SMEs more severely affected by tighter labour laws

DINE at a large restaurant chain, and it is increasingly likely that some of your food will have been prepared by a machine.

From central kitchens to automated cooking equipment, larger players in the food and beverage (F&B) industry have been quick to embrace automation in the face of rising manpower costs.

Smaller establishments, however, are still struggling to survive, and the prospect of these companies eventually calling it a day is higher.

Still, with Singaporeans loving their food, it is no surprise that there are new outfits opening every week.

There are more than 6,400 food service establishments here employing more than 101,000 workers and contributing $7.1 billion in operating receipts.

The sector - which includes restaurants, caterers, pubs and clubs - is one identified by the Government in its push for higher productivity.

The value-add per worker is only about $26,000 in the food service sector, well below the overall service sector's average of $97,000 in 2011.

While the sector still lags in the productivity stakes, there are bright spots, especially among larger industry players.

Some have started taking steps towards coping with permanently higher labour and operating costs.

Setting up a central kitchen, and investing in machines that can cook food automatically have "become the fashionable thing to do" in the F&B industry, said Mr Andrew Tjioe, president of the Restaurant Association of Singapore and executive chairman of the TungLok Group.

"Machines can address a lot of problems, for example, a shortage of manpower, food quality and consistency, and energy usage," said Mr Tjioe, who is a member of the National Productivity and Continuing Education Council, which helps various sectors improve their productivity.

Companies such as Select Group, BreadTalk, Japan Foods, Mr Tjioe's own TungLok and scores of others in the industry have jumped on the central kitchen bandwagon in recent years, in a bid to reduce the number of employees and space needed at each food outlet.

TungLok, for example, has invested in a machine or robot that can prepare fried rice or fried Hokkien noodles.

Select Group has its own kitchen, which produces sauces and mixes. It is also raising training standards, with a newly opened culinary institute.

Mr Kurt Wee, president of the Association of Small and Medium Enterprises, said the F&B industry has "more or less entered into a phase of adjustment" in the face of the economy-wide push for higher productivity.

"Some restaurant chains are still in transition to improve their service quality... but Singaporeans also understand the manpower constraints, and are willing to accept lower service levels," said Mr Wee.

While central kitchens and automation have become popular strategies among larger companies, the squeeze has not let up for smaller ones unable to take advantage of economies of scale.

Ms Nina Mammen, whose company Naidevya runs two restaurants serving Indian food, said the firm has implemented an iPad ordering system at its outlets in a bid to cut down on manpower, but "things like cooking cannot be done with machines".

The company's profit margins have fallen 50 per cent to 60 per cent over the past few years on the back of escalating rentals and manpower costs.

"During low periods such as school holidays, we find it difficult to meet overheads like rentals and salaries," said Ms Mammen.

The labour shortage has made it difficult for the company to boost sales by giving out discounts or vouchers, she added.

"What happens if people come in and we are not able to serve them properly?"

The Singapore Business Federation (SBF) called for more help in this year's Budget for food & beverage players to boost their productivity.

Small and medium-sized enterprises (SMEs) such as Ms Mammen's are more severely affected by rising costs and tighter manpower policies.

The SBF urged that F&B businesses be allowed to hire workers from more countries, and widen the scope of staff training.

Mr Tjioe said productivity improvements for smaller restaurant operators are possible, but likely to be tougher.

"Small-scale businesses don't necessarily need to go into automation in a big way," he said.

For instance, restaurants can look into outsourcing the production of some menu items to food manufacturers, or redesigning their menus to include more mass produced items, he noted.

Ms Mammen, however, is less optimistic, and constantly grapples with potentially having to shut down.

"Many times, we have felt like quitting because of the constraints, but we have invested a lot in the business," she said.

"It is really tough...We are trying our best to keep the place going."