Richard Jacob: Cost of allowing restaurant businesses to fail is too high

Woman Holding up a shop sign saying: Sorry we're Closed Generic Stock

THE restaurant business is not just an industry, it’s an integral part of society.

We need our cafés, restaurants, and hostelries to meet, share ideas, laugh, and mourn.

Since the pandemic, the number of people working in offices and visiting shops has been reduced significantly, rendering many daytime businesses unviable.

Since Russia invaded Ukraine, energy prices have spiralled and food costs have soared.

The cost of staffing a restaurant has effectively increased by about 30% since 2022. Employer PRSI has increased, providing a pension has become mandatory, annual paid sick leave has increased, and the minimum wage has risen.

I have heard many say: “If you cannot afford to pay your staff, you shouldn’t be in business.”

This glib statement might apply to a pharmaceutical business or a car factory, but it’s more complicated for hospitality.

Richard Jacob ran Idaho Café in Cork City for 21 years. File pPicture: Eddie O'Hare

The average restaurant will need to increase prices by 15% just to cover cost increases.

A €3.50 coffee becomes €4 and €18 pasta dish is suddenly €20.70.

The restaurant is not making any extra profit but is seeing turnover drop as the prices rise.

Unlike the pharmaceutical industry and the car industry, demand is linked inextricably to price in restaurants.

The only viable restaurants are going to be either ultra-premium or ultra-casual.

To remain viable, if they are not ultra-premium, businesses will have to minimise staff costs.

Expect fewer wait staff, more online ordering, more self-service, and shorter menus, cooked by fewer chefs.

Ticking time bomb

And then, there is the elephant in the room.

During the pandemic, businesses directly impacted were offered the opportunity to defer debts until cashflow permitted them to repay.

Now, after a couple of extensions, Revenue is to start collecting the debt from May.

Many businesses simply cannot afford new repayments.

The bulk of the money outstanding is owed by 6,139 businesses, owing a combined €1.699bn.

This is a huge, ticking time bomb in the economy.

When the amount of debt is finally revealed, many businesses will simply fold.

The cost of allowing these businesses to fail is simply too high. These premises employ thousands of people and are an essential part of the fabric of many towns.

So we need to talk about how much we value our tradition of gathering together to break bread.

We need to talk about how our changing habits have changed the viability of many businesses.

We need to talk about the future and whether we are prepared to pay much more to eat out, or whether it is the responsibility of the State to fund more sick pay, pension contributions, and increased PRSI for those working in SMEs.

• Richard Jacob ran Idaho Café in Cork City for 21 years