ood lovers get ready. Your frequent visits to popular restaurants could see a steep decline if your salary is not able to keep pace with escalating food bills. Come April and your bill after having eaten from a teetotal menu could zoom up considerably. Much more than you might have imagined on Budget Day this year. You may end up paying almost 35 per cent more than the actual bill in terms of the various taxes. And all you might have ordered could be some bland tomato soup, humble vegetable pakoras, and a ladle of pulav and daal fry. Eating out inflation, if you may. The 12.36 per cent service tax on airconditioned restaurants that is set to kick-off from the first of next month could rip open your lunch meetings with colleagues or dinner plans with friends or family. That’s because this 12.36 per cent will be over and above the 5-10 per cent you will be paying as service charge and the 14.5 per cent value added tax (VAT), both of which are already in existence in most restaurants. In short, if your bill totals Rs750, you would be shelling out Rs262.5 more as taxes and weakening your wallet by over a 1000 rupees. Slightly discomforting, isn’t it? And then, remember you have not sipped a drop of either Bloody Mary or Tequila Sunrise or Singapore Sling. The restaurant you were seated in does not serve alcohol. It just has flashy lights, some light music, and an airconditioned ambience. Even a mere sundae ice-cream at any of the fancy parlours measuring 2,000 sq ft in space could see you paying over 26 per cent as taxes (14.5 per cent VAT and 12.36 per cent service tax, as several ice-cream parlours do not levy service charge). So for an ice-cream bill of Rs115, you will have to throw away Rs30 more as taxes, the amount with which you can buy another ice-cream from vendors off the street. And going home with a big hole in your pocket might not seem a good idea when talk of your salary hike is only met with whispers in office corridors. Consider this. You are paying 35 per cent extra as taxes each time you eat out in an AC restaurant. Your salary on the other hand might not even rise by 8-10 per cent as most employers are drowned in pessimism. Which means it makes economical sense to cut down on eating out habits, says Revati Dubey, a BPO professional in the city who has started feeling the pinch even before this service tax regime on AC eateries has kicked off. Her visits to restaurants and food courts have reduced from one per day to about thrice or four times a week. In fact, there have been times when this die-hard foodie has coaxed herself to relish a meek meal of sambar rice at the various Sagars dotting the city. “It is about managing monthly budgets,” Dubey states. More so, when the Rs30,000 you earn per month has to go towards paying the house rent, monthly bills, transport and food.
Eating out, in other words, looks more of a luxury. Many restaurants have hiked prices, she opines, and spending Rs1,500-2,000 per week on eating out seems frightening. Dubey feels that by cooking at home, she is not just able to curtail expenditure, but also curb the intake of fried and fatty food. Siddharth Shankar, who works in a IT firm and stays by himself in Koramangala, reveals that he has been stacking his larder with readyto-eat bisi bele bhaat, rajma chawal, pulav, etc. Buying such packets which cost Rs40-50 works
every three buffets. That’s what this has come to. “There is pressure on the economy that has already translated into a pressure on eating out and some eateries are witnessing it,” explains KS Narayanan, CEO, Pan India Food Solutions, which runs restaurants like Spaghetti Kitchen and Copper Chimney. Estimates by restaurant associations show that footfalls have already fallen by 10 per cent, while average bill sizes have tapered by 10-15 per cent. Although weekends imply 100 per cent occupancy, many city restaurants are un-
years in the hotel industry, believes that the finance minister is burdening the very aam aadmi his party claims to fight for. “The rich will remain unaffected by such taxes. It is the middle-class who occasionally enjoy dining out with their parents and children who will be impacted. Why should people pay extra to the government just because they are eating in an AC restaurant?” asks Mishra. The eating out segment is vast in the city, comprising over 6,000 eateries, of which about 2,000 have ACs. Experts say there is already a 20-35 per cent difference in the bills of the AC
Bangalore, thinks profits would be impacted. “The increase in pricing for hotel services and products cannot be in proportion to the increase in related costs. The industry is already incurring losses due to increase in prices of essential commodities, LPG, etc. “ In a good period, restaurant margins range between 15-20 per cent and can fall as low as 10 per cent during a lean season. Usually, vacations including summer and Christmas are seen as peak periods, while February-March (exam time) and the monsoon are projected as lean seasons. But factors like zero pay hikes, inflation, etc ,can have a profoundly adverse effect on eating out throughout the year. “If margins fall lower than 10 per cent, then operating a restaurant is not viable. Investing in an FD could yield better returns,” rues Kunisseri. Experts predict that with the service tax, standalone AC restaurants not serving alcohol will be the ones to be hit maximum. “If a restaurant is located in a mall or office complex, there is greater possibility of drawing in customers than a standalone unit existing by itself on a street,” says Kunisseri. Moreover, customers like Dubey might change loyalty to non-AC eateries. Mishra anticipates a 50 per cent possibility of restaurants closing down if the scenario at their end gets hard to manage.
Travel to be hit
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cheaper than eating the same in restaurants, contends Shankar. Many middle-class Bangaloreans are devising ways to control their restaurant budgets ever since inflation hit double digits and recession talks become omnipresent. And restaurants are already feeling the heat.
Buy 1 biryani, get 1/2 free Ever seen such offers on food?Well, Bangalore eateries are going the shopping mall way. While a biryani joint in Indiranagar is openly advertising a buy two (containers) get one free or buy one get 1/2 free offer, a barbecue restaurant is gifting a flat 20 per cent discount on bill for the barbecue buffet that includes 12 starters, 10 main course and six desserts. A fine-dine in Jayanagar has gone a step further by offering 1 buffet entirely free with
—Anantha Subramanyam K
able to meet even 50 per cent occupancy during lunch hour on weekdays or 70 per cent during dinner time. And in Bangalore, five new restaurants open every week, thereby eating into the competition of existing outlets, says a restaurant partner. “Thus, such discounts have to be offered to lure back customers.”
Brickbats for Chidu While presenting the Union Budget on February 28, finance minister P Chidambaram had remarked, “At present, service tax does not apply to air-conditioned restaurants that don’t serve liquor. The distinction is artificial, and I propose to levy service tax on all AC restaurants.” Thereafter, making restaurant owners grumble in their seats as much as their customers debate on frequency of visits. HA Mishra, CMD of consulting firm Foodesign Hospitality Systems, a veteran with 43
and non-AC restaurants. With the service tax coming into effect, the divide will only deepen. “Specially in the summers, when it is vacation time and most families like to eat out. That is also when the requirement for the AC section goes up. This service tax will simply punish people,” asserts Mishra. Experts predict frequency of visits by customers could drop from 1-2 times a week for a family meal to once in 10 days depending on household budgets. “A gradual decline of 10 per cent in repeat customers is being seen already,” points out Manoj Kunisseri, director, Pepper Restaurants which runs Kaayal, a restaurant serving Kerala cuisine in the city. And coupled with lower footfalls and shrinking bills, food joints will have to walk a tightrope managing the various overheads, rentals, inflation, outside competition and staff salaries, say experts. Nitin Pathak, general manager, Citrus Hotels
Alongside the rise in every other price, the increase in restaurant bills will also impact tourism. Experts say travel of all forms including business, leisure, meetings, religious and visiting family; can see some decline. Says Pathak from Citrus Hotels, “For the leisure traveler, the service tax exacerbated by high fuel prices, other costs will further push down the demand for holidays, impacting tourism in a negative way.” While as a result of tight budgets, corporates might shift conferences and gatherings from star hotels to office auditoriums, thereby impacting MICE (meetings, incentives, conferences, exhibitions) tourism. A marginal few don’t quite agree. Kapila Saigal, owner of restaurants like Ruh and Chandni Chowk, feels Indians like celebrating and entertaining themselves with food and would not necessarily feel the pinch of paying a little more on their bills. Then again, hospitality consultant Ravi Wazir, also author of “Restaurant Startup:A Practical Guide”, thinks the hue and cry over this issue will die down quickly the way we have absorbed rising fuel prices. “The hue and cry is valid in the context of all prices going up. But taxes is the only way the government can work towards covering deficit. People will complain but grudgingly pay the tax.” Maybe people will accept, maybe they won’t. But prices will surely jump. email@example.com