Cork food industry in crisis - special feature

IT’S hard to make a living from food, and owning a food business can be a fast track to losing it all.

In the past six months or so, headlines have been awash with news of high-profile closures here in Cork, and across Ireland generally.

For many, it’s been like watching a car crash in slow motion. 

The Restaurants Association of Ireland has been shouting for a long time that the return of a 13.5% VAT rate would be catastrophic for food businesses. But that’s just the beginning.

Covid, wars in Ukraine and the Middle East, an energy crisis, a cost of living crisis, and rocketing inflation are all factors outside the control of any business. 

As are government policy decisions such as paid sick leave, increased minimum wage, VAT and, still to come, automatic employee pension contributions and maturation of warehoused debt.

No-one is saying better pay and conditions are beyond the remit of food businesses. But in an industry where margins are paper thin, this “everything now” approach in rolling out these policies, coupled with huge volatility in the price of operating essentials, is proving to be the difference between a restaurant surviving or not.

Old hands or new, large or small – it seems no business is immune from catching this particular seasonal flu.

Most cite financial pressures as the reason for closure. But this is a tough industry; it takes its toll, and arguably everything about it has changed over the past three decades. Cooking and chefs have become media darlings, and food is lauded as the latest hot thing.

We may forget that, behind it all, there are real people trying to build a good business, balance the books and earn some money.

Maybe we have forgotten that restaurants and cafés are a business like any other, and the same rules apply. So why is the rate of failure for food businesses much higher than other sectors?

Blaithnaid Bergin is an industry professional with decades of experience running food businesses. Based in Abbeyleix, she grew up and worked in the family pub business, established her own catering company and small cookery school, and is now the founder of Ireland’s only industry-specific training and consultancy service called The Business of Food.

The service began when she noticed the same issues were coming up with all her consultancy clients.

“I was able to identify what wasn’t working; seeing all these people make all these same mistakes. I knew I had to get to them before they put so much money into their business and ended up losing everything. But there was nobody out there doing short, tailored, very focus courses on the A-Z of opening and running a restaurant,” says Blaithnaid.

“It took me three years to develop my long course, the 12-day Business of Food, which covers all the bases from finance and employment law to operations.

“Many people that have come through my courses in the last 12 years are now running successful cafes, restaurants, and pubs. I’ve also had people already in the industry doing the course, which I didn’t expect to see.”

With the breadth of experience Blaithnaid has, she is able to take a long view on how food businesses have transformed over two decades. Before then, getting into the industry meant going through formal training.

“You had to have been through catering college, a hotel management or restaurant management college to even get your nose inside the door of this industry,” says Blaithnaid.

What happened in the last few decades is people from completely different backgrounds started to come into the hospitality sector without formal training.

The demise of the Maitre’d and the rise of the Chef, says Blaithnaid, was a tipping point in the industry away from the slick operation of restaurants as successful businesses.

“The Maitre’d was front and centre in the conversation about the industry. Suddenly, that completely tilted on its head and the chef became the centre, running the restaurant, and they haven’t got a clue how to do it.”

With today’s scarcity of chefs, Blaithnaid says many emerge into the industry knowing how to cook but not how to run kitchens.

“Young chefs now are being strongly encouraged to take up management positions before they are ready, going into kitchens with huge responsibility over the management of people, processes and facilities for which they are not ready. It’s not fair to them, or to the industry.”

Blaithnaid doesn’t mince her words - she has a deep love and respect for this industry and the people that work in it and doesn’t want to see either fail. But, she says, we’re in a time when anyone with a bit of money in their pocket that wants to open a restaurant, can. That’s fine if you approach it as the business that it is and not a hobby.

Anybody who knows me, knows I don’t pull my punches. I owe it to people to tell them the truth, and once they know that they have the knowledge, they’re informed.

As well as the long course, Blaithnaid offers shorter courses in areas such as Management Development, Business Audit, Menu Design and Menu Planning. There is also the option to work one-on-one on a consultancy basis, which can last anything from a single session to a whole year depending on the needs of each food business. “I’m responding to what I see is needed out there,” she says, “and that’s how The Business of Food has developed.”

One of the fastest ways for a food business to unravel is not having a grip on the financials, and, contrary to popular belief, Blaithnaid’s experience is that turnover tends to be healthy.

“Money is being spent, but the bottom line is getting slimmer and slimmer. One business I worked with had a turnover in 2022 of €2.4 milllion, but after everything was paid there was €25,000 left!”

Blaithnaid conducts two full days of workshops as part of the Ballymaloe Cookery School 12-week course.

“I say to them they are running a business first, so all business rules apply. It’s not a hobby.

“Creative people don’t like being boxed in with systems and rules, but if they can’t pay their bills, their creativity will die really fast. I burst bubbles all over the shop, but then I feel I am doing them a favour!

Did you know in Ireland there are up to 23 regulatory and legislative bodies associated with the hospitality industry?

So, while there are many costs that are outside the control of a food business, there are plenty of actions that are easy to implement in every food business, no matter the size, which can often be the difference between a business surviving and thriving or closing for good.

Blaithnaid’s Top Five Expert Tips

• 1. Get on top of your finances
• Every business should get a set of Management Accounts prepared at minimum monthly, ideally weekly, to get a grip on finances.
• “Get yourself a good bookkeeper or accountant and sit down with them and your key people once a week or once a month and understand where the business is financially.
• “A quarter of the all the money that’s turned over, doesn’t belong to you, so only looking at turnover is a hugely unrealistic way of looking at how well your business is doing.”
• 2. Open a second bank account for money that isn’t really yours
• About a quarter of the money turned over in a business is simply passing through. VAT, rent or mortgage, and a contingency for things like unexpected maintenance or breakages are all real costs of business.
• “The number of people that have said to me the one piece of advice that has saved their business was putting money aside to pay the VAT bill.
• “Because, whether you have it or not, you’re going to have to pay for it. That second account is like a piggy bank so when the VAT bill comes in, you don’t have to worry about it.”
• 3. Tackle food waste and food loss
• As a food business, ingredients are a major expense, so make the most of everything. Ensure good separation of any unavoidable food waste and monitor it to quantify how much is being wasted, the cost, and if improved systems reduce the amount generated.
• “One of the first things I look at when I go into a business is their food waste. I want to be there the day before the food waste is lifted because that’s going to tell me about 85% of what I need to know about how your business is run. Look at what you are spending; be sure that everything you’ve ordered and paid for is coming in the door and not getting filtered off to someone else.”
• 4. Menu planning
• Menu planning and food waste/loss go hand in hand. Find ways to make use of veg, meat and fish trimmings by repurposing them into something else.
• “Look at your menus: are there any wasteful ingredients? Avocado is a wasteful ingredient because a quarter of what you buy will be bad, but you won’t know until you cut into it. Can it be replaced with something else, like a blitz with garden peas, broad beans, and yogurt?”
• 5. Theft and fraud
• “There is rampant theft in the industry. If you discover theft going on, everyone is under suspicion until that is sorted, and you only need one person embezzling to destroy your business. “Putting systems in place for security protects honest people.”

Courses and training available from The Business of Food run throughout the year and are funded to a minimum of 40% of the cost through the National Organic Training Skillnet (NOTS).

Consultancy and other training services can be tailored but aren’t covered by the NOTS subsidy. Blaithnaid is happy to work with clients based on their needs and expected outcomes.

Find out more at www.thebusinessoffood.ie