SINGAPORE, April 11 — Labour woes, high rents and slower footfall brought on by the proliferation of shopping malls led to the abrupt closure last month of popular American restaurant chain Chili’s Grill & Bar in Singapore, its franchisee has revealed.
The eatery’s franchiser, Brinker International, determined that the market was not viable because “escalating labour expense, difficulty in hiring and training people, exceptionally high leasing expense, and the general expansion of shopping malls in Singapore have fractured the market,” Greg Blakney, managing director of Belgarath Investments, told TODAY.
Belgarath Investments owns GDA Restaurants, which was Chili’s franchisee here.
The foreign-worker quota for the services sector is set to drop in the next two years and this will make it “considerably difficult” for restaurant operators, Blakney said.
The Ministry of Manpower (MOM) told TODAY, however, that the move will not affect most firms in the sector, as their pool of foreign workers is below the quota.
MOM records show that Belgarath Investments’ utilisation of foreign workers was “higher than average” among food and beverage (F&B) companies.
“The average and median wages for its local employees are also lower than their industry benchmarks,” the ministry said.
Last month, Chili’s announced on Facebook that it had shut all its restaurants in Singapore by March 24 after about a decade in business.
No reasons were given at the time for the closure of its stores at Tanglin Mall, Resorts World Sentosa and Clarke Quay Central mall, prompting questions from customers on its sudden exit.
Training, hiring challenges
Blakney, 53, a Singapore permanent resident, said that it was expensive to train employees and those who learnt the ropes would leave after several months, as restaurants compete for qualified workers.
“There are so many people looking for qualified restaurant employees and people trained at Chili’s were valuable in the market,” said Blakney, a Canadian who arrived in Singapore in 1996.
The problem was compounded by the fact that few Singaporeans are willing to take up such jobs.
“The fact that machines cannot replace people in restaurants means the coming quota issues are going to make things considerably difficult for operators, except the small, mobile ones,” he said.
In February, Finance Minister Heng Swee Keat announced that the Government would reduce the foreign-worker quota for the services sector in the next two years to push companies to restructure and raise productivity.
The sector’s Dependency Ratio Ceiling — which stipulates the proportion of foreign workers firms may hire — will be cut from 40 per cent to 38 per cent on Jan 1 next year, and to 35 per cent on Jan 1, 2021.
Accommodation and F&B companies are part of the services sector.
According to the MOM, most companies in the sector would not be affected as their foreign-worker numbers are below the ceiling. “For those that are affected, the Government will continue to help them access the local manpower pool and to operate in more manpower-lean ways,” the ministry said.
It also urged companies to improve the quality of jobs and transform.
Despite raising wages for most workers by 30 to 50 per cent in the past five years, Blakney said his firm could still not get people to work in the industry.
“Restaurants need to be staffed with people and there is no way around the need of them. So, either you get a small location and highly productive people, or you die,” he added.
“There will be dozens of brands failing these coming years. The market is completely unsustainable.”
In the last three years, the MOM said that the food services sector has consistently recorded strong employment growth for Singapore and foreign workers, although productivity has declined.
High rents, slower foot traffic
Besides having to contend with high rents — a perennial peeve in the F&B business — Blakney said that the proliferation of new malls has reduced foot traffic in many places except where the MRT stations are.
While the chain has tried its best, he said the challenges posed by rental and food costs, and its lack of ability to raise prices scrambled its profits very quickly.
“We had no choice, once the decision was made, to immediately close. It was out of our control, and it has caused our company a considerable loss and (cost us) our team,” he said.
Government agency Workforce Singapore will help Chili’s Singapore employees to look for other job opportunities, the MOM said.
Some patrons, such as compliance executive Cindy Wong, 28, said that they would miss the restaurant chain.
Ms Wong, who dined at Chili’s Clarke Quay Central store about twice a year, liked its “vintage vibes”.
“Its menu was comprehensive, and the meals and drinks came in big portions. The lighting made the whole place very welcoming,” she said.
Explore technology, relook business models
While Chili’s is among the more recognised names to shut here after the Government announced tighter foreign-worker quotas for the services sector, it is not the only established F&B chain that has called it quits in the past year.
In September last year, TODAY reported British coffee chain Costa Coffee’s exit from Singapore.
Earlier this week, The Straits Times reported that Kenny Rogers Roasters will shut its last store in Great World City mall on Sunday (April 14), although it is unclear if the chain is leaving Singapore for good.
Beset with labour woes and increasing operating costs, it is reasonable to expect that more F&B businesses will exit the market, said Jeremy Sim, course chair of the culinary and catering management diploma at Temasek Polytechnic’s School of Business.
Analysts said F&B businesses must attract more Singaporeans and explore technological solutions to deal with the labour crunch.
Dr Michael Chiam, a senior lecturer in tourism at Ngee Ann Polytechnic, said firms would have to tap technology to raise productivity, such as by having patrons place orders via mobile tablets.
They could also move their business model from full-service to one that is partly or fully self-service, or adjust their processes such as by preparing food in a central kitchen.
Stores that are part of large global franchises, however, may have their hands tied.
In Chili’s case, Dr Chiam said it has been operating as a full-service restaurant worldwide.
“If they convert part of their business into self-service, it will not be consistent with their business model,” he said.
Agreeing, Associate Professor Lawrence Loh of the National University of Singapore (NUS) Business School said that the flexibility of such establishments to adapt to local conditions may be limited due to the need to adhere to standard practices across markets.
“They cannot simply adapt novel solutions like technology usage just for the Singapore market. So, they have to do their sums, and enter and exit markets accordingly,” said Loh, who helms the Centre for Governance, Institutions and Organisations at the NUS Business School.
To strike a balance between nudging businesses to raise productivity and helping them stay in business, Sim said government funding, training programmes, proper menu planning, effective cost management and the strategic deployment of technology could help.
The reliance on foreign workers cannot continue indefinitely, Loh said.
While firms may reduce costs and consumers pay lower prices, there is a broader social cost involved.
“Having low-value-added foreign workers strains the tight social infrastructure in resource-scarce Singapore,” Loh said.
Dr Chiam suggested that F&B businesses have regular dialogues with the Government to understand each other better, so that they can work to overcome challenges facing the industry. — TODAY
Source: The Malay Mail Online