It seems that burger joints are losing the crisis-spawned battle in the fast-food world to their Greek counterpart, the souvlaki shop. Last month saw the closure of the last McDonald’s outlet in Thessaloniki. The flagship restaurant, which opened in 1994, was located on the corner of Egnatia and Aghias Sophias streets, a few minutes’ walk from the bustling docks.
While VAT on food services was cut to 13 percent at the beginning of the month in an attempt to boost business, it had stood at 23 percent, which, coupled with the economic crisis, had led to a dramatic decrease in food sector sales. And the McDonald’s outlet was no exception, as its manager was forced to refrain from renewing the rental contract.
This was one of three McDonald’s franchise restaurants in Greece. From the initial 11, today only two remain open, and they are in Athens. Last March, the closure of the McDonald’s in Omonia Square brought the total number of corporate stores in Greece down to 18. The Goody’s fast-food chain has also closed several restaurants recently because of a significant decrease in revenues. However, it remains the leader in Greece’s fast-food industry with over 150 branded outlets across the country. According to the company’s balance sheet, revenues from its Flocafe and Goody’s branded stores fell to 212.36 million from 278.44 million last year – a 23.7 percent decrease. Total net sales at all Goody’s outlets fell 28 percent, while their market share was 11.6 percent compared to 12.7 percent last year.
But, theoretically, the fast-food industry should have done well given that in times of financial crisis, people tend to turn toward cheap food. However, it seems that the decrease in spending power and a surge in youth unemployment – a vital target group of fast-food chains – have resulted in a dramatic drop in fast-food consumption. According to the most recent major study conducted by ICAP, while the value of the domestic market for fast-food chains – mainly selling burgers, sandwiches and pizzas – showed an upward trend for the 1992-2008 period, from 2009 onward it declined steadily: by 3.9 percent in 2009, 3.7 percent in 2010 and a record 7 percent in 2011.
In contrast to the dwindling fast-food chains, consumption of traditional Greek snack foods such as koulouri bread rings, cheese pies and souvlaki remains strong. It’s expected that in these times of financial crisis, bakery and confectionary chain stores such as Veneti, Choriatiko, Appolonion and traditional grillhouses will start to replace the burger joints. Such stores offer a large range of options and can adapt to consumer needs while keeping their prices low.
Even though it is estimated that the reduction in VAT will help businesses, experts worry that this sharp rise in bakery and grill chains is a bubble that’s going to burst.