Impossible to manage an HORECA profitably in Belgium ? Not true!

In a recent interview Diane Delen, president of the FedCaf (Federation of Coffee Shops and bars), complained about tax rates, monitored cash registers mandatory as from January 2015, too high employer’s contributions. Il all makes it impossible for an entrepreneur to be profitable, she said. She went a step further and explained that it lead to 4000 bankruptcies last year.

Cash register at the heart of the debate

Monitored cash registers (they will get a “black box” that fiscal authorities will be able to use to control the actual activities) are seen as a threat. It actually aims at preventing all retail stores to make black money. However black money is a widespread practice within the HORECA sector (Hotels – Restaurants – Coffee shops & bars) which is why a bill was passed to impose those new cash registers.

Is black money necessary to survive in the Horeca sector ?

By fighting the introduction of these new cash registers (delayed already several times under the pressure of federations) and stressing the impossibility to remain profitable, Mrs. Delen indirectly acknowledge the necessity to make black money to remain in business. We don’t agree with this.

We can’t agree neither with the relationship she made between employers’ contributions, tax rates, … and bankruptcies. The level of bankruptcies is higher in the Horeca sector in many countries. You may remember the statistics we analyzed on bankruptcies in France. The reasons for bankruptcies are many. It’s obvious that a high taxation rate will not make things easier; but a good financial plan and a good business plan will take such aspects into account. The reasons for the bankruptcies in the Horeca sector are elsewhere.

You can survive in the HORECA sector without black money

We are positive that you can be profitable in the Horeca sector. However most entrepreneurs launched their Horeca business without sufficient knowledge of management, without a real market research, and neglect the factors that will influence their survival and their profitability on the long-term. Marketing strategy and differentiation is one of them.

Too often we see entrepreneurs who don’t want to spend money in marketing research, who actually don’t understand why it’s important, and who launch a venture without being actually prepared. Those are the entrepreneurs who will fail.

We have many examples of entrepreneurs and would-be entrepreneurs who have started profitable businesses. In August 2013 we even helped a customer start a business in the Horeca start and one year after he’s proud to report a 30% net margin. The reason why he is successful is that we helped him chose the right location, the right positioning, and understood –through market research techniques- what customers needed.

By Pierre-Nicolas Schwab Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)