Sudden restaurant closures: what’s the story?

News that Minister for Finance Paschal Donohoe is actively considering retaining the 9 per cent VAT rate for the hospitality industry, will come as a relief to restaurateurs in a week that saw two high profile dining rooms close their doors permanently.

On Wednesday, Gavin McDonagh, chef/patron at Brioche, in the Dublin suburb of Ranelagh, posted news on social media of the restaurant's immediate closure.

The following day, Fenn's Quay, the Cork city centre restaurant with chef Kate Lawlor at the helm, followed suit.

At the end of last month, Donal Doherty shuttered Harry's Bar & Restaurant in Bridgend, Donegal.

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Doherty said that the decision to close after 26 years was down to rising costs, and reduced revenue from sales of alcohol.

Drink driving

“Costs simply continued to rise, year on year, but the the Donegal economy was not going to allow us to increase prices. Also, the changes in drink driving attitudes, rules and enforcement, dramatically decreased our wine and beer sales over the past three to four years. There is no arguing against this, but sadly it ended things for us.

"Brexit and the collapse in sterling was tough on us too, and until the border issue is sorted we cannot even think of investing in our Donegal location."

The Bridgend premises is family owned. "In the short term we have leased the pub business to a neighbouring pub, The 19th, which recently burned down. This will help them keep their customers as they rebuild. The kitchen is still our central production point for our new Harry's in Derry and our Harry's Shack on Portstewart Strand.

"In the long term we might come back with a different offering, or we might sell the building and concentrate on our Northern Ireland businesses where it is simply cheaper to do business," Doherty said.

“Harry’s in the Craft Village in Derry is off to a great start ... and the Shack is having its best season ever, with tourism on the north coast booming. We just launched a new outside bar and eating area that is simply stunning.”

Insurance costs

In Cork, Kate Lawlor blamed increasing insurance costs, car parking and access issues and ongoing building work for the downturn in business that led to the decision to close Fenn’s Quay.

“Cork is a city that is coming back into its own, with new buildings, new eateries and new hostelries. But with 15,000 less cars in the city, increased parking charges, increased insurance costs, a potential increase in VAT, and a main street that is a building site, it has been increasingly difficult to do business,” she said.

Lawlor began working in Fenn’s Quay in 2001 and took over the business in 2008. “The decision to close was not one I took easily,” she said. “Today is a sad day, but I am proud of what I and the crew have achieved. It’s now time to think about the next chapter.” She plans to taking a break “and figure out what’s next for me”.

Gavin McDonagh moved his Brioche restaurant from its city centre Aungier Street location to the south side suburb of Ranelagh just over three years ago. Originally offering a “small plates” style of dining, it more recently offered a la carte, and tasting menus. Customer demand led to the introduction of brunch last year, replacing weekend lunch service.

Closure notice

Calls made to McDonagh after the closure notice was posted on Wednesday were not returned. Brioche’s front of house manager Patrick McArdle moved on four months ago, taking up a position with Wilde restaurant in the Westbury hotel.

While this latest spate of closures has sent chills through the restaurant industry, at the same time, some restaurants have been reporting record profits (L'Ecrivain and Restaurant Patrick Guilbaud, both in Dublin), and others are embarking on expensive refurbishments (Peploes, also in Dublin).

There have been suggestions that the industry is polarised, with restaurants outside the capital not benefitting from improved economic circumstances to the same degree as those in Dublin.

‘Staying alive’

Adrian Cummins, chief executive of the Restaurants Association of Ireland, believes there is "a general consensus that some parts of the country are not feeling the effects of the economic recovery. Staying alive is a mantra we are starting to hear again".

According to Cummins, many factors contribute to the closure of a restaurant. "Since 2015, business costs have escalated substantially. Insurance premiums have on average increased by 30-35 per cent (even without claims). In 2017, we have seen commercial rate increases across the midland regions and we are due to see water charge increases in 2018. Labour costs also account for 40 per cent (on average) of a restaurants turnover."

However these are not the only challenges facing restaurateurs in Ireland at present. “The staff shortage is the largest issue facing the industry at present. In the past 18 months in particular, we have seen significant growth in the number of new openings, so competition for staff is fierce,” Cummins said.

“Since the VAT rate was lowered from 13.5 per cent to 9 per cent in 2011, it has played a crucial part in allowing restaurants to offer value for money and stay competitive. Given the rising costs, it is vital that the VAT remains in place. Should it increase, we’ll certainly see a drop off in tourists and their spend in the coming years,” he added.