Financial Crisis Hits Cafes

Some of Israel's most renowned restaurants are failing. Others aim to survive through discount deals.

The collapse of restaurants considered among the best in the land shows just how hard the times have become, certainly in the food-service sector. On Sunday the shutters are coming down at Asian-style eatery Minna Tomei in Herzliya. Barcarola in Kfar Saba, home of steak in whiskey, is gone. Orca, a fine-dining establishment by the shuk in the heart of Tel Aviv, is closing at year-end, and already gone is nearby Ali Oli on Brenner Street.

Blame the times, blame the consumers whose confidence is shattered: The financial crisis has arrived and is blitzing the restaurant industry. People are eating out much less, and when they do, they're doing the math before choosing their meal. Restaurants are reporting much lower bills than in the past.

But collapse isn't the only item on the menu. Other restaurants are determined to stay afloat and are adjusting by coming out with "recession menus" characterized by special low-price items designed to keep the crowd coming in and appeal to a broader audience.

Rafael, a bistro by the sea, is offering special low-cost business-lunch deals, hoping to attract a clientele hitherto deterred by the restaurant's high prices. SushiSamba also launched a "recession menu" of low-cost business meals after the global chain's senior chef, Michael Cressotti, visited Israel while preparing the SushiSamba empire.

Other less name-brand restaurants are trying to offer more value instead of lower prices; for example, by serving more food for the same money. Some are firing from both barrels, offering new low-cost dishes as well as better value to keep the people flowing in.

Meanwhile, suppliers unnerved by their bankers antsiness and fears their cherished customer is about to implode are starting to cut credit durations. The average number of days they're willing to wait for payment after delivering the goods fell to 70 in the last two months, from 73.

In September and October, the number of collapsed restaurants doubled from the two previous months, according to a survey by BDI-Coface for TheMarker. About 650 people have lost jobs in the restaurant industry during those two months alone.

Moshe Weingarten, among the owners of the nationwide chain Spaghettim, says the havoc isn't evenly spread across the country, it's a function of region and specific area. Restaurants serving industrial zones and high-tech parks are crying, he says.

The Spaghettim chain boasts annual turnover of about NIS 100 million from its 18 branches. Weingarten, who also owns a stake in Minna Tomei, says that while turnover is dwindling at some of the Spaghettim branches, not all are being hit. "The branches in residential areas aren't seeing much of a drop," he says - about 5% in some cases. "But the restaurants in industrial zones, like in Herzliya Pituach, are seeing a 10% to 15% drop in sales."

Northwest Israel is among the worst-hit areas as far as the restaurant business is concerned - Haifa, the Krayot and the western Galilee. There no less than 21% of cafes and restaurants went out of business in September-October, and 12% had collapsed in the preceding two months.

Jerusalem and its surroundings are also not doing well: 15% of its restaurants and cafes fell in September-October, and there too 12% had collapsed in the preceding two months.

Moving onto the southern desert, in the Negev area the pace of closures inched up from 3% in July-August to 6% in September-October. The worst-hit area was the Red Sea resort city of Eilat.

Part of the reason restaurants in industrial zones are hurting is that companies have stopped subsidizing lunches for workers, explains Ran Katzman, marketing and sales manager for the catering company Norcat. In better times it had become customary for many companies to give workers vouchers, essentially sharing the cost of discounted meals at local restaurants. No more.

The Web site says the economic slowdown will hurt mainly small restaurants and ones in peripheral areas.

Noam Shaked, 2Eat manager, predicts that about 250 of these smaller businesses will fail.