With high overheads and shrinking margins, it has never been more challenging to run a successful restaurant in Luxembourg. Delano spoke to entrepreneurs and experts to learn the secrets of success.

Each February some of the more serious Luxembourg restaurateurs flock to Stuttgart’s Intergastra, one of the most important trade fairs for the food industry in Europe. Here they hear about the latest dining trends with a view to integrating them into their businesses.

“You’ve got to come up with new ideas all the time,” Kathy Liebl, who founded Kathy’s Deli and Cupcakery in rue de Strasbourg in 2013, told Delano. “Last year it was infusions and smoothies. Vegan meals are a huge area that people are looking at now,” she added, saying that keeping up with new trends and concepts were key for long-term sustainability.

Restaurant and hotel federation Horesca’s François Koepp agrees. “The customers increasingly request more and more creative concepts of restaurants, something out of the ordinary,” he said.

Luxembourg, with its international population, is an ideal testing ground for such niche markets, says House of Entrepreneurship CEO Tom Baumert. “We’re seeing niche markets that weren’t tackled five years ago,” he said, adding that vegan and vegetarian are the in thing while fast food has been given a healthy twist with salad bars or an emphasis on local produce.

Photo: Mike Zenari/archives. Hitch in Limpertsberg serves as a night club three times a week to ensure maximum revenues to counter the high rents

Location, location, location

A strong concept may be crucial but it alone will not guarantee restaurant success, as Concept Partners CEO Christophe Diederich and his associate, Jérôme Bigard, learned the hard way. The pair, who began their concept restaurant chain by opening Fabrik in Mersch in 2013, hit a snag with their sixth eatery, Franz.

“We knew the location wasn’t great but considering our previous successes, we thought we would succeed here, regardless of the location.” The pair closed Franz 18 months later and put the experience down as a lesson learned. It highlights the importance for entrepreneurs to be certain that the location of their business will get the footfall needed to cover the high costing of renting commercial property in the capital.

“If you’re the [building] owner, you can earn money because you don’t pay rent. In general, most entrepreneurs rent,” Baumert said, adding: “If you’ve a concept place in the city centre with high rents, that’s where you need to go to the mass market.” As an example, he points to restaurants like Hitch in Limpertsberg, part of the Concept Partners group, which serves as a night club three times a week to ensure maximum revenues to cover the high rent.

Alternative models

And it is not only the rents which are high. The cost of kitting out a restaurant for up to 40 people are estimated at between €50,000 and €80,000, a risky sum to borrow from the bank if you haven’t done your homework.

Some entrepreneurs have found ways round this by hosting pop-up restaurants, as was seen with Syriously in Hollerich, or by entering into partnership with commercial landlords. Farid Azizi is in a testing phase with N Joy, a temporary Persian restaurant he opened in rue Bender. The owner of the existing venue agreed to enter a partnership that would remove some of the financial risk provided he underwent a trial period. “If I had to borrow money to open a restaurant and it doesn’t work, I’d go bankrupt”, Azizi said.

Photo: Patricia Pitsch/Maison Moderne/archives. Kathy Liebl, pictured, opened Kathy's Deli in rue de Strasbourg in 2013

Rapid change is a common reality in the catering and hotel sector. According to government figures, over 250 new restaurants and hotels open in Luxembourg each year. But there were 237 bankruptcies in this area in 2007, a figure which remained stable in the years before. But even these figures do not give an accurate picture of how many restaurants open and close in Luxembourg since “most close before they go bankrupt because they realise they are not earning enough money,” Explorator editor France Clarinval explained. She added that high minimum wage costs also add a challenge to entrepreneurs in Luxembourg, which their peers abroad may not experience to the same degree.

Shrinking margins

The rising cost of food and beverages is also squeezing the restaurant entrepreneurs, Baumert suggests. He says the food and beverages federation had noted that margins were shrinking generally on food.

“They say that compared to 25 years ago, restaurants need to be more professional and better organised. Because when margins were higher, it was easier to circumvent a good or bad month or throw stuff away,” he said.

Most industry professionals agree that a fast, friendly and efficient service, ensuring two sittings at lunch time, and tighter management of produce, are key to success. That, and having the right motivation in the first place as Liebl says: “You’ve got to do it for love, not for the money.”