Keeping an EYE on the Restaurant Industry JULY 2017
Recently, I have been asked by many of our clients how the Restaurant industry is doing and how other Restaurants are managing in the current economic climate. Having done some research here is my take on the state of the Restaurant industry at this present moment.
It has been interesting times for the Restaurant industry in 2017 to date. With the opening of various new big shopping centers, it seems there are an oversupply of Restaurants in certain areas. This has had an undeniable negative impact on the turnover of existing businesses in and around these specific areas.
In Pretoria the opening of the new Menlyn Maine has severely affected the profits of Restaurants in the Pretoria East area specifically. The Restaurant offerings in Menlyn with the exclusion of one or two, are not that unique however, the excitement of the casino and wide range of Restaurants in one spot, is a big drawing card. Some wise men say that after initial interest some, if not most patrons, will return to their usual local eateries. Can this be?
Let’s use as examples other casino complexes in Gauteng. Both Monte Casino and Silverstar Casino have lost many of its original Restaurants after some initial successes. In Monte Casino many of the Restaurants are now owned by Tsogo Sun directly, as private owners could not cope with high rent and declining numbers of feet in this complex.
Has the Menlyn Maine developers learned a lesson from these two Casino complexes and are Pretoria diners different than the ones in Johannesburg? You decide. Keep in mind what a show piece Monte Casino was at first with many top Restauranteurs owning Restaurants there. Not to talk about the M@sterChef Restaurant disaster.
In Johannesburg the industry seems to be doing better with businesses performing more consistently. The new Waterfall and Kyalami shopping developments are doing well. Considering that there were many new property developments in these previously unpopulated areas, it is clear that businesses in these centers now have a new client base to tap into.
The mecca for the restaurant industry is still the Sandton / Fourways areas with Restaurants reporting continuous, albeit slow growth. It is also the more unique modern Restaurants that offer something different that seems to be thriving while some dare I say, more dated franchises are feeling the pinch of difficult economic times.
As far as Johannesburg East and South is concerned, the industry appears to be struggling. Established Restaurants seems to be stable whilst most of the new stores that we are aware of, are unfortunately not making headway at the moment. The best example here must be the Mall of the South – although not brand new – I have heard some sideline comments referring to “the Mall of the White Elephant”. (This not due to the lack of leading Restaurants in the center)
It seems apparent that in a shopping mad country, the success or slow death of a Restaurant lies in its location now more than before. Whatever the brand and whatever analysts say about growing “shopping power”, it still is location, location, location.
A reality check shows that long existing Restaurants and Restaurant groups / franchises are scrambling to modernize their brands in order to stay prominent and in some cases, just to stay afloat. All of this comes at a very high price. If we consider that 2 new well known Restaurant groups from the USA, with all the backing in the world, almost failed to crack the SA market, then existing Restaurant owners and groups can feel encouraged that they must be doing something right.
Let us see what the future holds, but for now industry conditions, for most, are tough and rather unsure.