Food is a basic necessity. No matter the economic situation, people still need breakfast, lunch and dinner. That is why the food and beverage, or F&B, industry is often seen as one of the safest businesses to be in. However, the reality is not that simple. Many restaurants appear to be full, with delivery orders flowing in, but owners are still struggling to pay rent, pay employees and buy raw material stocks.
From an economic perspective, the main problem for F&B is the gap between sales and profits. Gross sales may be high, but net profits are very small after deducting operating costs. The prices of raw materials such as chicken, cooking oil, vegetables, milk and spices can fluctuate depending on supply conditions, weather, currency exchange rates and logistics costs. When costs increase, businesses face a dilemma: raise prices and risk losing customers, or maintain prices but accept shrinking margins.
At the same time, consumers are increasingly price-sensitive. The pressure of the cost of living is causing many customers to compare prices, reduce orders or choose cheaper options. They may still eat out, but the value of each transaction may be lower. For merchants, this means that customer numbers alone are no longer enough; they need to ensure that every sale actually contributes to profits.
Expensive Overhead Costs
The F&B cost structure is also quite heavy. Premises rent, employee salaries, electricity and water bills have to be paid even when sales are slow. These costs do not automatically decrease when the weather is bad, the holiday season, traffic is low or demand is weak. Furthermore, food is at risk of being wasted because raw materials are perishable. Small errors in sales forecasting, stock purchases or food preparation can turn into daily losses.
Competition makes things even harder. The barriers to opening a stall, cafe or food delivery business are relatively low, causing many players to offer almost the same menu in the same area. To attract customers, merchants are forced to offer discounts, promotions or combo sets. This strategy can increase sales in the short term, but if done without control, it only teaches customers to buy when there is a promotion and continues to squeeze business margins.
Commissions by Platform Providers
Food delivery platforms also have two effects. They help merchants reach a wider customer base, but come with commissions, packaging costs and the need to participate in promotional campaigns. More orders doesn’t necessarily mean more profit. If the pricing on the platform doesn’t take all of those costs into account, merchants may actually be working harder for a smaller margin.
F&B is a business that is vulnerable to cost inflation, price competition, changing consumer habits and unavoidable operating costs. The stores that survive are usually not just the most viral or have the most customers, but the ones that are most diligent in controlling costs, reducing waste, maintaining quality and building a loyal customer base. In a challenging economy, consistent sales are important but maintaining cash flow and making healthy profits is far more important.
