In recent years, facing the double pressure of slowing economic growth and weak consumption in China, the catering industry has been plunged into a harsh winter. The Chinese Communist Party’s ban on alcohol has made things even worse for the catering industry, with some restaurants that mainly offer private dining rooms experiencing a staggering 90% drop in daily revenue. What used to be highly sought-after private dining rooms have become a burden for restaurant owners, leading more and more restaurants to abandon the private dining room model and set up street stalls to survive.
According to the catering industry media Red Dining Network, a restaurant in Shandong with 10 private dining rooms only serves two to three tables of customers per day; a chain restaurant in Hefei with over 40 private dining rooms only receives a dozen tables on average each day; and there are establishments with seven private dining rooms where bookings are less than 20%.
The principle of “attracting customers with private dining rooms and making profits” used to be a golden rule in the catering industry. Private dining room services, especially for business receptions, were an essential source of profit for mid-to-high-end restaurants. However, in the past two months, the business of many restaurants with private dining rooms has been declining.
Three years ago, Zhang Jun (pseudonym) invested 2 million yuan to open a Huizhou cuisine private kitchen in Hefei, Anhui. With no main hall, the restaurant only had seven private dining rooms, and the daily revenue used to range between 7,000 yuan and 10,000 yuan. Starting in May this year, the average daily revenue has plummeted to between 800 yuan and 2,000 yuan, with the highest daily revenue drop reaching 90%.
Li Mao (pseudonym) opened an upscale Sichuan restaurant in Chengdu two years ago, also with only private dining rooms. The customer flow has notably decreased over the past month, leading to an overall revenue drop of about 20%. Li Mao revealed that local restaurants focusing on private dining rooms have experienced over a 30% decline in revenue.
Wang Ning (pseudonym), who operates a refined Cantonese restaurant in Foshan, expressed that many restaurants that mainly catered to business banquets and private dining rooms are facing challenging times. The revenue has decreased by 20-30% compared to the same period last year, with some restaurants even halving their income.
To cope with the sudden downturn in business, some restaurants have started to cut salaries and lay off employees. Xiao Yi (pseudonym), a front desk staff member at a large hotel in Shaanxi, revealed that some chefs responsible for private dining room services at the hotel have been placed in a state of “semi-retirement and semi-work,” with some even voluntarily resigning to seek other opportunities.
“For instance, my salary was nearly halved in June. I can endure it for the short term, but no one knows when we can return to the previous state,” she said.
Xu Zhi (pseudonym), who runs an upscale Cantonese restaurant in Zhejiang, has recently laid off three servers and two chefs due to the noticeable decrease in business.
Zhang Jun, who originally had six kitchen staff, laid off three in June. The front-of-house staff was reduced by 30%, and the remaining employees had their wages cut by 20%.
He mentioned that a nearby private kitchen closed at the end of May, and if their daily revenue remains at one or two thousand yuan, they might consider shutting down within two more months.
The person in charge of a Cantonese-style seafood restaurant in Nanshan District, Shenzhen, bluntly stated, “During the first two weeks of the alcohol ban, private dining room bookings plummeted by 80%.”
To salvage their businesses, many large restaurants and five-star hotels in Anhui, Shaanxi, Jiangsu, Zhejiang, Sichuan, Henan, and other provinces have taken to the streets and joined the ranks of the street vendors. Data shows that there are already over 20 mid-to-high-end hotels in downtown Lianyungang involved in outdoor business, contributing 15%-20% of their revenue.
Nan Jingang, the operational director of Huajia Yiyuan, stated in an interview with the Economic Observer that there are no longer any “big customers” at present. The reason restaurants can maintain stable income is due to having a sufficient and diverse customer base.
Many in the industry admit that setting up street stalls means “lowering their status,” but they are not relying on street vending to make big profits. Some even have to invest money to sustain this effort.
“Our purpose of setting up street stalls is not to earn meager cash flow but to ensure customers still remember us,” a hotel manager in Hefei told Red Dining Network. “Once we shut down directly, with employee turnover and teams breaking up, this establishment will truly ‘perish.'”
According to Red Dining Network, nearly three million catering establishments in China closed last year, hitting a historical high. This year, the industry may face an even more severe wave of closures.