Restaurants shape up as customers dine elsewhere

One of Russia's biggest restaurant chains, Rosinter, expects revenue to drop 10% this year, and may close up to 4% of its restaurants in the face of a deteriorating market that is forcing owners to cut costs or opt out.

Post-Soviet Russia’s private restaurant business doesn't have a long history – but it already faced two major crises.

Kirill Podluzhny opened his first restaurant when the crisis of 1998 was at its worst.  Now he has 5 restaurants, mainly aimed at middle income clients and says they are less affected by the crisis than top-end restaurants.

“It’s not that there are fewer clients, it’s that the average bill goes down. It's fallen by 20 to 30 percent. Some restaurants even have problems with business lunches.”

In the premium segment, Moscow restaurants have lost 25 -30% of their turnover since last autumn. Kirill says they suffer higher rents, and have lost some of the big-spenders from their middle-class clientele.

“Now in serious trouble are those who have only one restaurant, plus owners who are paying huge rents. 3 years ago, when lots of top end projects started, the owners agreed to pay crazy money in rent. Now these payments are sinking them.”

Andrey Petrakov, CEO of Restcon Consulting, says the average rent for mid- range restaurants has fallen by a third. But food and utility prices are still creeping up, making life for restaurant owners much harder.

“Restaurants are trying to manage their costs, mainly rent, procurement and staff. Most of the restaurants use imported products and the prices for these are growing. In terms of staff, they've already laid off those they can do without.”

Last year, 215 restaurants closed down in Moscow. Investors for whom restaurants are not the main business are quitting the market, with no hesitation. But some the main players think the worst of the crisis is over.  Not only businessmen, but also good psychologists, owners say the current fall is temporary. People eat more when under stress. So they’re sure that their clients will come back.