High costs hit Irish restaurant profits

17 June 2005
High costs hit Irish restaurant profits

High costs mean restaurateurs in the Irish Republic make a profit of just €3 (£2) for every €100 (£66.83) spent in their premises.

According to calculations by the Restaurants Association of Ireland (RAI), ingredients and staff wages each gobble up 31% of an average bill, while overheads and VAT consume 22% and 13% respectively, leaving a profit of 3%.

RAI president Aidan MacManus, who owns the King Sitric fish restaurant in Howth, near Dublin, said fine-dining and family restaurants counted themselves lucky to achieve margins of 35%. "I have had to put eight bedrooms on since 1998 to subsidise the restaurant," he said.

The problem lies with Ireland's high indirect taxes and costs compared with other EU states, such as Spain, where, MacManus claimed: "The restaurants are all making more money, although they charge less."

Spaniards pay just 7% VAT on food and drink and no excise duty on drinks.

Their Irish counterparts stump up VAT of 13.5% on food and 21% on drink, plus tariffs of €2.49 (£1.66) on wine and €4.98 (£3.33) on Champagne.

Spanish insurance premiums are two-thirds of those in Ireland, while the Spanish minimum wage of €3.21 (£2.15) is half Ireland's €7.65 (£5.11).

Adding to the burden, Irish restaurants pay 10% more for raw ingredients than those of any other EU member; Ireland's property prices and rents are the steepest in Europe; and its energy costs are 15% higher.

King Sitric sample dinner menu:

  • Smoked salmon and asparagus parcel, horseradish hollandaise

  • Choice of soups

  • Fillet of hake, herb crust, tomato dressing

  • Choice of dessert or Irish farmhouse cheeses

  • Coffee and petits fours

Bill before tip€52 (£34.75)
Produce€18.40 (£12.20)
VAT€6 (£4)
Wages€15.60 (£10.42)
Overheads€10.40 (£6.95)
Profit€1.60 (£1.07)
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