Restaurants in France bitten by tight economy
October 17, 2008
In Paris and all over France, some restaurants starve for business.
Profits for French restaurants and cafés have dropped 20% in 2008. Worse yet, almost 3,000 restaurants and cafés across France closed their doors in the first half of 2008—a 30% rise over the same period last year. In a notoriously difficult business, the economy in France and around the world has made it even more difficult for restaurants to succeed, as more people in France sacrifice the luxury of eating out and more tourists are staying home.
It amounts to a full-blown restaurant crisis in France, according to François Simon, the much-feared restaurant critic of the French newspaper Le Figaro who first broke the story.
Some restaurant owners blame the problems on the new ban on smoking in restaurants and cafés, which took effect on January 1, 2008. While the ban has certainly altered the long-held habits of the French, the timing of the restaurant slowdown with the smoking ban is seen by most as an unfortunate coincidence, or at best a perfect storm. French diners already feeling the economic pinch have a further disincentive to eat out at restaurants when they know they can’t even enjoy a cigarette after their meal. But this alone does not account for the steep decline in restaurant customers.
At the same time as French people are feeling the effects of the tight economy in their own disposable income, prices at restaurants in France have had to rise on account of rising wholesale food prices.
The rise of the euro against the dollar is also a culprit, as American tourists are finding travel to France too expensive, and even those who do travel to France have to watch their budgets more closely. Restaurant prices in Paris, considered high even before the fall of the dollar, are now astronomical for Americans, who may easily pay the equivalent of $50 for a simple lunch in a café and hundreds for a good dinner in a fine restaurant. More and more savvy American tourists are fighting the high cost of travel in France by renting private apartments, which are not only cheaper than hotels but also have kitchens for preparing simple meals at home, obviating the need to have all their meals out. Of course, that’s all business taken away from restaurants and cafés.
The French financial insurance company Euler Hermes SFAC issued a report recently that said that 1,782 traditional French restaurants went bankrupt in the first six months of 2008—a 25% increase over the same period last year. Victims are mostly low or mid-range neighborhood restaurants, rather than high-priced gourmet establishments. The problems are greatest for restaurants offering menus at €16 to €30.
The hit for cafés in France—a 56% rise increase in bankruptcies—was even worse. Here the smoking ban is clearly to blame. What’s a cup of espresso without a cigarette?
Desperate for some relief, officials from restaurateurs’ trade body in France are begging the French government to deliver on its promise to persuade the EU to allow a cut in VAT on restaurant meals in France. A cut from 19.6% to 5.5% was pledged by former President Jacques Chirac six years ago. President Nicolas Sarkozy has revived the idea but it remains blocked in the EU, where other countries fear similar demands.
Tourism and high prices for locals in France isn’t the whole story, however. Many restaurant owners bemoan the changing eating habits of the French and their lessening interest in well-prepared food as convenience begins to trump quality in the French soul. Many younger people in France are no longer being brought up with the emphasis on fine cuisine and the enjoyment of food that was such a feature of the past.
Behavior in France has been changing in business as well. Where the civilzed business lunch, complete with wine, was once a way of life, now more people in France are acting more like Americans and bringing sandwiches to eat at their desks, both for economic reasons and time constraints as companies in France are forced to adapt to become more competitive in a global economy.
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