A STUDY by Fáilte Ireland has found no evidence that excessive profits are being generated in the restaurant sector and says that input costs are higher here than abroad.
However, the tourism development body said caution should be exercised with the findings as they were based on a survey of just 26 restaurants. There are about 2,500 restaurants in the State.
The research by Horwath Bastow Charleton consultants was conducted earlier this year and found that raw materials, such as food, accounted for 31 per cent of the cost of a typical meal.
Staff costs accounted for 25 per cent, while VAT and excise duties accounted for 17 per cent. Electricity, gas, rates and other operational costs made up 14 per cent of the cost. The remaining 13 per cent of the cost included property costs such as mortgage repayments, capital expenditure, taxation and profit.
Fáilte Ireland’s economist Caeman Wall, said it was difficult to give a precise figure on profit, but the research suggested that excessive profit-taking was not evident in the sector.
Fáilte Ireland director Aidan Pender said a profit margin of 2 to 4 per cent would not be excessive in the restaurant sector.
Mr Wall said the study found that input costs for Irish restaurants were higher than in many comparable countries.
Irish VAT rates were significantly higher than the rates in other comparable states.
Food and drink costs were 21 to 30 per cent higher than the average for the 27 EU states, he said, and Ireland had the highest excise duty on alcoholic products in the EU.
Utility costs had increased at rates “far above general inflation” and our electricity and energy costs were among the highest in the euro zone. “Tackling high costs in the restaurant sector is challenging,” Mr Wall said.
“While the recent economic slowdown has moderated cost pressures and, in some cases, led to cost reductions, concerted action will nevertheless still be required on the part of restaurants to contain costs.”
Asked if wages should be reduced, Mr Pender said wages were not all that high to start with.
Of the restaurants surveyed, the average hourly rate was €11.67 for chefs, €9.49 for kitchen porters and €9.78 for waiting staff. Ireland’s current minimum wage is €8.65 per hour.
Mr Pender said this research was commissioned because there was ongoing commentary describing Ireland as “rip-off Republic” but there was no research to back this up.
Value for money had also cropped up as an issue in surveys of tourists, he said. A survey of 300 restaurants would have been “statistically robust”, but it was impossible to get this number of restaurants to participate as many were small businesses and did not have the financial and management data required by the researchers.
Of the 26 participating restaurants, nine were from Dublin with the remainder from Cork, Galway, Kerry, Mayo, Waterford, Westmeath, Offaly and Sligo.
They were all mid-priced and 12 were attached to hotels. The research found that pay rates were slightly higher in the restaurant sector compared with the hotel sector.
Mr Wall said many restaurant owners had highlighted the increased cost of utilities, particularly local authority charges.
He said these findings would be shared with a number of Government agencies, including the Competition Authority and Forfás.
The Restaurants Association of Ireland (RAI) said the report showed that restaurants were burdened with oppressive regulation and weighed down with a multitude of costs and charges.
RAI president Paul Cadden said the next six months were critical for the sector and banks must free up credit and increase overdraft facilities for restaurateurs.
