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“Top Management”

Revolution in the restaurant world

 

Reinventing a Traditional Business

Just take a walk down the street to see it. In major cities like Lisbon and Porto, but also in smaller ones, you feel compelled to enter every door you pass. Restaurants, burger joints, cafes, ice cream parlors… each more appealing than the last. Interesting concepts, with elaborate branding and decoration, have replaced cafes and snack bars covered in aluminum and fluorescent tubes illuminating the usual assortments. Old owners and employees have given way to younger people, more worldly and with a more educated informal approach.

Of course, some may argue that there was a certain charm in traditional Lisbon and its idiosyncrasies, and that many of these new concepts could exist in any other city. It is, to a large extent, true. But for me, this discussion is a bit like that of the so-called “historical shops”: for every “Ulisses” glove store worth supporting and preserving, there are twenty boutiques on “Rua dos Fanqueiros”, with shop windows stuck in the seventies, perpetually liquidating leftover stock that no one wants to buy.

It’s interesting to analyze how a traditionally unsophisticated and static sector was able to reinvent itself in record time. In my perspective, through the combination of five factors.

1st Factor: The Crisis and the Emergence of Packed Lunches

We all remember those tough years of the troika where we literally stopped consuming everything that wasn’t essential to our survival. And the phenomenon of packed lunches. Who, before this reality check, would have had the courage to bring a packed lunch to the office and face the judgmental looks of colleagues? Well, packed lunches came and stayed. And the first victims were cheap and undifferentiated snack bars where everyone used to have lunch.

2nd Factor: The Urban Rental Law

Named after its creator, the “Cristas Law,” criticized by some and praised by others, gave an unprecedented dynamism to the rental market. Combined with the “emergence of packed lunches”, the liberalization of rents made many obsolete businesses unsustainable. These had been dragging on for decades on excellent locations, but subsidized by landlords stuck with symbolic rents they couldn’t update. These spaces started to be released and made available to entrepreneurs with more competitive and profitable businesses.

3rd Factor: A New Generation of Entrepreneurs

And at that moment, those entrepreneurs were there. Forced out of their careers in large companies and banks in collapse or strong retraction, here was a new generation of highly qualified entrepreneurs needing their own project to rebuild their lives. Some succeeded, while others filed to anticipate the major disappointments fueled by the market’s force. But they took the space and injected an energy never seen before into the restaurant business.

4th Factor: New Consumer Habits

The post-troika consumer is another consumer. In addition to packed lunches, consumers also lost the shame of negotiating, of demanding promotions and discounts. They learned to better assess “value for money,” and this was reflected in many successful businesses. Look, for example, at the phenomenon of “Padaria Portuguesa,” now widely copied: good, cheap, and “cool,” supported by a highly efficient commercial and productive machine – “Blue Ocean Strategy” in its purest form.

5th Factor: Tourism on the Rise

And when the domestic market declines, tourism takes off, and we are invaded – in a good way – by volumes of tourists never seen before. Restaurants, bars, cafes, and the like fill up with consumers of various profiles and nationalities, giving these new businesses a fuel that the domestic market could hardly provide in a scenario of economic recovery.

The Victims We Cannot Leave Behind

Of course, this success story has its victims. An entire generation of business owners, with low qualifications to change their lives, suddenly found themselves without a means of subsistence. A liberal like me tends to think that the market is inexorable, and it’s not the role of the State to prevent necessary renewals through distortions paid by the citizen consumer and taxpayer. What the State should do, however, is ensure, in addition to the social cushion for those who really need it, the conditions to support transitions and gain new skills, as in the concept of “flexicurity,” so popular a few years ago and so forgotten these days.

 

A CONTRIBUTION FROM… 

Asunção Cristas | President of CDS-PP party, Minister of Agriculture, Sea, Environment and Spatial Planning in the XIX Constitutional Government

How do you assess the impact of the 2012 Urban Lease Law on street-level commercial activity?

There are two deeply interconnected issues: the urban lease law, by protecting housing situations linked to greater social vulnerability—such as age or economic need—while allowing greater flexibility in other cases, was a breath of fresh air. It made many new economic activities possible, particularly in the restaurant and commerce sectors, creating conditions for the renovation of severely run-down buildings. As you pointed out, tourism was crucial for the success of many projects.

Besides the five mentioned, were there other relevant factors for the described cycle of renovation?

The simplification and flexibility of short-term rentals (“Alojamento Local”), combined with a depressed real estate market, along with fiscal measures to attract foreign investment, and further compounded by historically low interest rates that steered investments toward real estate, were critical in this cycle of renovation.

What remains to be done?

Tourism and all associated economic activities, particularly the rehabilitation of buildings for “Alojamento Local”, hotels, restaurants, and other commercial activities, are responsible for economic growth and reduced unemployment. The increase in municipal revenues, precisely due to the rise in construction licensing fees, economic activity, and tourism itself, should have resulted in a prompt city council response to prevent and mitigate less positive effects that ultimately created an atmosphere against “excessive tourism.” There was a delayed response at the municipal level, both in the realm of permanent housing and in matters of exceptional protection for commercial establishments of interest to the cities themselves.

Written by Filipe Santiago

September, 2019

This article was published in Publituris Hotelaria as part of the “Top Management” series. You can access the printed version here.

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