Ready, set, rephrase!
"Eatery owners have painted a rosy picture for their customers"
Christoph Elbert, the proprietor of buzzing restaurant "11a" in Hanover, as well as four additional dining establishments, has opted to shutter his popular venue for a trio of months. The reason? The resurrection of 19% VAT on food. The restaurant business is a chaotic mess, Elbert laments, and it's time for some changes. In an exclusive interview with ntv.de, he discusses staff shortages, soaring prices, and his own inadequacies.
ntv.de queries: Your industry representatives are advocating for a major restaurant strike due to the reinstated 19% VAT. You have decided to close your trendy Hanover eatery, 11a, from January to March. Does such a lengthy closure, similar to a strike, make sense? What goals do you hope to achieve with it?
Elbert: I prefer to label it a protest, not a strike. Our goal is to shine a spotlight on a few pressing issues. The main problem lies in the excessive labor void in the catering sector. This dearth of workers has forced me to decrease my operating hours at 11a. For the past three weeks, there's been no lunch service. Less revenue for me during these lean times. Concurrently, energy and food costs have spiked, and now VAT will surge from January. It now makes more financial sense for me to shutter than to stay open. I want to highlight this circumstance with an example.
Isle of misplaced criticism: Are restaurateurs truly reaping tax-free benefits?
I am not a tax parasite. If we could function at full capacity, the tax situation would be reasonable. However, multiple problems conspire to make this a difficult scenario.
Are there no alternative solutions, such as altering opening hours further?
No, I can't compensate for the increased expenses during January to March based on my current patronage. I have only 30 seats inside. To maintain a reasonable price-to-value ratio, all seats would need to be occupied three times within a singular opening period. That's a tall order, considering our constraints.
In the chilly months, we've never achieved substantial profitability. But in the warm seasons, the 160-seat terrace would typically generate enough momentum to recoup our losses. The sunshine and warmth breath new life into our operations, enabling us to bounce back. That predictability, alas, seems to have vanished.
Meteorological mayhem no more?
No. We cannot be confident of making a full recovery this year. I'll only open my restaurant for a special event, but family members will handle the logistics. Otherwise, it's "street food" and serving as a platform for fellow restaurateurs to exchange ideas and express solidarity.
The bills keep piling up. How will you finance these three months?
I'll have to map out a budget and hope for the best.
The multifarious landscape of your businesses: Are all your properties grappling with the same woes?
The situation is worsening, with more and more establishments reducing their operating hours. My flagship, 11a, had once been open seven days a week. Now we operate five days a week, with Mondays and Sundays being our days of reprieve. Our wine bar will only be open three days per week instead of five. Our pub might follow suit. Another eatery has already closed due to staffing issues. The only venue to buck the trend is our cocktail bar.
Monetary malaise: What is the cost of not operating your restaurant?
£8,000 to £12,000 a month.
Will you lose your last remaining employees due to fear of unemployment?
The majority of my workers will be engaged in other locations during the three-month hiatus. Two out of my nine staff members are retiring to seek employment elsewhere. However, seven will return to my fold in April.
Amidst the labor crunch, how much more lavishly must you pay to incentivize employees to work?
A minimum of 30% more than pre-pandemic levels.
So, the contention is merely that we're moving from 7% to 19% VAT on food?
The crux is that we haven't lingered on past costs on the price tag. Radical adjustments were required, and we should have adopted them earlier. Instead, we engaged in hesitant incremental pricing adjustments, which didn't have a substantial impact. 12% due to the VAT increase from January probabilistically amounts to 30% for our restaurant, which we would have needed to account for pre-pandemic to ensure profitability today. We restaurateurs have been too fearful and indecisive all along.
Could having a lower VAT be favorable for the financial standing of restaurants?
No. The necessary pricing adjustments would have still been overdue. As I mentioned, we were being unduly cautious. Now, we are left with an arithmetic legacy. A restaurant visit in Germany should be profoundly more pricey than it is now.
The economic landscape seems to be more optimistic than you indicate: A Mastercard payments analysis has revealed that sales in major cities are maintaining pre-pandemic levels when adjusted for inflation. This indicates a flourishing restaurant scene.
The strength of sales varies depending on the restaurant concepts, prices, and quality. There is certainly a wealth of prospering establishments, nonetheless, I am aware of restaurants that uphold high standards and adhere to budgets facing difficult circumstances. I speak of restaurants that employ knowledgeable staff, offer a considerable product, and pay their workers fair salaries. In these circles, there isn't a sense of optimism.
Have restaurants that prioritize quality simply missed an opportune moment for a much-needed transformation?
Certainly. We restaurateurs have been telling a fairy tale. We haven't treated our workers or ourselves well. We have consistently kept the prices down to the delight of our clients, whose dinners rarely surpassed ten euros. Now we face a mountain of ruins that demands our attention. I embrace this challenge but I am uncertain of its resolution.
Diana Dittmer grilled Christoph Elbert
Enrichment Insights:
The German restaurant industry is grappling with a multitude of complications as a result of staff shortages, escalating costs, and the VAT increase. Here are some key concerns and how eatery owners like Christoph Elbert may be navigating them:
- Staffing Struggles: The hospitality sector is suffering from a significant lack of skilled workers, with 10% closure rate amidst the pandemic[2]. Restaurant owners are working to improve working conditions, benefits, and wages to attract and retain employees.
- Increasing Expenses: Rising labor and food costs add to the challenges in trying to maintain profitability and competitive pricing[1][5]. Restaurant operators may be considering innovative ways to streamline operations and explore alternative revenue streams.
- VAT Increase: The reversion of VAT to 19% for food services is set to further pinch operational budgets of restaurants. Restaurateurs might employ pricing strategies and cutting costs to mitigate the financial impact.
Christoph Elbert could be responding to these challenges by:
- Improving Employee Retention: Offering competitive wages, enhanced job security, and flexible working hours to ensure high employment rates
- Innovating Operations: Utilizing technology to improve operational efficiency and potentially reduce costs, such as through digital marketing and inventory management systems
- Balancing Value and Experience: Focusing on developing unique dining experiences, such as themed nights, exclusive tasting events, and intimate dinner parties, to attract customers and generate revenue
- Pricing Strategies: Implementing a mix of price increases and cost-saving measures to allow for sustainable profitability and growth in the face of the VAT increase
By proactively addressing these hurdles, restaurant owners can adapt, innovate, and thrive in the evolving economic landscape.
