about to closing after two decades in business.

It’s popular, booked out all the time. In fact, I understand it’s had the busiest Christmas period in its history.

Its closing because the business is no longer sustainable to due to rising costs. Not lack of custom - it’s very busy - but energy costs, rates, staffing costs.

A much loved business down the pan.

There really is something fundamentally wrong when experienced restauranteurs with a busy restaurant can’t make this work.

I don’t see much concern from the government.

AIBU?

I agree with the reasons quoted - cost of rent, utilities, supplies, labour etc however it wouldn’t also surprise me if part of this is just people have had enough. Working hard for a smaller and smaller reward. I would imagine the rewards of running your own cafe/restaurant etc aren’t just financial (although that’s the main one of course) but also community, pride, evolving your business l, using your skills etc. When you are just constantly hammered by government, when business people are not respected and entrepreneurs not supported in the end you say enough is enough. I think many business people like this might continue if they thought things are going to change/improve however it’s very clear that things aren’t getting better anytime soon. In fact I think it’s fairly clear that the government will be coming back for more this year.

I think this also applies to people like me, I could work if I wanted, I choose not to and cut my cloth accordingly.

Part of it has got to be employers costs - just the compulsory NI contribution plus the compulsory pension contribution makes an additional nearly 20% on an hourly wage. Its been a huge increase for our own small business and we are really struggling. Add to that the increases in rates, insurances, costs of materials (food prices have gone through the roof as we all know) , and suchlike its no surprise that however lovely they are, however lovely the food is, small businesses are falling like ninepins. And with the latest attack on dividends there aren't any incentives left to take a risk and start a business

Have you offered to pay more for your dinner there?

Would they be so busy if the menu was increased by 30%?

Minimum wage keeps increasing, their ingredients costs will be increasing, their fuel costs, their insurance costs etc etc etc. We keep asking for wages to increase for nurses, police, doctors, minimum wage etc etc etc. We want investment in public services. We want benefits for everyone. We want special care & schooling for every child who doesnt fit into the 'normal box'. Well this is the result, costs for everything go up and those who think they are getting more arent really, because they are no longer paying the same for stuff they need.

Its a vicious circle that will only end when we tear up the political system we have in place which rewards false promises and popularity votes. Mixed government with only the best person doing the best job for the country regardless.

Busy doesn’t pay the bill. more often than not, busy places are under priced, which means more work for less money.
Less busy but better margins is the key, but the balance us hard to find.

2 by me are the same. One closed just after Christmas and had been open 30+ years and always popular/booked out. They just couldn't make the figures work.

The other was a bakery that had been open even longer. That one had been trying different things over the last few years to make it work so had lost it's way/identity a bit. I think they were damned if they didnt try to change and damned when they did.

Neither were "cheap and cheeful". Both charged what should be enough.

Thinking about it, I suspect the local cafe will be gone sooner rather than later too. Again, always busy. They charge £11 for a breakfast which seems fair (Ive never worked in a cafe but it seems like it should be enough to make a profit?) but they have reduced opening times, the menu and staff. They have also become cash only. That might be because of card fees but in ky exoerience is generally because of cash flow issues.

That's the crux - i.e. finding the "sweet spot". You don't know the effect until you do it and then it's often too late if it doesn't work out.

Raising prices by small increments is probably not going to work as you will lose some custom, but your income/profits won't be high enough to cover the lost trade. Also, customers may accept the first time it happens, but when they return a few months later and prices have gone up again, they may not return a third time.

Raising prices by too big an amount and you could lose almost your entire customer base!

Once the damage is done, it's hard to reverse the decision. A regular customer suddenly seeing the prices rise by 25% may never return as it will force them to look elsewhere and they may find somewhere else they prefer and won't ever know that you've reduced your prices again.

Every business is different and will have a different demographic of customers so there's no "Default" sweet spot for all businesses, so changing menus, prices, opening hours, etc will always have to be a "suck it and see" thing.

With our family newsagents/convenience stores, we were open 6.5 days per week, only closed Sunday afternoons, but we closed 7pm evenings the other six days. It's easy to say we should have opened longer and on Sunday afternoons, but we tried, and tried, and tried, but there was too little custom to justify it. We trialled Sunday afternoons for an entire Summer, thinking once customers knew we were open, it would get busier, but it never did. Yes, we had money in the till on a Sunday afternoon, but we quickly noticed they were regular customers who'd have paid their weekly paper bill or bought their magazines/chocolates on Sunday morning or Monday if we'd not been open Sunday afternoon - when we started closing again, those same customers returned to coming in on other days! Classic retail "displacement". We did the same with evening opening, but same result, very little "new" customers, so we stopped again. Over the 20+ years we had it, we also trialled all kinds of different things in the shop, from a National Lottery terminal, to slush machine, to selling lots of different types of things, such as being a Xmas toy catalogue commission agent, selling models after the town's big model shop closed, commission agent for a local coach tour firm, photo developing, etc etc. Sometimes, there simply isn't enough custom/footfall to survive. As for raising prices, we once increased our newspaper delivery charge by just 5p per week and were astonished that so many customers stopped their order - for just 5p - so we had to freeze the delivery charge after that and never risked raising it again!

We are returning to the situation as it was in the 60s or 50s or before.

Which is what people wanted.

That may have been me.

Also when people were asked "What if leaving the EU does make us worse off ?", those that did not shout "Project fear" quite happily said it was a price worth paying for sovereignty.

And business rates.

Business rates charged by local councils are a big issue. I know of a factory in England that made parts for certain equipment. It was successful for decades and even more so during COVID, when parts could not be got from China. Recently the council DOUBLED the rates. Manager of said company sold off some assets to meet the extra cost, and the business continued to succeed. Then the council put the rates up again. This time, there were no more savings to be had and the factory is having to close, with the loss of dozens of jobs. Both central and local governments need to decide if they want British businesses to succeed or not, and be honest about it, thereby not misleading current and future entrepreneurs.

We also had a much loved and very popular local restaurant that had been going for many years, close due to hikes in business rates.

Afterthought: prompted by a PP I just checked and yes, business rates are set by central govt, not councils; the councils just implement what govt decides. So something else to blame the wretched govt for!

I agree, working in hospitality (and more widely in "retail") is considered work for students, people between "real" jobs, low status part time work for women, etc.
In other countries it's a career.

OP, if this is the restaurant in Manchester that recently emailed customers, I fully agree with you. The owners have put in so much of their own money to save it, to no avail. It was always busy but vicious tax rises have finished it off. Now a bunch of young people have lost their jobs. I just wish someone could explain to Rachel Reeves the damage she is doing to the very people her Government claims to support.

Successive governments don't care about small independent businesses. Labour just absolutely hate ALL businesses. Tories hate small businesses and only care about their big business paymasters. We saw it during covid with over 3 million self employed/freelancers/directors excluded from the grants/furlough - that's a whopping 10% of the workforce excluded for no genuine reason. Whilst big business were given personalised/tailored support packages and whilst the general covid grants etc were available to property owners and not the tenants!

Agree with you. Our local town has lots of those “freed up resources”, i.e. empty shops, and it’s getting worse and worse.
Hardly anyone wants to go and seek out that one shop still standing amongst others that are boarded up.

What people who voted Brexit wanted.

Yes. But democracy requires we all get it.

I worked in a cafe during covid (after losing my job from a big firm who pretty much went down the hire and rehire route without comeuppance). The rent they had to find was astronomical and they were tied to the contract for six years (only just got rid of it now, despite the cafe closing years four ago. And the landlord had to approve anyone that they sublet to, and he only seemed to like very naive tenants. You see the same with brewery’s and pub rents.
I have since started my own coffee kiosk type cafe on my own land, so no rent, and no employees. But in the four years I’ve been here my costs at cash and carry or the supermarket have tripled. My prices have gone up 10%. Imagine if I tripled the cost of my coffees - nobody would come. I very nearly closed before Xmas.

My hairdresser closed recently and they said that their business rates and rent was £6K a month before they factored in any other costs such as stylists, energy, shampoo/materials etc.

You have to cut and colour a lot of hair to make a profit on that.

Don't councils set business rates?

High rents are probably a factor, however we also have the amongst the highest electricity prices in the world thanks to Net Zero, which is why we are losing all our industry, too. It’s a sad state of affairs watching our economy slowly collapse whilst China is busy building coal fired power stations and producing what we used to produce.

Is this tnq?

I think they’re responsible for billing and collecting, but it’s the central government that sets the rates.

It's nothing to do with net zero.

Electricity prices are linked to the price of gas

https://www.greeniow.org.uk/why-uk-electricity-prices-are-tied-to-gas/

Going net zero with less reliance on fossil fuels should make energy cheaper.

I have a Ltd company as does my H and he also has separate self employed status too for separate work . It’s not an open and shut case that ‘all’ of those people couldn’t claim - my h claimed bounce back loan on his company ( not huge but still £10k as that part of his business very much affected) and also got 2 or 3 payments of several thousand on his self employment via SEISS as that was related to tax assessment filed for previous year on 31st January - just before the 1st lockdown . My company was ok but I could carry on- one issue of course is a lot of self employed profits aren’t that high due to using as deductions everything you can possibly deduct - hence making profits look smaller and that’s what Swiss payments were based on - no one likes to say that, but is a fact.

the problems in the main were with freelancers and self employed who had been going less than a year and had yet to file any accounts and directors who paid themselves mainly via dividends and little on PAYE ( a lot I know) - I’ve since changed how I pay myself, far more PAYE and less in dividends . And there’s a 3rd bunch including several people I know of ( I work in media/entertainment) that simply ‘hadn’t declared tax’ -

Im not saying I agree with people being excluded and it was particularly harsh on those who had yet to file but certainly made me realise that I would rather pay PAYE than risk that again - I was lucky that I wasn’t affected , I just thought it’s a bit more nuanced than people might think and didn’t apply to all self employed/freelancers or directors

It’s what happens when a business doesn’t pass on the price rises to customers. It’s sad in a way but business is business. I wonder if the place would be as busy with people happy to pay £20 for a lasagne or £18 for a pizza? Probably not, and maybe the owners knew this.