Bankruptcies plague catering industry

20 August 2005

BRUSSELS — Almost half of new restaurants, cafés and bars go bankrupt within the first four years of opening, with just 56 percent of businesses that opened in 2001 still operating in 2005.

A spokesman for small and medium size business association Unizo, Tom Compernolle, said the bankruptcy rate in the catering industry was much worse than other economic sectors.

In Flanders, for example, some 22.7 businesses go bankrupt each week. The average is based on a five-year period (2000-04) based on the most recent figures from trade and marketing information bureau Graydon.

From the start of January to the end of July this year, some 805 restaurants or cafés went bankrupt nation-wide, 5 percent more than last year, Flemish daily newspaper ‘De Standaard’ reported.

The large number of bankruptcies is being reported in every Flemish province. Only West Flanders performs slightly better, but the differences between the provinces are small.

“The hotel and catering industry has always been a risky sector,” the secretary of branch association Horeca Vlaanderen, Luc de Bauw, said.

“That is primarily due to the lack of earning capacity. The margins — both income and expenditure — are very restricted. During the first year, very little can go wrong, otherwise the venture immediately has problems”.

Moreover, De Bauw said the catering industry is highly sensitive to economic ups and downs. During an economic dip, consumers quickly cut spending, directly impacting on the catering industry.

However, it is not only a business economics problem.

“The catering sector is a sector with a low entry threshold. Start-up entrepreneurs dream of their own business. That often brings them to the catering sector because it is easily accessible,” De Bauw said.

“Everyone can pull a beer or prepare a meal. But of course it is more than that. Independent enterprises demand a great deal of knowledge, something that start-ups often overlook”.

Another factor is investments: “Luxurious equipment such as in restaurants is indeed important, but offers no guarantee of success. It must also remain affordable”.

De Bauw said restaurants are also hit hard by VAT tax and that internal sector competition is a factor that must also be taken into account.

Horeca Vlaanderen is trying to give start-up entrepreneurs a helping hand and will organise information sessions at both a local and provincial level.

It has long hoped the government would help broaden operating margins in the sector. “Without these efforts, the high risks for start-up catering businesses will not disappear,” De Bauw said.

Several high-profile bankruptcies have been reported in the hotel and catering industry in recent months.

In Ghent, the well-known nightclub Culture Club and steakhouse Stendhal closed their doors, while in Antwerp, there was the bankruptcy of Absoluut Sweeds. In Leuven, top chef Frank Fol sold his restaurant Sire Pynnock.

Subject: Belgian news