How the cost of eating out will rise after lockdown
With reduced capacity and fixed overheads remaining the same, restaurants will have to make up for losses with increased prices, writes Katy McGuinness
‘It’s the thing that nobody wants to talk about,” says Mickael Viljanen, of The Greenhouse restaurant on Dublin’s Dawson Street, which holds two Michelin stars, “the elephant in the room.” He’s speaking about the impact that Covid-19 in general and social distancing in particular are going to have on restaurant prices, when they start to re-open at the end of the month.
The Greenhouse won’t be back open until later in the summer, and Viljanen doesn’t yet know what the precise distancing guidelines are going to be at that time, but he does know that his prices are going to have to go up to take account of them. He’s not yet sure by how much, but says an increase in the region of 10-20pc — or more — is likely.
Simple maths explains why that’s the case. “We’ve lost three or four months’ trading but when we re-open we will have reduced capacity in terms of the number of customers we can serve and our fixed costs — labour, rents, insurance, rates — will stay the same. We’re in a prime location, we use ingredients that are the best in the world, we pay our suppliers on time. Our plates cost €80-100 each and our wine glasses €40; breakages are inevitable.
“We are in the business of making people happy, giving them an experience that they can’t have at home. It’s more than a dinner, it’s a night out. People get confused between cheap prices and value for money. I’ve eaten meals that cost me €10 that weren’t worth it, and others that cost me €1,000 that were the best value I ever had.”
Viljanen doesn’t expect his customers to baulk at the inevitable increase in the cost of eating at The Greenhouse, pointing out that pre-Covid, the prices in high-end Irish restaurants were far lower than those in equivalent establishments in London, New York and Paris.
“If you have a product that is worth the money, people will want it. I think it’s more a question of why the chicken you buy in the supermarket for €5 is so cheap, than why a meal in a great restaurant is so expensive.”
When the dust settles, he thinks that casual restaurants offering decent food at fair prices, and neighbourhood and rural restaurants with a loyal customer base will thrive. But he does predict casualties in the middle market in the capital in particular.
“One thing I know is that bargain basement pricing is the road to the bottom. My biggest fear is that the chains with centralised kitchens will take over, and that all the progress that’s been made in terms of a culture of eating out over the past 10/15 years will be lost. In New York they are on their third generation of people who never cooked at home. Here, people in their twenties and thirties have travelled more; they know more and demand more. I hope they won’t let restaurants get away with it.”
Around the corner on Merrion Row, Gina Murphy of Hugo’s is getting ready to re-open on June 29, even though she still doesn’t know whether distancing will be at 2m or 1m.
“In terms of pricing we are doing our best to stay around where we were,” she says, “but we won’t be offering an early bird and we’ll be charging for bread which we have never done before. We’ll have to reassess once we’re open. The wage subsidy scheme is making it possible — if that was to go then I don’t know what impact that would have on our pricing. Our fixed overheads are not changing, but our capacity to do business has been greatly curtailed and many of our regular customers are working from home.”
Jordan Bailey of the two Michelin star Aimsir restaurant in Kildare says that he and his wife and business partner, Majken Bech-Bailey, had already decided to increase the price of their tasting menu from €155 to €180 (before wine or juice pairings) before Covid hit.
“Before we closed, we had several guests each week telling us that our prices were too low,” he says.
Aimsir is lucky to have a spacious dining room, but implementing social distancing means that the number of covers will reduce from 24 to 16 when it re-opens in July. There is only one service each evening.
“A couple of staff members left just before we had to close and we will not be replacing them,” says Bailey, “and we are looking at whether we can use our bar area to be able to offer different snacks there and at other ways of bringing in additional money rather than increasing the prices again. We’ll re-assess in a couple of months and see if it is working.
“I think that restaurants that depend on large numbers of customers are going to find it tricky. Here, we may not make as much profit but at least we can open and the experience will not be that different. I think everyone is expecting there to be price hikes and as long as they are fair I think customers will accept them. I hope restaurants try to offer the best food they can for the best price rather than
‘I hope restaurants try to offer the best food they can for the best price rather than average food for a very low price’
“I need to turn over €10k each week to cover fixed costs”
average food for a very low price.”
At Liath in Blackrock, which holds a Michelin star, Damien Grey opened bookings for his re-opening in August last week and the increased prices — the tasting menu has gone from €96 to €120 and the wine pairing from €86 to €95, with unlimited water now costing €15 per person — drew an angry reaction on TripAdvisor from one potential customer, but bookings up to the end of October sold out almost immediately.
Grey says that these increases, combined with the revenue that he’s pulling in from the successful Liath To Go meal kits that he started offering early in lockdown and will continue alongside the original restaurant, are the only way he can break even — and then only just.
“When I re-open, I’ll be operating at 40pc of the pre-lockdown capacity, down to 10 seats,” he says. “Food prices have gone up, and some imports are hard to get. I have brought all my staff back and made one new hire. Everyone has taken a salary cut pending the re-opening, but I want to be able to pay them €15 per hour as a basic salary, which equates to €30k per annum, the living wage for Dublin. People are in denial about the real cost of running a restaurant. It’ll cost us €25k just to re-open Liath in terms of screens, PPE, air purification units, servicing equipment and re-stocking. I need to turn over €10k each week to cover fixed costs. Our previous business model was based on serving 22 people, five times a week. Now it’s 10 people twice a week. I think we offer very good value, but we are not aiming at a mass audience; it’s not for everyone. Our focus is on people who like high-end dining.
“People often forget that this is a business. As a business owner, I won’t make money but the business will survive and then hopefully we will get back to making money when there is a vaccine.
“I was struck by Gabrielle Hamilton’s [chef and owner of Prune restaurant] piece in the
New York Times recently. She said that most of the time the business model for restaurants works off a margin of 7-10pc, whereas it should be 19-25pc like other businesses. It’s a culture that’s been built up over generations. But good food is not cheap and behind every meal in a restaurant such as Liath are careers, expertise and years of training that come together to produce an experience that is worth paying for with great service and ingredients cooked well. We should not be pressured to bring prices down, customers should pay for that skill set. I hope the industry starts charging what it’s worth — although that may be a rude shock to the public.”
It remains to be seen whether, if restaurants adjust their pricing to reflect the true cost of eating out while paying their staff a fair wage, we’ll see fewer of them, with customers eating out less frequently, and only on special occasions.