Restaurants : High Hopes, Big Challenges

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Restaurants : High Hopes, Big Challenges

For a long time, dining out was seen as a luxury. But not anymore.  And hospitality companies are drawing in customers like  ever before.


Restaurants have become an integral part of the daily life of the average Nepali salaried class. Rather than staying at home and cooking, people are spending that extra time (and money) to try new things in a city which has been getting high standard new restaurants opened with so high frequency in recent times. Pankaj Raj Shrestha, Managing Director of management firm Mahizen Consulting Pvt Ltd is one such professional who often visits restaurants, exemplifying the constantly changing food habits of a city’s population. “Restaurants in Nepal have changed a lot over the years. They are focusing more on the ambience side to attract guests,” says Shrestha who is also the former CEO of Himalayan Distillery. “Restaurants nowadays spend more on interior décor.”  

The business of food has gained noticeable momentum over the past few decades and the number of people joining the business has grown significantly. The increasing spending capacity of Nepalis has been one of the major factors for this. Aided by the rising inflow of remittances, Nepalis now have more disposable money to spend than what they had 20-30 years ago. As per Nepal’s macroeconomic update published by the Asian Development Bank in August 2016, the gross national disposable income (GNDI) in Nepal reached USD 1,027 which was USD 926 in 2012. Similarly, Nepalis spend around 11 percent of their income at restaurants. 

The staggering number of restaurants across the country clearly indicates the lucrative opportunities that exist in the eatery sector. According to Pramod Jaisawal, President of Restaurants and Bar Association of Nepal (REBAN), there are around 2,000 standard restaurants, bars, fast food outlets and cafes operating across the country.  According to the Department of Industry, there are 716 registered restaurants with an investment of Rs 30 million and above. 

“The investment needed to open restaurants ranges from as low as Rs 2.5 million to as high as Rs 40 million,” shares Jaisawal.

Anup Lal Kakshyapati, Vice-President of REBAN and Director of The Bakery Café relates the rise in investments in restaurants to various aspects of the business. “Many people now consider restaurants as their second kitchen. The changing food habits and the busy lifestyle have led many Nepalis to go and eat outside,” he says. 

Despite the various challenges, many young people today opt to open restaurants when starting a business for the first time. Officials at the Department of Cottage and Small Industries (DoCSI) say that six to seven restaurants are registered at the office daily.  

“It is very difficult to open even a basic restaurant for less than Rs one million as various aspects including the interior, food selection along with the kitchen and the overall hygiene levels need to be properly maintained,” adds Kakshyapati.  

New Trends
Restaurants are not just places for people go and try out different food items. They are also social gathering places where the atmosphere is just as important for guests. Nepali restaurateurs, in that regard, have been introducing new trends in terms of interior design and services. Many are designed in a modern style, giving the restaurant a 3D look. Some are also making the old new again. “If we observe the interior designs of restaurants some are harking back to the old days with their classic attractive look in furniture, dishes and other services,” says Jaiswal. 

An offshoot of the business has been the rise of coffee culture along with a bistro feel, highly visible in the number of hightech coffee making machines in restaurants and bartenders. In terms of adopting new technology, Jaiswal mentions that restaurants pretty much adopt the changes as soon as they arrive. 

Restaurants have also adopted digital technology helping them to get and stay connected to their customers. Many websites and apps dedicated to the restaurant service have been launched in recent times. Such portals and apps allow customers to find restaurants in nearby areas, order food from them, with some even providing complete menus.  

Growing Hubs
There was a time when Durbarmarg, New Road and Thamel were the only places in Kathmandu with quality restaurants. Nonetheless, things started to change in the last 15 years as other places such as Jhamsikhel, Naxal, Bhatbhateni, Baluwatar, Lazimpat, Maharajgunj, New Baneshwor and Jawalakhel-Kumaripati grew as restaurants hubs.  “The new areas have become centres of attraction for food lovers who search for new tastes and ambiences,” Kakshyapati says. The last few years have also seen areas such as Sankhamul, mid-Baneshwor and Battisputali develop into restaurant hubs with the opening of quality eateries of various types. 

Outside the capital valley, established tourist areas in Pokhara and Chitwan have a number of high standard restaurants while other cities are also witnessing a boom in the opening of eateries. The eastern cities of Dharan and Damak and other cities like Birgunj, Hetauda and the far-west city of Mahendranagar also host a growing number of restaurants.  

The new shopping malls have also contributed to the rising number of restaurants. Once a mall is opened, new eateries come into operation in and around such shopping and cinema places. 

Better trained chefs with a wide knowledge about food are also adding to the culinary experience. They are quick to introduce new foods that are considered trendy. Foreign dishes across the staple continental, Chinese, Thai, Japanese, Korean, Italian, Vietnamese, Indian and Mughlai categories are in high demand. Similarly, traditional Nepali dishes such as Thakali and Newari also occupy a significant place in the menu. Meanwhile, many cafes and restaurants also serve different varieties of espresso to quench the caffeine thirst of Nepali coffee lovers. 

Says Raunak SJB Rana, Managing Director of Lazimpat based Trisara, “Our restaurant has been offering special menus to its guests with new tastes in a timely manner.” 

However, there are still marks of discontent in this flourishing sector, namely related to labour issues. Though the militant labour unionism of the past in the service industry has lessened in recent years, various related issues still exist. Restaurateurs and labour unions are in dispute over the issue of the 10 percent service charge distribution which has flared up again.  As per the current provision, 68 percent of the service charge collected from customers is distributed among the employees, while the management keeps the remaining 32 percent. Restaurant workers want the entire service charge to be distributed to the employees. 

The lack of trained employees is another problem for the restaurant sector.  According to REBAN President Jaisawal, the sector provides direct employment to a total of 250,000 people. He says that restaurant owners are having a hard time retaining their workforce who enter the sector, learn skills and then leave for another country or something similar.

According to Kakshyapati, restaurants have become something akin to training centres as people come for work, learn a skill and then go abroad. “After learning some skills, the employees mostly go aboard,” he says, adding, “All the available human resources working in the industry are filtered and we are providing training to this filtered manpower.”  

Maintaining the quality of service has also been a challenge for the restaurants. Unlike big hotels, the restaurants do not get facilities from the government, and this causes the service quality to be compromised. “Big hotels get customs duty waiver facilities while importing necessary equipment and have the ability to maintain standards,” mentions Jaisawal.

Entrepreneurs also seek support at the policy level in terms of taxes to ease the impending problems. “We have long been requesting the government to implement multiple VATs which will expand the tax net.  However, the government always acts very late with issues related to the private sector,” complains Jaiswal.

Entrepreneurs argue that all restaurants should come under the tax system. Currently, the government levies a 13 percent VAT on the services the restaurants provide to their guests. Nonetheless, only a few restaurants have been paying VAT on a regular basis and a large number of eateries do not follow the provision.  “When the nature of business is the same, everyone should be under the tax net and the facilities need to be provided equally,” believes Jaisawal. Similarly, he wants the government to reduce the current 13 percent VAT rate to three or four percent for all kinds of eateries which will ultimately make the services more affordable to customers as well create grounds for the overall restaurant businesses to enter the tax net. According to REBAN Vice-president Kakshapati, the restaurant entrepreneurs have long been demanding concessions in VAT as they also prioritise locally produced agro products.  “We mostly rely on domestically produced seasonal vegetables besides the sea food that is imported from India or third countries,” says Raunak SJB Rana of Trisara. 

Restaurateurs also seek a one-window policy so that the government can provide all services from a single place. At present, the restaurants are required to register and pay taxes at multiple government offices. “We are demanding the government introduce a one window policy so that there will be proper management of data and to make quality control easier,” says Jaiswal. He also suggests the government establish a separate government department to monitor the level of hygiene in the restaurants.

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