Business Hundreds of restaurants fighting for survival as Czechs curb spending
Despite projections of economic growth, fear of the future and high unemployment is making Czechs increasingly cautious when it comes to spending. Polls indicate that in 2013 two thirds of Czechs significantly cut back on their expenditures, forking out less on clothes, entertainment, holidays but also food and in some cases even medical care. Restaurants around the country are feeling the pinch and hundreds of them are literally fighting for survival.
Economists may be predicting an economic upturn, but the majority of Czechs are waiting to see it to believe it. On average people have savings of around 100,000 crowns which would cover their expenses over a period of three months.
Consequently eating out has become a luxury and many restaurants are reporting a steady drop in profits. While in 2011 there were over 30,000 restaurants and eateries around the country, presently there are under 29,000 and only half of them are showing a profit. The rest are still fighting for their place in the sun and the agency Data Servis, which has been following the trend and collecting relevant data, claims another 1,000 restaurants will not survive the year.
The growing rivalry in the restaurant business has brought home the need to offer clients added value with which to get an edge over the competition – be it a children’s corner, a unique décor or live music. One restaurant owner actually installed a train set which brings clients their drinks. Another restaurant offers home-brewed beer and others bank on regional specialties.
Vaclav Starek, President of the Czech Association of Hotels and Restaurants says newcomers in the business need to do their homework better – to take good stock of the locality and assess potential demand for a certain type of cuisine before opening up a new restaurant. Czechs are presently most interested in domestic and Italian cuisine but four pizza eateries on one street are not all going to survive, he says.
Experts in the business say that the way to success is through quality food, creativity and good service. They criticize the fact that many Czech restaurants still offer customers the same fare, very often cooking from semi-finished products and processed foods to save time. Many restaurants play with the menu –devising exotic sounding dishes – rather than taking the time to cook plain good food from scratch using quality products. Experienced cooks are important as is a waiter or waitress with a smile –something that is still missing at many Czech restaurants.
Foreign visitors are used to good service and in the spring and summer it is foreign visitors who will primarily be bringing Prague restaurants their profits. Experts say that there’s a fair chance 2014 may finally bring the downward trend in the restaurant business to an end. And if the predictions of economic growth materialize, Czechs too may finally be encouraged to start spending.
What would really make a difference is for restaurant services to return to the lower VAT bracket. Vaclav Starek says the transfer of hotel services to a lower VAT bracket in neighbouring Germany created 7,000 new jobs in just a year and argues that not just Czech restaurant owners but state coffers would benefit from such a move. However that is unlikely to happen any time soon – the new centre-left government has already announced which products will be transferred to the lower VAT bracket – baby food, nappies, medicines and books.