Ever since September 11, 2001, employees, owners and managers in the tourism and hospitality industries around the world have been nervously waiting and watching. Waiting and watching to see what people were going to do - because there was no precedent in history that could possibly leave this sort of consumer downturn in its wake. As good old Donnie said, it was an unknown element and a lot of people were panicky.

Restaurant owners in Sydney were no exception. Ever since September the 12th, people in the restaurant biz have been only too happy to cast aspersions on where the trade was headed. The people that spread these rumors and innuendo in the most expedient fashion were the suppliers. The meat supplier, the cheese vendor, the seafood buyer, the vegetable providore. These people deliver to dozens of restaurants on any given day, and apart from having a tiresome and thankless job, they all have one thing in common; they are all incorrigible gossips.

If some chef said this or that about business across town and half an hour ago, we will most likely hear it in an (almost) intact fashion a very short time later. Before Christmas 2001, just about everyone in town had an opinion on when the bubble would burst, or when restaurants would start ringing up suppliers saying, "…We don't want to play food anymore, and you know that nine grand we owe you? Well you can forget it…"

See, the problem in Sydney was that there was an underlying problem all along; S11 was just the catalyst for turning into catastrophe what was already a disaster in the making. 2001 saw the opening of several multi-million dollar fine dining establishments such as Restaurant VII and Ampersand. These joints were so over-capitalized that it would take 10 good trading years to even think of turning a profit. Aside from this, the industry was flooded at all price points in the market. Just before the 2000 Sydney Olympics, somewhere in the order of 10 000 new restaurant seats opened in the CBD alone. I'm sure you will agree, that is a lot of bums to entice.

I personally expected the downturn sometime early in 2002, around January or February. However, a strange thing happened - Sydney restaurants didn't get any quieter, they got steadily busier, right through until the New Year period, and then into 2003. Whether this was a natural reaction of a frightened populace that is fearful of the future and declares, "Hell, lets spend up big today, for tomorrow we are dust" will always be simply conjecture. Still, the unexpected upturn did undeniably occur, and held out with a vigor that surprised more than a few commentators - that is, until now. You see, I was spot on with my months; I was just one full calendar year out with my guess.

January and February 2003 have been horror months for most people in the trade. Those two restaurants I mentioned above that were going to turn a decent profit in 2010? Gone. Respected restaurateurs such as Bel Mondo's Manfredi Family? Gone. Even Rockpool, one of Australia's most awarded and renowned establishments just recently started closing on Mondays. To put it simply, in the last 8 weeks, a lot of Sydney restaurants have begun to drop like flies.

So how much of this can be attributed to the September attacks, followed by other horrors in places such as Bali, and the impending war in the Middle East¹? To be honest, I really don't think a whole lot. The big initial casualty in 2001 was airline travel, and so followed international tourism. But international tourists tend to eat at a very different establishments than the natives of a country. Most touristy restaurants in Sydney are located on prime real estate, either near the harbour, or around significant landmarks. The rent and overheads are naturally high, and this means that management will need to, and often can afford to run a restrictively tight ship. These joints aim to be running at between 15% and 20% food costs, leaving a high margin for error, and some money in the bank to pay the insatiable landlord. These factors are directly represented by the almost uniformly low standard of grub you will have placed before you. No - these operators won't fall aside, they may have a downturn in trade, sure - but they will weather it. It is what they are built to do.

For the remaining restaurants, especially those in the midst of cutthroat CBD competition, decent trade and weathering the storm all hinge on one simple factor - regular, return customers. And those little business savers are getting pretty scarce.

Firstly, the halcyon days of 2002 when consumers spent regardless have now well and truly finished. It wasn't any single act of global upheaval in the last 18 months that did it - not like how the airlines got killed - but rather a culmination, an almost silent agreement amongst the populace that conspicuous consumption will now be reined in. Nothing causes bad news to spread faster like more bad news, and this is exactly what happened in early 2003. Major newspapers, magazines and food journals started running centre-page articles on restaurants going down the gurgler. Stories on how fine dining is dead in Sydney. Stories of distress and bankruptcy, and of course once printed, these stories have a habit of coming true.

In addition, when you add the post-Olympics dining oversupply to the equation, things really start to get gnarly. Chefs you haven't heard from in years start ringing up, making vague statements about "…moving to Queensland…" and "…No, I can't give you a contact number yet…" - That'll be a scent for the creditors you see.

Tough times call for Bronsonesque style measures, but what exactly does a restaurant do to keep out the wolves, and how does it affect you - the diner? Fairly obviously, the first step is to cut costs to offset any downturn in trade, and these cuts follow a fairly uniform pattern across the industry. First to go is profit - that can be worried about next year. If the restaurant is owner operated, expect the proprietors to take a self-imposed pay cut. I have many friends who have spent plenty of time living directly out of the business just to make ends meet.

Next will be the food costs. 30% - 33% of a restaurant's gross takings spent on fresh comestibles (i.e. meat, fish, vegetables, dairy, coffee and dry goods) is considered to be a benchmark, and many chefs find their way to an early grave trying to maintain this figure. In times of distress however, owners will instruct their chefs to pull this figure down by even more percentage points. This is universally difficult, because as the turnover goes down, so in turn up go the percentages. That is just the way it happens. If a chef is going to be successful at trimming costs in this manner, he will have to take some fairly drastic measures - measures that will noticeably affect your dining experience. That 300-day grain fed sirloin on last month's menu? Goodbye. It will be replaced with pasture fed blade steak. Did you love the John Dory we were pan-frying last week? Well, don't dwell on that friend, because today we have mackerel or sardines. Used to your local dishing up nice crisp chips (fries) fresh from soybean oil? Well, beef tallow is a good 20% cheaper, so why don't you try these dripping sticks of goodness instead.

The next casualty will be utilities and accoutrements. Fresh linen deliveries will be stripped back and perhaps re-used; and you can even expect to see squares of butcher's paper under your plates, rather than a tablecloth. Chipped plates, dull glassware and tired cutlery will all have to wait before being replaced. A new paint job? Next year. Carpet cleaners? Lemme check the budget.

Finally, a really struggling restaurant will start to cut the one thing it never should. Floor staff. Say you only roster one waiter on for a Tuesday night, instead of two. Say it gets unexpectedly busy, with tables walking in off the street. Say you end up doing 35 covers (what we call customers). The next day, the owner will be pleased with the takings, and ask how the lone waiter coped with the load. The waiter of course, will reply that it was hectic, but in the end manageable - he doesn't want to look incompetent after all.

"Were the customers happy?"

"Sure... everyone seemed to have a nice night."

Well of course they would seem content. The lone waiter was too busy doing an impersonation of a blue-arsed fly to hear any complaints. The owner will be overjoyed and will continue to roster on only one waiter. This money saving ploy however, is a genuine gamble, because diners will not put up with sitting around while one waiter runs crazy, trying to attend to dozens of customers at once.

The final nail in the coffin is the restaurant that changes cuisine, or style - overnight. As Anthony Bourdain rightly observed, there is no sign that reeks more of impending bankruptcy than a restaurant that is French on Friday, and Thai on Monday.

We down at the Palisade have been hit fairly hard this year. Yet gladly, I can report that we are still buying yellowfin tuna and free-range chickens. We still get fresh linen delivered every day. We took delivery of some shiny new white plates the other day, and the waiters still tread the boards in acceptable numbers. There will not be any profit however - just breaking even will be a toast-able victory. Two weeks ago we did the first service I can remember in an era that we cooked for no one - not one person walked through the door. It was pretty chilling. On a positive note however, this week has seen a thorough improvement, with numbers well up on last week - but ultimately, this business is exactly like a recovering drunk. Its just one day at a time, friend.

Perhaps could you do me and my colleagues a favour sometime soon? Go out to a local, dependable little restaurant and have a slap-up meal - they will love you for it.

  • Update 20-04-03

    ¹ That impending war is now a grim reality for hundreds of thousands of Iraqis, and its horrific wake is now (supposedly) drawing to a close. To dwell on local financial effects as some particularly unpleasant world leaders have done recently, while innocents lie wounded, dissolute and homeless, could rightly be construed as heartlessly callous. Fair cop – but here is the news. I have to pay rent, and look after my daughter, just like anyone else who considers themselves part of a society. The words above, while undoubtedly grim, still shimmered with slim hope for an upturn in the restaurant trade. The unpleasant truth is that simply has not happened. Since the beginning of the invasion of Iraq, diners in Sydney have stayed indoors with an almost unprecedented vigour. Things are pretty grim.

  • Update 6-06-03

    Across the industry things have segued in a vicious fashion from bad to worse. Since I originally penned the above, the ingeniously nasty coronavirus, SARS has commenced its march. This has only made matters worse. All levels of the industry have now been affected. Banc restaurant, awarded 3 chef's hats and winner of the best restaurant in New South Wales last year? It has just gone bust. Tetsuya's, another 3 hatter, and recipient of a plethora of awards, intoned by some to be one of the best restaurants in the world has stopped serving lunches. Last year they had a 2-month waiting list.

    Thankfully, there is a happy twist. On the 27th of May 2003, the most influential food critic in Sydney reviewed us, and he reviewed us glowingly. We have gone from next to no custom to turning walk-in diners away due to lack of tables. Here is the review.