The restaurant biz faces a bloodbath. But there are ways to survive

There’s no way around the fact that the hospitality industry was hit hard by Covid-19. Then by global financial dips of various depths and, in the UK, by a nastier, deeper and more protracted cost of living crisis. The first months of 2023 are going to witness a bloodbath as restaurants that have held on for the traditionally lucrative period of Christmas slip into the inevitable slump of January and February.

There’s a very simple rule for small restaurants. As you lock the doors on New Year’s Eve, you need enough surplus in your pocket to get to Valentine’s Day on mainly empty tables. This year, lots of small places simply won’t.

But think back to what defined the great restaurants and hospitality venues of the past. The great survivors. This is not just a question about New York, London or Paris. It’s a universal truth about eating places. Some time back in the day, a couple of people — often a married couple, sometimes a maître d’ and a head waiter fleeing a more established restaurant, sometimes a promising young chef and a business head who wanted a less secure financial future — would find a small place and hang up a shingle.

Restaurants have always been good businesses for young entrepreneurs, immigrant families trying to form some kind of financial foothold and creative talents willing to gamble. It’s a business which of its nature rewards creativity and sweat equity.

A good restaurant would be tested and formed over years. It could build a following at the same time it built its offering. The food would improve as the chef developed, more customers would come and then, one day, the recognition. Word of mouth would attract critics, reviews would attract the guides and soon there would be crossed knives and forks and stars and ticks all over the window, a full book and a queue outside the door. Keep going like that for a decade and maybe, just maybe, you might consider a top-notch cellar, a tasting menu and a helicopter pad for your high-rollers.

What’s key about this progression, this life cycle, is that it’s a repeating narrative. It’s not a business plan. Many of the most respected restaurant names in the world legendarily survived for decades on the sort of primitive business structures you’d expect on a market stall, and responded to changes in conditions ranging from a snow day or a bust fridge to a kitchen fire or trading insolvent.

As hospitality has grown around the world in recent decades, there’s been a natural ambition to speed up this process and it’s now very different. A chef will build and manage a reputation over a shorter period by working in other kitchens or, more speedily, by appearing on a TV cooking competition or running some kind of pop-up. Investors become interested, and then the advance PR will begin for a “bricks and mortar” debut of a “fine-dining concept”.

There are plenty of young chefs out there with the talent and craft skills to carry off fine dining straight out of the traps, but there’s a much higher level of risk in delivering the complete package. To put out multicourse, high-quality food requires expensive ingredients. That much is obvious. It also requires a larger kitchen brigade of skilled and expensive hands underneath the head chef. It needs a first rate front-of-house team to get the food out and, obviously, it needs stars. I’ve lost track of the number of chefs who’ve told me that stars on the door are their goal, their presence ensuring the solid flow of customers that will make their business model run. And here’s where things fall apart.

I obviously keep close records of the amounts I pay to eat in the restaurants I review and, since coming out of the lockdowns, those prices have risen to where, even with my paper covering the bill, I’m choking as I wave my card over the handset. Even a greedy zealot like me can’t quite believe that any meal might be worth this. What’s worse is I know that ingredient prices, energy costs and staff wages have all gone stratospheric, consumer confidence has nosedived and everyone’s personal budget is constrained, but the poor restaurants can’t survive on a penny less. They’ve launched a business to a pattern that has no flexibility, which is being pulled in so many directions that the centre cannot hold.

Looking at my inbox over the past few weeks, I’ve seen dozens of restaurants announcing changes in menus or reduced opening hours to enable the use of fewer staff. Some are turning to crowdfunding as a survival strategy. I’ve just finished a review of an established chef who’s opened a new place selling simple French food in a room over a pub. I’ve got three more lined up for operations opening in weird, new, cheap spaces with massive innovation in menu and service model. Back in the day, someone coined a term for this: rightsizing.

I feel nothing but sorrow that we will lose many independents in the first part of next year, but we made a huge error in ever believing that fine dining was a business plan on which you could predict success rather than a critical opinion formed in hindsight.

My industry is resilient, resourceful, creative and ambitious. Some young businesses will survive and thrive next year, but mainly those who can chew off their own foot and escape the trap that is fine dining.

Follow Tim on Twitter @TimHayward and email him at [email protected]