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Food outlets face ‘unsustainability’ problems

By Miriam Dunn

The news that Farsons has decided to downsize its fast food franchises has sent shockwaves through the catering industry, although many admit the decision is not surprising considering the current economic situation.

Louis Farrugia told our sister paper, The Malta Financial and Business Times that Farsons subsidiary Food Chain would be tailoring operations at Pizza Hut, Burger King and Kentucky Fried Chicken in the near future. He cited fierce competition as one reason for losses which he described as unsustainable.

Reacting to the news, the president of the hospitality and leisure division of the Association of General Retailers and Traders, Philip Fenech, said there had been an indication that business has been slowing down for some time.

"Fast food outlets have their own particular problems because they need volume and frequency to survive," he said. "The current ‘stop-go’ trends we are witnessing, due to the economic slowdown locally and seasonality problems in tourism are making it very difficult to keep a business sustainable."

In fact, last year was an exceptionally difficult year for many fast food outlets, especially burger bars, which had to deal with extra problems caused by the BSE crisis.

Mr Fenech explained that on the local front, it was evident that people were not eating out as much as they would like to, while many businesses in the tourism industry were also feeling the impact of the 11 September tragedy which came at a time when things were already difficult.

"Fast food is very popular with mainstream tourism and in particular, with the younger markets," Mr Fenech explained. "Although we are now beginning to see some improvements in niche markets."

He adds that continual increases in the supply side have not helped the situation and points out that the GRTU has long been asking the Ministry of Tourism to look at ways of smoothing out fluctuations in occupancy levels throughout the year.

"The seasonality problems we encounter, which translate into slumps and then short busy periods make business unsustainable for many people," he explained. "That is why we always tell people that they have to look at the big picture to get an overall idea of how things are going.

"It’s no good basing a conclusion on how outlets appear over Christmas or just on Saturday nights."

Mr Fenech said that the decision to downsize is not one that an outlet would make lightly.

"But if someone has exhausted his overdraft facility, he cannot continue in business without taking certain measures, especially if there is no indication that business is going to improve," he explained. "If their turnover is dropping, they have to decrease their staff ratio accordingly.

"For example, we now have outlets only opening at the weekend."