Top restaurants find new rules hard for them to stomach

The government's nationwide clampdown on graft and wasteful spending has left many high-end catering companies with a simple choice: Adapt or die.

On Dec 4, China's new leadership issued eight rules to improve officials' working style, which included scrapping extravagant banquets.

The effect on exclusive restaurants was felt quickly.

A Ministry of Commerce survey in February found expensive eateries in Beijing had seen a 35 percent drop in business since the rules were announced. Those in Shanghai reported a 20 percent decrease.

A separate study of the catering industry over the May Day holiday by the China Cuisine Association saw similar results.

"There has been an obvious decline in high-end food consumption," the association summed up in its report. "The fall in business for Shun Fung, Royal Garden Hotel and Xinhuafu Hotel all exceeded 50 percent."

For some, it has been even worse. A manager at an exclusive restaurant close to Beijing's West Second Ring Road, who spoke on condition of anonymity, estimated on Thursday that she has had 80 percent fewer customers since the rules were announced.

The amounts they spend have also decreased, she said.

"Before, the money spent on one dinner was more than 5,000 yuan ($815)," she added. "Today if they spend 2,000 yuan we're as happy as if it was Spring Festival."

To offset the downturn in business, she said her boss had fired eight out of 10 waitresses and four-fifths of the kitchen staff, on top of reducing the dining area from two floors to one.

Yet the changes have made little difference, the manager said. "You can't imagine how much the boss has lost," she added. "We'll surely close down soon."

Merrylin, a high-end chain of restaurants that originated in Shanghai, shuttered one of its Beijing venues after 11 years on April 30, the date its lease expired.

In an interview with China Central Television, the director of Merrylin's Beijing operations, identified only as Cai, said business volume had fallen more than 50 percent.

China Daily was unable to reach Cai or another spokesman at the company's headquarters for comment.

However, a financial employee who was still working at the Beijing restaurant last week to clear up membership card issues said media that blamed the working style rules for the closure were "irresponsible".

When asked why she thought the decision was made to close the business, she replied only with a question.

"Do you know how much the rent has risen in the last several years?" she said.

"Also, are you willing to be paid 2,000 yuan as a waitress now?" she added, suggesting that the increase in workers' salaries had also eaten into profits.

Bian Jiang, assistant director of the China Cuisine Association, agreed that rising rents and staff costs have contributed to the pressure on high-end restaurants.

He estimated that, depending on the location, rent at some restaurants may rise 30 to 40 percent this year and the cost of supplies is likely to go up at roughly the same rate.

"Labor costs will probably rise 20 to 30 percent," Bian added.

Making changes

While some exclusive restaurants are opting to close, others are looking for ways to save their bacon.

Xiang E Qing, for example, which is a listed company serving a combination of Cantonese, Hunan and Hubei cuisine, has attempted to transform its image from high-end to family friendly.

"We've been successful so far," said Yue Xiaoyu, a manager at its Yuetan branch in Beijing. "We cancelled the minimum spending limit in the private rooms and now offer favorable prices."

Like many restaurants, she explained, Xiang E Qing also now uses group-buying websites, which offer goods and services at significantly discounted prices based on a minimum number of purchases.

The company posted a turnover of 109 million yuan last year, up from 76 million yuan in 2009. Yet it reported a loss of 68.4 million yuan in the first quarter of 2013.

"I've seen business on the rise again already," Yue said. "The transition from high-end diners to catering to everyone is one way for exclusive restaurants to get themselves out of a bad situation."

China Economic Net, a news website, reported that Quanjude, a brand well known for its roast duck, is for the first time planning a nationwide discount, while a branch in Beijing's Shuangjing area is to start offering a cut-price buffet.

Meanwhile, Jingya Hotel, another high-end venue, is to begin selling steamed stuffed buns and hot pot.

There are also other ways companies adapt, Bian added.

"One is to make full use of the ability to offer meal delivery services to upscale neighborhoods," he suggested. "Another is to make and sell their own brand packaged food products."