Germany shows appetite for 'fun' themes and foreign flavors

Nation's Restaurant News, April 17, 1995 by Richard Martin

Distressed by new taxes and sidetracked by economic downturns, most of Germany's 82 million consumers have restrained their appetites for traditional restaurant meals and flattened the growth aspirations of the nation's $37 billion foodservice industry.

"It's all a bit doom and gloom these days," says Karlludwig Willemsen, chairman of the Nordsee fish buffet chain, Germany's fifth-largest restaurant company.

The German economy, Europe's largest, has reached "the end of a very deep recession," Willemsen explains. But many consumers are just beginning to make deferred car and appliance purchases, and "the retailing and food industry is all still a bit sluggish."

Moreover, because of perennially fierce price competition, countless business regulations and stratospheric operating costs, Germany will remain "a hard market" for foreign brands, says Gretel Weiss, chief editor of Foodservice, a Frankfurt-based trade publication.

Of all Europe's nations, only Switzerland is more problematic than Germany in terms of high business costs and profit thresholds, Weiss says.

Nonetheless, McDonald's, No. 1 in sales in the German market, Burger King, No. 9, Pizza Hut, No. 13, and a hugely successful upstart, T.G.I. Friday's, all are gaining ground and expanding, increasingly into the troubled but promising former East Germany.

And while most of the nation's restaurateurs were struggling during the recession to buttress their core businesses, Pizza Hut -- which says its profits in Germany have doubled each year since 1991 -- last fall was diversifying there by acquiring the 21-unit Nudelmacher pasta buffet chain.

T.G.I. Friday's, meanwhile, has been cashing in on traditionally staid Germans' emerging fondness for casual, upbeat dining and such trendy novelties as nachos and fahitas. The British restaurant firm My Kind of Town, too, has met with apparent success in Germany by launching such fun-oriented, American-style theme concepts as Chicago Meat Packers, Henry J. Bean's and Tacos in major cities.

So hot has Mexican food become in Germany that German restaurateurs, who historically have left foreign-ethnic trends in the hands of foreigners, are rolling out such chains as five-unit Sala Doloris in the Dusseldorf area and eight-unit Hacienda in and around Mainz.

Chili's says its attraction for the German market could yield a presence there by next year if a local partner with the right expertise or clout can be found. "We think it will be a real important market for us, which is one of the reasons we're keeping an eye on it," says Lane Cardwell, executive vice president of strategic development for Chili's parent, Brinker International in Dallas. "You can't be in Europe and not be in Germany," adds Cardwell, whose company has Chili's branches in Paris and the United Kingdom.

But hard economic times and high unemployment have affected virtually all sectors of the German foodservice market, which can be sliced roughly into thirds -- chains of all types, various ethnic mom-and-pop operations and independently owned German restaurants offering such traditional meals as schnitzel, french fries and salad.

Throughout Germany consumer reluctance is reflected in downscaling among high-end establishments and in smaller portions being served by restaurateurs under pressure to hold the line on pricing, often to a targeted limit of 10 marks, about $7.25, per luncheon meal.

Of course, expensive restaurants are pushed hardest by curtailed spending, including sharply reduced business dining. Cited by authorities as an example is Figeherei Hafen, a famous high-end seafood restaurant in Humburg, which recently launched two downscale, bistro-type spin-offs.

"There are a lot of `star' restaurants that are thinking about building bistros," says Ralf Singer of the Bonn-based German Hotel and Restaurant Association. Although the recession is not thought to have caused any fatalities among pricey, fine-dining establishments, many "are thinking about new marketing concepts," he adds.

"Most of the people say, `Let's spend not as much money in the restaurants,'" Singer explains. "And they say, `Normally I would like to have three or four beers, but today I will only have two."

As a consequence, total sales by Germany's 210,000 restaurants declined last year between 0.5 percent and 1 percent, Singer reports.

Reunified in 1990 after the fall of the Iron Curtain yet still fractured by economic inequities and costly industrial upgrades in the East, Germany nonetheless has become fertile ground for U.S. brands that possess the strength and savvy to weather Europe's comparatively chilly business climate.

Among the challenges Germany shares with the rest of the continent are extraordinarily steep occupancy and labor costs, which are tied to Europe's tradition of architectural preservation, the longstanding prior development of major business locales, high social taxes on employers and the fact that virtually all workers are salaried with extensive benefit entitlements.

As a result, combined food and labor costs in Germany, as a percentage of sales, average nearly 65 percent for full-service restaurants and 60 percent for fast-food operations. Such barriers tend to weigh in favor of family-run restaurant businesses and restrain chain operations, especially full-service concepts.