(21-05-2020, 01:41 AM)jfc18 Wrote: [ -> ]For dine-in, a 10% service charge is levied while there is no service charge for take aways. Most restaurants net margin are less than 10%. Do the maths.
Running a restaurant in SG has extremely high overheads. Rental and manpower salary are the top killers. When revenue inflow freezes up while expenses outflow are still chugging along, the cash burn can be devastating even for a couple of months.
Now, imagine those successful restaurants with dozen of outlets across SG, the losses can easily runs up to million of dollars. Assuming rental $30k, manpower $20k (10 staffs at $2k each). Just these two expenses alone are $50k per outlet, $500k for 10 outlets, per month. Multiple by two months, its $1m already. Without govt Job Support Scheme and rental rebate, most SG restaurants would have closed down by now.
If you are the owner of a restaurant, with the uncertainties of Covid19 situation ahead, will you continue with the loss-making business and let it drain your savings away (may be months or years!)... OR... will you close down your business first, cut your losses, stop the bleed, and reopen a new restaurant when Covid19 is over? Which is the more rational and "cheaper" option?
As an owner of a small F&B business, I can attest to what you said is pretty accurate. It’s very difficult times for most businesses, including F&B business. A friend of mine who has a shop primarily selling desserts (mango saga, yam paste, chendol etc…) has already given up. Another friend doing maid agency is already preparing to give up too. I am still hanging on for now, despite the huge losses, primarily because I felt sorry for my small team if I were to close, and also partly because our govt has provided relief, which while is not sufficient to cover the losses, is nevertheless very helpful
Yes, the overheads are high in F&B business, Shops that are rented to F&B command a higher premium than other trades. Rental makes up about 15% of gross turnover, and with sales plunging by 70%, you can do the math yourselves. The margin for the remaining 30% sales can barely cover rental!
Manpower cost is also high. On average, an employee cost about $2.5K a month, taking into account CPF, levy for foreign workers, lodging etc..
As to whether it is cheaper or more rational to close now and stop the bleeding and open another one again when situation is better, or continue to stay in business and bleed, it is a very tricky question. There are pros and cons to the two options. I guess every business owner will try to hang on for as long as they possibly could, with a little bit of optimism that things will improve faster than thought.
Closing a business is easy, but opening up another one later it is very hard, and can be costly. First and foremost, there are strict requirements to comply with for operating a F&B outlet, and the process of getting all the regulatory approval is not an easy task.
Next, equipping a shop for F&B is very costly, especially the exhaust system which is a must have for F&B business. A very basic and simple exhaust system can cost more than $20K upwards. The cost of equipping a 500 sq ft bare shop to be ready for operation will easily be in excess of $100K.
Then there is also the consideration of losing the regular customers if you were to close, and will need to build up the goodwill again when you open up a new one elsewhere.
Lastly, and perhaps the most crucial and challenging part, is you will lose your good staff, especially if you have a skillful chef, and may not be able to find an equivalent replacement in the future.