The local Romanian restaurant market is almost four times lower than the Czech Republic’s, a country with half Romania’s population, but with many more tourists.
“Prague alone is visited by more than seven million tourists a year, while Bucharest attracts only several hundred thousand,” says Dragos Petrescu, owner of City Grill, one of the largest local businesses.
“I’ve seen an increase in the number of tourists who spent more and offset the decline in average bill of Romanians this year. The market has been stable in 2013 overall in terms of both the average bill and the number of customers.”
Dragos Petrescu says his business increased by 12% to 13% on a flat market in 2013, because he his powerful brand gave him a competitive edge. “People know what they get from well-known brands.”
Romania is next to last in the region in terms of its restaurant industry, which amounts to EUR900 million. The most developed economy there, Poland, has a three times bigger industry, while Hungary’s is 50% higher than Romania’s.
“The sector may see a slight contraction in the coming years because of the increase in fiscal pressure put on it, which the slight improvement in consumers’ purchasing power will not be able to offset,” says Alina Cinca, senior consultant Transaction Advisory Services with Ernst & Young Romania.
The introduction of the lump sum tax for restaurants and coffee shops will lead to a decline in the number of small economic operators and a slight decline of the market, Cinca believes.
“Still, the small improvement in purchasing power expected will give a boost to this market.”
The hospitality industry, which includes the restaurants, contributes 2.1% to Romania’s gross domestic product. The EU average is 3.7%, which means there is room for growth in the restaurant and hotel industry.
More and more restaurants and pubs have been opening over the last few years, while others closed due to the financial crisis. Dozens close in Bucharest’s old center each year.
“The overall market is flat, as 20% of the existing companies close and 20% new ones open. There’s a three-month psychological threshold in Bucharest’s ld center and many companies can’t cope,” says Marian Alecu, who had run McDonald’s operations in Romania for more than a decade.
He remains involved in the restaurant industry.
The overall restaurant market is small because of two reasons, he adds – small revenue per restaurant and tax evasion.
“The smaller the restaurant, the higher the evasion is as a share of the total business. I think evasion stands at 35% on average, but may go beyond 80% in some cases.”
Ernst & Young officials say that the introduction of the lump sum tax may hurt economic operators, which avoid paying taxes, while the large restaurant chains may stand to gain.
In turn Alecu says the market should progress through an increase in spending as shown by the restaurant bill, not just by opening new restaurants. A substantial increase could occur once foreign companies enter Romania, and the fast-food industry could contribute tens or hundreds of millions of euros to the total business.
The largest three operators in Romania are international chains McDonald’s, KFC and Pizza Hut, the latter two franchised.
A number of 17,089 companies whose core business was restaurant operation were registered with the Trade Registry and active in mid 2013, 3,167 of which in Bucharest.
(English version by Loredana Fratila-Cristescu)