Supermac's Managing Director Pat McDonagh has called on the Government to reintroduce the 9% VAT rate for the hospitality sector in Budget 2025.
Pat McDonagh, who also owns and operates the SÓ Hotels group, said that the future of hundreds of small businesses will depend on decisions made by the Government over the next few weeks and that these decisions will have long term repercussions for the country.
He said the hospitality industry is struggling to deal with increase in operating costs linked to changes in employment law, including increases in the national minimum wage, and higher energy bills.
"Figures from the Restaurants Association of Ireland indicate that 270 restaurant and food-led businesses have been forced to close this year in the face of rising costs," Mr McDonagh noted.
"If you add up all the additional costs, margins are down 12-15%," he said.
"What do you do to control that? You either cut back on labour or put-up prices. But you can't put up prices to cover all your costs or you will become uncompetitive," he added.
The RAI said a typical food business with a turnover of €1m will see its total costs increase by €97,000 this year.
The single biggest driver, accounting for €37,000, relates to the increased VAT rate to 13.5% followed by wage inflation (€36,000), increased supplier costs (€13,500).
Mr McDonagh also said the cost spike had coincided with a contraction in disposable income.
"People are cutting back on their spend and VAT is the most efficient way to alleviate the pressure on businesses without depressing wages for workers," he added.
