Is the rise in employee costs the Achilles' heel of Hong Kong restaurants?

A lot of adverse comments were noted in response to a post by Dr Edwin Lee, CEO of a local shop fund, published last week. Dr Lee quoted some P&L figures from three HK listed firms to support his claim that high wages are leading to the fall of F&B businesses in HK. Netizens, on the other hand, have challenged these figures and doubted that the high wages are in fact due to directors’ remuneration.

Whilst CHFT held a luncheon https://lnkd.in/gCz83tR9 in early July on a similar topic, we would like to share some further views here.

1) Just as Dr Lee mentioned, staff salaries currently amount to 30%+ of the F&B revenues. Directors’ remunerations share a very minor portion;

2) The increases in wages costs in 2023/2024 could not be directly compared with the nominal cost amounts in 2022/2023. Back in early 2022, there were social distancing measures limiting the number of people for meals together, as well as limitations to restaurants’ operation hours. In response to the lowered revenue, through various cost-cutting measures such as the use of staff rostering systems, and employing more part time but fewer full time staff, operators did manage to lower the staff costs in 2022/2023. Therefore, when restaurants resumed normal business in 2023/2024, the staff cost figures appeared to have big increases. But actually, the staff cost-to-revenue ratios were more or less the same in those years for these medium tier restaurant operators; and

3) According to the data from the Census and Statistics Dept, the median monthly and hourly wages of employees engaged in the F&B industry recorded y-o-y increases of 5.0% and 4.7% respectively in June 2023.

Self ordering systems have been widely used to ease the pressure of high staff costs. While the dining experience of the customers might have been slightly hindered at the launch of these systems, they now have basically got use to it.