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Restaurants need to adapt to harsher industry conditions

By Ye Chuhua (Global Times)

08:30, August 29, 2012

The profits of China's catering and dining industry grew by just 5 percent year-on-year in the first half of 2012, 3 percentage points slower than the same period last year, and a record low since 2003 when anxieties about outbreaks of SARS, an infectious disease, on the Chinese mainland kept people away from restaurants, according to a report released by the China Cuisine Association (CCA) on August 10.

The CCA's report also shows that the restaurants which suffered the biggest losses in the first six months were predominately small eateries in terms of revenue. In Shanghai, for example, only some 10 percent of the restaurants in the city were able to turn a profit during this period, and most of them were large franchises.

But in China's highly competitive dining market, the hardscrabble existence many small and independently-run restaurants are being confronted with now will likely only get more difficult as operating costs mount and customers stay at home.

In the past, many restaurants were able to easily record a profit by paying their staff a pittance and shirking their responsibilities as employers to contribute to their workers' social security funds. But during the first half of this year alone though, salaries of restaurant workers have shot up by 10 percent year-on-year, according to data from the CCA. At the same time, the government has strengthened its oversight on labor rights and has compelled many restaurants to pay social security on behalf of their workers.

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