Spain: The country with 328,000 bars

In the last five years, Spain has seen the opening of 33,000 new bars and restaurants, according to the Economic Annual Report from La Caixa. The hospitality industry growth is impulsed by the increase in population, the tendency to eat away from home and the Spanish culture, with its desire to live doors outwards. The heavy competition in the sector increases the business transfers and halts the business of groups and franchises.

Are you thinking of starting a business in Spain? How about a bar? “Everyone dares with our business” concludes Gaietà Farràs, president of the “Gremi d’Hosteleria de Barcelona” (Hospitality sector consortium). In Spain, according the annual economic report of La Caixa, there are already 328.202 bars and restaurants and the numbers are increasing: 11% growth in the last five years alone, with the opening of 33,000 new businesses.

“The hospitality industry is a sector which works as a cushion to industrial sectors in crisis or reconversion”, claims Farras: it is not unseen that a workers who is fired invests his indemnization in starting a bar. The real estate and tourism booms, which urbanize areas dedicated traditionally to agriculture also feel the changes: Murcia (with an increase in 21% the last five years), Andalucia (with an increase in 18,2%) and Valencia (18,1%) are the communities which have felt the most increase in bars and restaurants since the year 2000.

The increase in the number of bars and restaurants is principally sustained by an increase in the habit to eat out. According to a study realised by AECOC and the consultancy TNS, the Spaniards spend more than 20,500 million euros in eating out every year, which is a 28% of their total spending on nurishmentm 6 points more than a decade ago. According to AECOC, this increase is mainly attributed to more and more homes consisting of less inhabitants, and that workers don’t have time to go home on their lunch breaks.

“There is business, our associates are not complaining about sales” says Farras. However, “competition is fierce and this translates into a high pressure on margins. So much, that many small family-run business, cannot keep up. We have a rotation of 40%: out of every ten new businesses, four ends up closing and get transferred in a year and a half.” The president of the assocation explains “currently it is taking a lot to get a cash flow of 10% of revenues, with which the final net profits are very low”. This siutation is halting the expansion of franchises in Spain, leaving this sector’s penetration in the sector well below the European average, because “franchises have to compete in price with family-run companies and have to support additional expenses, such as royalties, publicity and other demanded initial investments to maintain the prestige of the brands.”

This situation is also affecting the national companies which have constitued restaurant groups, such as Cacheiro, Noia, Agrolimen, Paradis ore Soteras. “The low profitability of the sector leaves some large companies to consider whether they should continue in the sector or deinvest”, explains Farras. The low profitability of the business and the toughness of working hours, of more than 12 hours of opening time a day, including holidays and weekends, has led to a massive increase of inmigrants into the sector, which takeover from professionals that are reitiring. According to the consultancy Christie & Co, the inmigrants are taking over 50% of bars and restaurant which are transferred in Barcelona.

“Before they setup a typical restaurant, but now in many cases they continue the business as is - the typical bar of the district”. Currently 6% of all affiliates of the Barcelona Restaurant Association are foreigners. Coro Chasco, professor at the Autonomous University of Madrid has elaborated the Annual Economic Report of La Ciaxa, attributing the opening of new bars to the population and the own idiosincrasy of Spaniards. “There is a cultural phenomenom: the growths are higher in meditterranean areas, where the good weather impulses people to live outdoors and in some areas such as Navarra, where there is a strong tradition for tapeo and the good meal.

Source: La Vanguarda