Food slump

New restaurants mean more diners "" so why are restaurateurs an unhappy lot?

Competition can be a double-edged sword, restaurant-owners in Kolkata are fast realising. "As many as 70-80 new restaurants have come up in the city in the past two years," says Rajesh Mishra, the newly elected president of the Federation of Hotels and Restaurants Association of India (FHRAI).

"Compare this with the fact that in the 20 years before that, you barely had five new restaurants opening."

The result, says S K Khullar, who owns Indian-cuisine eateries Amber and Zaranj, is dipping profitability. "Average billing per person is down by 15-20 per cent while margins, which used to be about 20 per cent five years ago, have come down to about 10-15 per cent."

The all-India situation is not much different either, says Kamal Sharma, secretary general, FHRAI. "Twenty per cent of the restaurants that opened in the last few years have closed down," he informs.

Not that there exists no demand or that the demand is rising by the year. According to KSA Technopak's Consumer Outlook Survey 2005, eating out comprises 10.8 per cent of share of wallet in Kolkata, far higher than the 6.8 per cent national average.

Collectively, Kolkatans are eating out more but with increased competition and rising inflation, opening a new restaurant has become slightly less profitable. "In retrospect, it seems that new restaurants have opened up so fast that the demand has not kept pace," Khullar ventures.

Gautam Purakayastha of Tamarind, the restaurant that introduced Kolkatans to south Indian dishes other than idli and dosa, says, "The situation is worse for eateries without a bar license."

These days, Tamarind remains less than full even on a Saturday night. Purakayastha has lately ventured into catering for corporate parties and the low-profit business of running office canteens to shore up his profitability.

According to Purakayastha, it is standalone restaurants that are suffering in comparison with those located inside a mall or shopping complex. "People these days want to finish off an evening's shopping with a meal. They loathe the idea of travelling all the way to a place just to eat," he says.

Prices have gone up in city eateries to offset the losses. "But the hikes, in the range of 5-7 per cent, are marginal as restaurant owners are afraid that steeper hikes would drive consumers away," says Khullar.

Government policies such as hike in luxury tax by the state government from Rs 300 per 10 square metres to Rs 2,000 do not help either. Then there is the value-added tax at a higher 12.5 per cent slab. "The FHRAI will make a representation to the government to bring down VAT to 4 per cent," says Mishra.

Things might appear bad but unlike in the other metros, no restaurant in the city has closed down yet. Khullar, however, predicts that in the coming year there will definitely be a shake-up and some closures. That perhaps would bring back smiles on the faces of those few who manage to keep their shutters open.