Sink or swim: Singapore’s restaurants in a state of flux

Last month, American pizza chain Little Caesars closed its last store in Singapore at Funan Mall, marking the end of six years of operations in the city-state. Little Caesars is just one in a series of restaurants closing down in the country this year, including one-Michelin-starred Sommer, Bam!, Ristorante Da Valentino and Voyage. 

According to Singapore’s Accounting and Corporate Regulatory Authority, last March saw the closure of 234 F&B businesses. 

These closures signal a changing landscape where customers have become more price-sensitive and are seeking affordable dining options. This shift in consumer behaviour is compelling restaurants to adapt their strategies or risk shutting down.

“Over the past eight years, industry-wide operating revenue has remained stagnant, while the number of competitors has increased,” Guy Llewellyn, assistant professor at EHL Hospitality Business School, Singapore Campus, told Inside Retail. “With rising food prices, labour costs, and rent, many restaurants are struggling to survive with the current customer base, leading to some restaurants having to close operations.”

Market shift 

Llewellyn said the dining habits of Singaporeans have shifted since the pandemic. The city has seen a rise in food delivery services. While the sales value of F&B services in July was S$989 million (US$758 million), 23.8 per cent were from online, according to the Department of Statistics. 

Economic pressures and increased living expenses have led to a reduction in the frequency of dining out. Consequently, consumers are reevaluating their dining priorities and adjusting their preferences accordingly.

“As dining out is non-essential and many options are available, diners have become more discerning when selecting a restaurant. They look for places that align with their values, such as offering healthier options, sustainably sourced seafood, or minimising food miles,” Llewellyn said.

“The closures are more reflective of the current economic pressures than a decline in the appeal of dining out.” 

Change or out 

“If no immediate changes are made, the restaurant industry will continue to see an increase in closures as many restaurants compete for the same limited revenue,” Llewellyn said.

The closure of Little Caesars and other notable restaurants serves as a wake-up call for other players, highlighting the crucial need for innovation and adaptability in Singapore’s oversaturated F&B industry.

“Gastrogaming, for instance, is a current trend where restaurants pair high-quality food with a gaming experience, ranging from darts, mini-golf, and bowling, to game simulators. Though some gaming venues have always offered food, this trend goes beyond the basic offerings, providing high-end cuisine that rivals top-tier restaurants,” he added.

Nevertheless, the restaurant industry is dynamic, with trends constantly evolving. What’s innovative today may become commonplace tomorrow, as new establishments continually emerge with fresh ideas to captivate diners’ attention.

Llewellyn said most restaurants should return to having a team interact with customers to create a welcoming atmosphere, there are other innovations worth adopting. 

“While not an innovation, one aspect that has been lost is community engagement, such as giving back and having the team volunteer, which helps demonstrate that the restaurant cares about its customers and the community,” Llewellyn said. “Restaurants need to be symbiotic with their patrons, only then will they be able to form a bond that will bring in a steady customer stream.”

Restaurants are also recommended to look into ways to diversify their revenue streams. 

“The majority of restaurants cannot rely solely on the diners coming into their establishments,” he said. “Restauranteurs need to consider incorporating other streams of income, such as ghost kitchens, retail products, or partnerships with similar businesses, to ensure that revenue remains stable even if the number of diners decreases.” 

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