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17th April 2024
04:58pm BST
I live in a part of Dublin which is pretty well-known for its pubs, less so for its cafes and its restaurants. Our nearest and arguably best cafe was a Scandi-inspired spot on a busy road, with plenty of foot traffic from determined walkers marching to and from a busy park. Midweek or weekends there was always a queue, people filing up with a dog or a pram in hand waiting for a coffee or a seat inside. There was always an amiable feeling about the place, parents chatted, faces smiled into buggies, and dogs' heads were patted. Inside the boxy, mass-concreted space was deceptively warm and relaxing, and the staff were chatty and so creative you felt sure they were slashes- barista slash artist/poet/dancer, pouring coffee to pay the bills.
You know this story already, but its one that needs to be told. A couple of weeks ago I walked past and there was a different type of queue, people in ones or twos, heads over their phones, dragging at their Google Maps in wonder. A hand-written note was taped to the closed door that was invariably always open, read "we are sorry we've closed". Once people had gathered close enough to read the sign they looked around for a few seconds and exchanged a shake of the head, or a "ah that's terrible" then broke apart and went their separate ways. We never got to the bottom of why this particular cafe closed, despite the usual kind of speculation about landlords upping the rent or the building being sold. I still see locals and tourists confusedly looking at their phones outside this once-busy cafe, looking around for anywhere to go and finding nothing. This is sad for us locals, it's the community aspect the hub function that we miss out on when these businesses close, I often walked past and saw sewing groups, parents and baby groups and even a group of aul lads doing some kind of musical rehearsals, through the big glass windows. Aside from a cafe serving coffee, pastries and brunch, it was a space for the community, a third space where people could meet up and spend time together. Since its closure the space has lain empty, the chairs stacked on tables, blinds drawn. Whatever the rationale for closing, it seems entirely wasteful for a space as valuable as it, to lie empty and gather dust.
It's easy for locals, we can pick up our feet and head to another spot, for the people who had to draw the blinds and find the pen and paper to write the sign it's a lot tougher. We've all read the headlines, and seen the closure signs going up in the city centre and in our neighbourhoods, hospitality in Ireland is in dire straights, and it's clear to all who live and work in this country that operating a business with these tight margins is becoming untenable. We've been described as the "RIP.ie for Dublin businesses" but as the editor of a food and drink publication based in Dublin, I would argue that it's difficult to cover food and drink in this city without covering the sheer scale of closures. A stark one for me was looking back over a piece which tracked our favourite new hospitality openers from the previous year to count up that roughly a third of them have since closed. Now, new businesses are notoriously susceptible to the headwinds of decline, but for that many businesses that have been so widely promoted and acclaimed to close is shocking.
It's a very Irish mindset to assume that if you own a business, you must be doing well for yourself. In hospitality that could not be further from the truth, it's not a career you opt for if you want to have a cushy life and rake in the 000's on the bank account. Cafes, restaurants and bars have complex business models, with exceptionally high costs for low-profit margins which can vary from 4% up to 8% for a bumper year. There's very little margin for error, in a setting in which certainty is rarely ever achieved, a cancelled table, an expensive main course sent back or an ingredient hike, which seems like small things, all add up. It's exceptionally hard work, physically and emotionally punishing, especially in this era of social media where any Tom, Dick or Harry with a phone is a reviewer, operating on platforms that reward negative reviews. One off day or a word said in the heat of the moment could jeopardise all those successful days that have gone before.
"It's pretty bleak," Popeley said in the roughly three years he was trading his vegan fast food truck YUMGRUB "the prospects went downwards, even though our business was growing and everything just got harder and harder". The negativity around the future played a big part in Popeley and his business partner's decision, questions around when hospitality in Ireland was going to improve ultimately led to their decision to close, as they simply could not see an end to it. This "depressing" mood has led hospitality business owners to engage in a game of cat and mouse about when covid ends when energy bills rebates when inflation levels out and on and on, for him personally "it was really hard to keep going, hoping for it to get better". This negativity is not just a feeling but a quantifiable situation, with the reinstation of the VAT rate, wage costs, the implementation of additional sick pay, the prices of raw materials all going up, "all these things are happening all at once "that's what's stressing business owners out I think and definitely there's a lot of stress involved as well and I think that plays a big part" says Popeley. Citing one of the founders of Ben & Jerry's experience running a company, up until the point they were bought out for over 60 million "he felt like he was like falling off a cliff like every day just trying to grab on to something" Popeley aligned with this experience "it's like it is like as soon as you accomplish something like you're it is just the next thing like it's just constantly like that time keeps moving forward you finish something you should have like written everything down for that thing to make sure the next time." The gloomy mood felt in the industry is something shared by Rebecca Feely who ran the vegan cafe Kale + Coco for almost seven years, who admitted she wouldn't open another hospitality business until she saw some changes being made. Collective losses of business owners out of the industry are a massive concern and a drain on the skillset and knowledge base of the industry.
We are blessed in living in a land of incredible small producers, boasting some of the best ingredients available in the world and we rightly value names and providence. Any restaurant worth its salt has a menu filled with these recognisable and incredible products, from oysters from Carlingford to leaves from North County Dublin. An unfortunate reality of doing business in this current landscape has meant that costs continue to rise, be that for producers or for the restaurants that cook with said products. Seeing a price hike in your favourite restaurant or cafe can feel like a sting, and the rationale behind it can often be misconstrued as profiteering when the reality is often far from that. A backshot of working with local or international premium products is a challenging reality of doing business, "using these premium products for our business like beyond meat products are so expensive and deciding to use those and then when they're going up there's only so much you can you can really charge for a burger like there's only so much you can go, and it goes up it goes up so much and then you know if it's it just feels a bit feels it feels like even though, you've done the maths it feels like a ripoff if you're feeling ripped off you know your customers going to feel ripped off it just sucks," says Popeley. For Feely there are plenty of costs that are not apparent to the customer, which makes any price increase feel a bit harder "lot of people are very like quick to point out you know when businesses are complaining about cost increases like, wage costs going up and like increased sick leave and holiday pay and PRSI all and of these are good things and every business owner wants to be able to pay their staff more and offer them more benefits but all of these things those things have a cost ultimately. When people when business owners are struggling with those I don't think anyone's ever complaining about having to do that it's just that money has to come from somewhere so if people want that they have to be okay with paying €5 for a coffee like ultimately that's the cost of it in order to be able to pay people a livable wage and to be able to cover like sick leave and all that kind of stuff right and I think maybe sometimes people don't really get that you know they'll be the first to say like of course you need to pay people more you know Dublink is so expensive no one can afford to live here which is all well and good but then you need to be okay with paying more for your coffees and your food and things like that."
For Feely it's the culmination of the last few years, two years of COVID, not having normal operating hours then going straight into the Ukrainian war and the effect that had on energy prices, then straight into the cost of living crisis and inflation. "It's been a really rough few years for hospitality and I think anyone that came out of COVID in any kind of vulnerable position they just haven't had a chance to catch their breath it's been like an uphill battle for four years now so I think for a lot of businesses it just reached like a breaking point where they had to make a call whether it was financial or just like personally with stress levels I mean I know running any kind of business is really stressful and I think anyone who goes into that does know that but I think hospitality is especially tough um you know it's a very like physically demanding industry as well as like the mental stress of running a business so I think at some point people just kind of have to make a call margins in hospitality are so tight so I think that's why you see so so many businesses close really like out of the blue or suddenly or like you know one week they're doing okay and the next week they're just like no I can't continue 'cos you have very very little breathing room to kind of you know get through things like covid and energy crisis and cost of living like we don't these kind of businesses don't sit on like piles of cash the way some other industries might that can kind of help you keep a flat so I think that's that's definitely a big part and when your margins are so tight and everything else all your costs all your inputs are going up you know you have to increase your prices it's the only way to survive really
It's worth noting that not everyone would classify this as an industry in crisis, Micheal Taft, a researcher for the trade union SIPTU, argues that there is little evidence in the discussion on restaurant closures questions whether that the information we do have "does not necessarily show a sector in crisis". "Most of the stories rely on anecdote, usually an owner explaining why they have to shut doors or are thinking of it," Taft queries whether businesses "just want more money to enhance their profit line?".
If you're feeling ripped off you know your customer is going to feel ripped off
Jack Popeley
'Multi-level' solution
"I don't think there's one quick fix," says Feely who opts for a broad or multi-level approach which doesn't involve "throwing money" at the problem. She maintains that more leeway and more tangible support would go a long way to help small businesses through these choppy waters.
The debt warehousing initiative implemented during COVID was widely well-received, it allowed businesses to defer tax liabilities to support them. However the time has now come to repay this debt, or to put together an action plan to do so. But the RAI has called on the revenue commissioners to give businesses a viable opportunity to pay back what they owe over a ten-year period to avoid what they describe as a "tsunami of liquidations." Speaking on the position of some hospitality business owners, Feely maintains that they would appreciate more leeway in terms of repaying Warehouse debt, "I know "that's a big reason a lot of businesses are facing closure now is because all of a sudden they're like you know revenue is like 'hey you need to pay us all of this money by this date or you need to get a payment plan in place' and that's putting a lot of pressure on businesses".
While classification of hospitality businesses is another another sticking point for Feely, who argues that distinguishing between small or medium-sized businesses in the food sector versus large chains or hotels is a more sensible way forward. Larger businesses or chains operate as different business models and are then subjected to different types of pressures, pressure nonetheless, but they are generally better placed to absorb outside variables like inflation and price increases. For Feely a segregation within hospitality businesses which creates a distinction between the VAT or PRSI paid and is reflective in the supports issued, seems like a logical step to take, "I don't think it makes sense that a coffee shop with six employees is subject to the same rates as you know an International Hotel chain, I think it would make sense to try and make a distinction between genuine small businesses and food-oriented business businesses versus the big hotels or like restaurant chains or Starbucks I don't know whether that would be done yeah like on a revenue basis or like number of employees but I think that would be something that the government could do, maybe businesses under a certain size pay like a reduced PRSI or reduced flat rate?".
Calls to reinstate 9% VAT Rate
Inflation is a global issue, closely linked to economic and supply chain disruption of COVID and geopolitical factors like Russia's invasion of Ukraine and the consequent rise in energy prices. Locally, some of the initiatives designed to help SMEs through the pandemic are now coming back to bite them, now that the pandemic has entered the rearview. In what's being described as a "perfect storm" both Feely and Popeley cited cost increases, inflation and the cost of living crisis as some of the reasons why they were both forced to close their businesses.
During the pandemic, the VAT rate was changed to 9% for hospitality, but in September 2023 this was reinstated to the original 13.5%. The RAI believes that the 50% increase in the VAT rate for the hospitality sector from 9% to 13% is the 'number one' cause of closures in the industry, they are lobbying for the rate to be re-instated to 9%. The Irish government's slow response if there was a response at all to global trends was a point of contention for Popeley, using the re-raising of the VAT "has made a bad situation worse, you are constantly on the edge... it's a little bit of a head game trying to keep yourself going that's why people are saying it's gone on so long they just kind of had enough." A VAT9 movement of independent business owners has just launched, aimed to put pressure on the government to lower the VAT rate back to 9%- a covid measure. "Government needs to intervene with immediate effect, otherwise more and more food led businesses will close their doors," said Cummins in a statement on LinkedIn, "'wage inflation, VAT increase, warehouse tax and rising supplier costs are crippling our sector."
While admitting that there was plenty of warning given to the VAT reinstallation, Popeley described it as "a bit toned deaf" and explains that he hoped that the hospitality landscape could have been considered a little more. Pointing to food as a USP for Ireland, Popeley made the point that food is a unique tourist driver to the country in terms of quality and unique appeal, maybe should be reflected as such in terms of grants and supports. Pressure has been mounting on the Government to take action to support SMEs, particularly hospitality but to date little has been done. Finance Minister Micheal McGrath has pledged that the Government will be flexible when it comes to businesses repaying their warehoused tax debt, in response to our query a representative from the Department of finance was fixed on the VAT rate staying at 13.5%.
-Incentivise city centre footfall
Another new reality since the pandemic is the impact of remote working, with businesses experiencing significantly lower footfall across the week. Our office is not alone, operating on flexi-time, this combination of time in the office and time at home has meant that popping out for lunch on a Monday or a Tuesday and you'll sometimes struggle to grab another other than a supermarket sandwich or a burrito. With rising staff and energy costs small businesses just can't stay open seven days a week any longer, especially if there's very little passing trade. "The council are notoriously difficult to do anything with," says Popeley, and speaking of her own experiences as a business based in Stoneybatter but in terms of the day-to-day running of her business, the local council gave Feely a lot of undue stress and unnecessary strain. Expressing a belief that the council should make life easier for small businesses as opposed to harder, "people are banging their heads off the wall trying to deal with a council whether it's sandwich boards being confiscated and being charged storage fees for that" alongside applying for licenses for straightforward things like expansion or put outdoor seating "the actual process of applying for a license for anything is so archaic and convoluted like it's a joke I don't know it's it's clearly been the the same system for like 50 years and no one's bothered changing it and pretty bad that in itself is just a barrier to doing it in the first place", Feely added "instead of like charging small businesses who are trying to actually add value to an area especially like the likes of Dublin City like if you create outdoor spaces for people to sit and eat like that's adding value if you were like creating nice signage to try and attract customers like you shouldn't be penalized for that and I think that's a big area where you know the government could make a difference I think if you go to any other European city like outdoor seating communal areas public toilets all those kind of things are so normal and we just don't have that in Dublin City and I think since covid the city is kind of like suffering a bit and there's businesses that used to have 5-day trades that only have three-day trades now because people are not in offices anymore and I feel like the council could be doing more to get people back into the City and make it a nicer space to be in". Feely spoke about being on hour-long phonecalls with the council "just to pick up later outside my Cafe that I end up doing it myself like I've had to pick up you know human excrement myself and I'm not the only business owner that's had to do that to do it on multiple occasions that shouldn't be my job you know like businesses are paying rates to the council for a reason they shouldn't have to go jump through so many Hoops to like get the benefits that they're paying for." She finished "it probably sounds like a small thing but I just know from speaking to other business owners they're the like little things that keep you up at night that are stressing you out".
-Tackle the housing crisis
Businesses are facing a 6.6% increase in payroll costs this year with Cummins estimating it rising to a 19.4% increase in 2026. An increase in the minimum wage, extra sick days, upcoming pension auto-enrolment, and increasing PRSI, have increased costs on already tight margins. In an industry that relies on many casual employees these hikes (while undoubtedly correct) are adding a definite strain to an already stretched margin. This is undoubtedly exacerbated by the housing crisis which has become a lightning rod for a lot of our current issues, with so many of them circling back to the basic tenants of there being little to no affordable housing, and whatever housing that is available is far out of the reach of most average earners let alone those who work in hospitality. With high rents (when available) saving for a mortgage remains a pipe dream for most in this country. Back in the day rent would be say 20% of someone's wage, noe its up to 40%-60% and when the inevitable rent hike comes in, employees are left with little choice but to leave and seek greener pastures or more profitable labour.
Ongoing staffing problems have been cited as one of hospitality's biggest roadblocks, it's rare to walk past a business in Dublin these days without a hopeful "we are hiring" sign stuck in the window. The job market has dramatically changed in the last few years, I remember when I tried to get my first part-time job in the frosty wake of the financial crash, jobs were as rare as hen's teeth, you needed experience before you got a job even in industries that are student havens, retail and hospitality, in a drastic move I ended up going abroad for the summer and got work no problem. Feely points out that maybe some of these business models that worked 10 years ago, "just don't work in today's economy".
That was a very different time in Ireland and employment has undoubtedly changed for the better, but the increase in jobs and decrease in people to fill the roles has been compounded during COVID, when as Popeley says a lot of veterans in the industry left, realizing that "they could probably make a better living doing an easier job, the reality is hospitality is really tough like it's not an easy job it's you know long hours on your feet it's very physical you're running around you might be in a hot kitchen you're dealing with the public all day, it's not for everyone".
This brain-drain of people who have worked in hospitality for a long time takes its toll, and with hospitality, it can be very apparent when it's lacking, I'm sure we've all been in restaurants with bad service. It's like anything if the people who know how the business is supposed to run, leaves, it can be very hard for new people to learn on the job. Especially when it comes to this industry, so much of hospitality can be light-touch hard to articulate service that can be very hard to divine when it's your first week in the job and nobody has trained you in. There does seem to be a shift in people choosing to work in hospitality, there are now a wide variety of jobs to choose from, and deliberately picking one in the service industry does seem to be slipping in terms of priorities, fewer people are setting out on their careers aiming to work in the service industry.
Feely noticed this shift, when she ran her business some of her employees worked while in college, "if you're a student your studies are a priority and that's how it should be but it's very hard to run a business staffed with employees that have other priorities". An unfortunate piece to this is that Feely in the past had employees who were priced out of Dublin, hospitality is historically badly paid and living in Dublin on a reasonable wage is becoming increasingly untenable, let alone on a minimum wage. "I had staff that left purely because they couldn't find somewhere to live and like they moved to other European cities and they're messaging me saying they'd love to come back and they'd love to back and work and they love Dublin but they literally can't find somewhere to live," said Feely.
New business models v outdated system
It was during COVID that the concept of food trucks really took hold, outdoors, and easily moved they were a great enterprise for people who worked in the largely shut hospitality sector and beyond. While in the public's mind food trucks were a mainstay, Popeley who started his food truck business in COVID, legislation or even a signal towards legislation hasn't happened, "there hasn't been any attempt to kind of legislate for that being a new thing in Ireland." Another problem faced by Popeley was when he started out there was a ground swell of support, and there were umpteen places to park your truck, but in a post-pandemic world these spaces have been removed, with plans for development (which is great) or sale taking place. What we are seeing a lot of is the spaces that were previously occupied by trucks/trailers have been boarded up, fenced off and are still lying empty, while owners are struggling to find spaces to operate from. Citing a particular spot on Clonbrassil Street the Chestnut Bazaar, which was a great space with a sauna and a few different food vans, the space was shut down for development but is still lying idle.
Limitations within the supports already in place
The Enterprize board are there to help small businesses but Popeley has found that they didn't fully grasp his business, while being given great advice in his experience he was being pushed to create a tangible product which they could then help with marketing as opposed to help with his current business model. Alongside investment matching, requesting 5k from the business owner who doesn't have it, for an investment match into tech "which as the operator of a food truck I don't have a lot of use for... that's not where I actually need the money for". For Feely, there was an investment there that she felt that herself as a business owner and her peers are not in a position to give, especially when it comes to tangible real-life benefits "every single business owner is so time poor like we don't have time so it's very hard unless you can show me like how is this going to improve my bottom line or how is this going to drive more people into my business it's very hard to justify that so there probably could be a different approach into the kind of supports that they provide for small businesses and maybe like being conscious of the fact of how time poor they are and how ultimately like our margins is so tight we need we need help that's going to impact that the bottom line ultimately."
Legislation around food delivery service commission
"It's insane" Popeley described the food delivery service commission which as a business operating in 2024 you don't have the option not to be on and it has recently risen to almost 30%, "if your bottom line is your product is €10 that's €3 going to them, you are having to put your product up 3 just to make up for it... they're taking a huge amount of the cash um for just not that much work." Echoing his views Feely said, "that's something people don't know about um but every single delivery service does it and nowadays I just don't think businesses have the option really to not be on delivery like it's just become an expectation that you have delivery service and then if you're on one and not on the other people are complaining that you're not on this one and they essentially have like a monopoly on the market yeah and yeah they take 30% minimum like unless you're doing insane volumes and can negotiate a bit better. That's become really tough for businesses that like you know if 50 or 60% of your revenue is coming from delivery services um that's like a huge chunk of your profits that you're giving away essentially and they yeah they don't provide much support for their restaurants I think it's very well known they don't provide any support for their riders and they're just like taking all this profits for themselves and it we don't see that reflected in the service at all or you have customers calling you saying my food didn't arrive and you're like I literally can't do anything like once it leaves your restaurant you have no control over it but still you bear all the burden of it. Popeley pointed to a concept when a delivery doesn't go to the customer, in some instances, the restaurant is expected to make the food again and is only paid 50% of the original cost, bearing the responsibility even though it wasn't their mistake.
Community impact of closing
When Popeley announced the closure of the burger van he co-founded there was an "outpouring" from the local community and customers. The final few days of trading were "quite intense", he describes trying to make an order and having to counsel people who were really upset, which he found difficult as he would have processed the closure outside of work. Feely had a similar experience during the last week of her business when it ceased trading after nearly 7 years, customers were coming in upset and she felt as if she had to justify her decision to close "which is tough when you're like feeling sad yourself already". For Feely, the closure of her business was undeniably sad but "I'll be okay" it was the feeling of loss shown on the part of the customers which seemed on the whole to be even harder to take. In the wider context, it may just be one cafe in a neighbourhood but it's what that loss means for the wider community and signifies for the wider hospitality industry. When we cover closures we tend to fixate on the owners, the staff but not on the customers, and while it is personal and too real in terms of employment and paychecks. "It's a personal loss and you move on to something else but, definitely is a hole for the people still left." Even after so much time has passed Popeley says he still gets messages to the business account "Are you definitely gone??", which he struggles to reply to.
It's sad that I had to closed my business, but I'll be okay, but it's more sad that Dublin is losing loads of really nice independent cafes and food businesses and that that's going to continue to happen, it's sad for the city to lose them and it's sad for the communities to lose them.
Rebecca Feely
Both Feely and Popeley are not sworn off starting businesses "once you're an entrepreneur like you'll always have that in you," says Feely, but both were uncertain about stepping back into hospitality. "I'd have to see like a change in the landscape to really have the energy for it again," said Feely, speaking of the level of respect she feels for people who operate in that sector "it's just one of the hardest working Industries out there, the people that stick with it and that are doing it they really really love it and they're so passionate about it because you know there's not a huge amount of rewards for that kind of job so you have to really love it." Popeley spoke of his nieveity before jumping in but now "knowing the true cost of doing it". "It's the toughest job I've ever had," says Feely but also the most rewarding, "there's very few jobs where you get that immediate feedback from people you know in real time when you're like handing them your service or your product so I think that's a big appeal for people is that you know you get to meet your customers every day you get to see the smile on their face and you have their coffee or you bring their food down to them or like they tell you how good it is or how much they enjoyed it or when you see people really like get what you were trying to create there's not like that many Industries where you get that amount of like direct feedback in real time so I think that makes it really really rewarding." Pointing to the closure of his own cafe a couple of months ago Griffin maintains the importance of hospitality spaces on local areas, "one café isn't going to be churning out millions of euros. You're almost doing it to be part of the community".
Like a lot of bad news it can be difficult to hear at the time, as hospitality customers it can hurt those little things that bring us clusters joy in our busy lives, that daily coffee that gives us a well needed ten-minute break from work, the meal out that brings you closer to your partner or that pint with friends which tops up your soul. There's a lot that can be done to help this industry which is clearly in crisis, and we'd better get cracking, 'cos at this rate will be having our coffees in international chains, our dinners in international chains and our pints in internationally-run chains. Those independently run hospitality businesses are what locals and visitors alike seek out and stand in queues to experience, losing them will be a harder blow for the fabric of our land than we can really quantify right now, let's use it or lose it.
The quotes included in this piece were part of a panel discussion for Lovin Dublin that you can find here.