After a gruelling work week, my spouse and I dedicated our previous Sunday towards the last thorough sanitation of our once owned bakery, which was supplier to our two coffee houses. Before we handed over the bakery to the new owners, every corner was meticulously attended to; from the ceiling to the intricately designed stainless steel units – they were defrosted, relocated, bleached, rinsed, and buffed to perfection. Wrapping everything up, I was completely worn out, and my hands were blistered from bleach and had garnered several cuts. This was not our initial plan for the day, but due to a shift in schedule and the bakery’s changeover date being brought forward, we had to adapt. As owners, the responsibility always falls on us. This was our unexpected Sunday.
This reality is an all too common scenario in the lives of cafe and restaurant owners. Gone is your day off if something abruptly malfunctions, if an employee is ill or a courier misses. As restaurant ownership involves numerous floating pieces, there are always challenges to counter. In the two-plus years since we opened, there hasn’t been a single week that has gone according to plan.
A usual day is a test of multitasking. My mind oscillates from rectifying a delayed delivery, scrutinising our fiscal flow to ensure VAT, salaries, and bills are paid timely, overseeing rosters, projecting staffing requirements for upcoming months, hiring and conducting interviews, reviewing prices amongst suppliers for stocked items, interacting with representatives, addressing staff issues, managing social media and promotional endeavours, persuading contractors to repair things. Coordinating our HACCP paperwork, validating that cleaning rosters remain current. The chaos never ceases and it feels like my to-do list even has its own sub-lists.
I was disheartened on this Sunday upon learning the closure of Ukiyo, a revered locale I frequented during my Dublin days. It now joins the close to 600 other food-centric ventures that have shut down in the past 11 months in Ireland. A particular sentence in their closure announcement is striking and worrisome: “Regrettably, the profit margins in our industry are currently so thin that there is no future for us or many other similar businesses.”
Ukiyo’s proprietors are not shuttering due to a sudden financial collapse after two decades; Dylan McGrath and his duo of restaurants likely have a similar tale to tell. The truth of the matter is that compared to the financial obligations and workloads, the profit margins are insufficient to make the effort worthwhile.
The question then becomes: what happened to the profit margin? The onus lies largely with the Government. Over the last 12 months, they’ve enforced multiple policies, each one adding to the burden, like relentless slashes with a thousand knives. The prime policies encompass the obligatory pension plan set to be rolled out in January 2025, a rise in minimum wage with another forthcoming, sick leave extensions, a novel public holiday, and an upsurge in the PRSI contribution rate. The cherry on top of this disastrous cake is the revival of 13.5 per cent VAT amid global inflation that’s already wreaking havoc in the sector. Whilst these policies might seem progressive, their cumulative effect within a single year has stripped the food industry’s capacity to sustain any meaningful profit margin necessary for an entrepreneur to deem the endeavour worth it.
In reality, the earnings the Government will amass from my enterprise will far outstrip my own. This begs the question, do I even qualify as a business owner, or am I merely a non-beneficiary civil servant?
In my hunch, there lies another stealthy villain gnawing away at the profit margins. I find it hard to believe that all the price hikes we, as individuals and modest businesses, have grappled with are solely a consequence of genuine inflation. For instance, we received a customer grievance about the 80 cents we charge for our non-dairy milks at our café. The reality is that this milk costs us a steep 80 cents per unit because a carton of Oatly we procure from our supplier is priced at €2.67. This indicates we’re not getting a major bargain compared to an average consumer shopping at a grocery store. Given that a carton serves us four to five cups, at approximately 60 cents each, we’re at a loss. When factoring in wages, electricity, rent, taxes, VAT, and so forth, the 80 cent price tag becomes detrimental. The only source of profit is the charge for the shot of black coffee.
One example to illustrate this: a block of simplistic Brie can be secured from Lidl for €1.50. However, obtaining the same chunk from our chosen food distributor would set us back over €3.00. Astonishingly, even at the lower price, Lidl is still turning an adequate profit, which reflects the harsh reality that many major wholesalers have astonishingly amplified their costs. Cafes and restaurants, in my perception, bear the brunt of the “Ireland’s scam” situation given that they are the end consumer in a lengthy supply chain. My proposal would be to examine the leading food wholesalers, which preside over the market, to infer whether their inflation-related price hikes are justified. An American analysis revealed that increased net earnings accounted for half of the inflation.
Similarly, I hear that Irish energy providers have employed a similar strategy. It appears that they purchase their gas/oil well ahead of time, up to a year before. Yet, when the Ukrainian conflict erupted and there was a steep rise in the rates of crude oil and gas, Irish energy companies made an abrupt hike in their prices. However, they were pricing for material that had been acquired when the prices were substantially lower. Contrarily, reductions in the electricity/gas costs by Irish providers have not been as promptly reflected.
Therefore, primarily, though the government is responsible, the profit margin is largely accredited to the sizable companies stealthily masking their avarice behind the façade of inflation. It begs the question – is it even worthwhile to commence a food enterprise? Duncan Maguire, who owns Ukiyo, discourages aspiring entrepreneurs. As I observe the scars on my hands from a strenuous Sunday spent scrubbing a bakery, concluding another week of gruelling labour with much of the financial yield departing to the government and large corporations, I can’t help but agree.
Jamie O’Connell, an author and the co-owner of Bean & Batch, alongside his spouse, John Hallissey, runs outlets in Kenmare and Killarney, Co Kerry, visible on Instagram as @beanandbatchkenmare.