LCQ19: The operating environment of the catering industry
Following is a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, to a question by the Hon Lam Tai-fai in the Legislative Council today (June 6):
Quite a number of members of Hong Kong's catering industry have relayed to me that the inflation problem in Hong Kong has become increasingly serious, with continuous rising shop rents and prices of food materials, and coupled with the implementation of the statutory minimum wage, the operating costs of food establishments continue to increase; the catering industry has to face the pressure of raising prices, laying off staff and closing down businesses. In this connection, will the Government inform this Council:
(a) of the respective numbers of food establishments newly opened and closed down in each of the past five years, together with a breakdown by type of food establishments;
(b) of the respective number of people engaged in the catering industry in each of the past five years, together with a breakdown by type of food establishments;
(c) of the respective total numbers of labour disputes in the catering industry in each of the past five years, the amounts involved and the numbers of employees affected, together with a breakdown by type of food establishments;
(d) whether it knows the revenues brought to different types of food establishments in Hong Kong by visitors under the Individual Visit Scheme (IVS) each year since the implementation of IVS in July 2003;
(e) whether it knows the total amount spent by members of the public in Hong Kong in different types of food establishments in each of the past five years, and the average percentage of the amount spent by members of the public in different types of food establishments in their income;
(f) whether it has assessed the impact of the implementation of the statutory minimum wage on the operating costs and manpower of different types of food establishments; if it has, of the details; if not, the reasons for that;
(g) whether it has assessed the impact of changes in shop rents in Hong Kong on the operating costs and profits of different types of food establishments in the past five years; if it has, of the details; if not, the reasons for that;
(h) whether it has assessed the impact of changes in the prices of food materials on the operating costs and profits of different types of food establishments in the past five years; if it has, of the details; if not, the reasons for that;
(i) of the time normally taken at present for processing the required licences for various types of food establishments; whether it will conduct a study on further simplifying the relevant procedures to shorten the processing time; if it will, of the details; if not, the reasons for that;
(j) of the targeted measures put in place in the past five years to support the continuous operation and development of the catering industry in Hong Kong; and
(k) whether it has assessed the difficulties and opportunities in operations and sustainable development faced by the catering industry at present, so as to introduce targeted policies and measures to help the industry resolve the difficulties and seize the opportunities?
Regarding Member's questions and suggestions, we have followed up with the Food and Health Bureau, the Financial Services and the Treasury Bureau, the Labour and Welfare Bureau, and the Economic Analysis and Business Facilitation Unit. Our consolidated reply is as follows:
(a) The Food and Environmental Hygiene Department (FEHD) does not keep records of the number of restaurants newly opened and closed down. The number of new restaurant licences issued by FEHD and restaurant licences cancelled/expired without renewal in the past five years, with a breakdown by the type of restaurants, is set out in Appendix 1.
(b) According to the results of the Quarterly Survey of Employment and Vacancies provided by the Census and Statistics Department (C&SD), the number of persons engaged in different types of food services establishments in the past five years are set out in Appendix 1.
c) The numbers of labour disputes in the catering industry handled by the Labour Department (LD) in the past five years, and the numbers of employees involved, are set out in Appendix 1. For labour disputes in the catering industry, LD neither has the breakdown by the types of catering establishments nor keeps statistics on the amount claimed.
(d) Based on the Hong Kong Tourism Board (HKTB)'s dedicated survey data, the estimate incremental tourist spending contributed to the restaurants sector under the "Individual Visit Scheme" (IVS) from 2004 to 2009 are set out in Appendix 1.
Since there was no dedicated survey conducted by the HKTB in 2010 and 2011 to gauge the impact of IVS, estimates on incremental tourist spending contributed to the restaurants sector under the IVS after 2009 are not available.
(e) The Government does not maintain a record of the requested information.
(f) The C&SD conducts the Annual Earnings and Hours Survey (AEHS) to provide comprehensive data on the employment situation of employees in Hong Kong. The statistics are also used for analysis related to the statutory minimum wage (SMW). According to the results of the 2011 AEHS, there were 206 100 employees in the restaurants industry in May-June 2011, up by about 1 000 when compared with the figures in April-June 2010. A breakdown by different types of restaurants is set out in Appendix 1.
In addition, C&SD conducts the Annual Survey of Economic Activities (ASEA) for compiling statistics on the business performance and operating characteristics of various sectors (including the catering industry). Operating statistics cover compensation of employees (including wages, salaries and other employees' welfare), operating expenses and business receipts. The 2011 ASEA, which can reflect the position after the implementation of SMW, commenced in February 2012 and its results will be available by end 2012.
(g) and (h) Based on the data collected from the ASEA conducted by C&SD on a yearly basis, some key statistics on the business performance and operational features of specific categories of food establishments and the whole food services sector over the past five years are set out in Appendices 2-4.
During 2005-2010, although the Hong Kong economy was hit by the global financial tsunami and had once slipped into a recession, the economy quickly emerged from the mire and still posted a cumulative 21 per cent growth in real terms over the period. Local shop rentals and food costs had risen notably over the past two years, thereby lifting the operating expenses of local food establishments. However, with the overall economy on an up-cycle and the domestic sector held buoyant, food establishments also saw notable business growth, thereby cushioning in part the impact of higher costs on profits. As can be seen from Appendices 2-4, Chinese restaurants tend to have a thinner profits margin and hence are more affected by rising rentals and food costs. Fortunately, thanks to the revival in business in 2010, the gross surplus/business profit ratio of Chinese restaurants stood at 5.0 per cent, largely on par with the average (5.5 per cent) in the three years prior to the financial tsunami (2005-07). In comparison, fast food shops saw an even faster growth in business, and thanks to stronger pricing power, they managed to attain double-digit profit ratio over the past several years.
In sum, while the profit ratio of the whole food services sector had declined somewhat in recent years, the figure in 2010 was still largely in line with the average ratio (7.1 per cent) over the three years prior to the 2008 financial tsunami (2005-07).
The ASEA for 2011 already started in February this year. The results will be released towards the end of the year.
(i) Under the Food Business Regulation (Cap. 132X), any person who intends to operate a restaurant must apply to the Director of Food and Environmental Hygiene for a restaurant licence. The applicant may apply to FEHD by submitting a duly completed standard form together with three copies of the proposed layout plans of the premises for the restaurant under application, and a declaration on compliance with Government lease conditions. FEHD will refer the application to the relevant departments for comments so as to ensure that the application meets all the criteria, including those in respect of building safety, fire safety, statutory plan restrictions and health. If the relevant departments have no objection, FEHD will hold an Application Vetting Panel meeting jointly with the relevant departments and the applicant and issue a Letter of Requirements to the applicant within 20 working days of acceptance of the application. FEHD will issue a full licence within seven working days upon confirmation of the applicant's compliance with all the licensing requirements.
As a business facilitation measure, an applicant for full licence may at the same time apply for a provisional licence so that he can operate the restaurant on a provisional basis. If the applicant can submit the relevant certificates signed by professionals certifying that the premises under application have met the essential health, ventilation, building and fire safety requirements imposed by the departments concerned for the issue of provisional licences, FEHD will issue a provisional licence with a six-month validity within one working day.
In 2011, the average time required for FEHD to issue a full and a provisional restaurant licence were 167 and 57 working days respectively. The present procedures and time taken for processing applications by FEHD for restaurant licences have already struck a balance between the need for effective control and business facilitation. FEHD has no plan to make changes for the time being. Nevertheless, FEHD reviews the relevant procedures from time to time to cater for the operations and needs of the trade.
(j) and (k) The Government is committed to enhancing the business environment of Hong Kong and reducing business compliance costs through conducting regulatory reviews and implementing the "Be the Smart Regulator" Programme. In the past five years, the Government worked closely with the food business sector to explore ways to remove unnecessary procedural and regulatory barriers, modernise the food business requirements and improve business licensing services for the catering industry through channels such as the Business Facilitation Advisory Committee, its former Food Business Task Force and the Business Liaison Groups for restaurant food business and non-restaurant food business. Various business facilitation measures such as relaxation of the food room requirement for licensed restaurants and factory canteens, streamlining the licensing procedures for liquor licence and application for outside seating accommodation, updating the fire safety requirements of food premises to make them clearer and more business-friendly etc., have been implemented by the Government to reduce the compliance costs and enhance the business opportunities and operational flexibility of the catering industry.
In addition, the Government has all along been providing assistance to small and medium-sized enterprises (SMEs) of various industries with a view to enhancing their competitiveness. These include the catering industry which comprises a large number of SMEs. For example on financing, the SME Loan Guarantee Scheme administered by the Trade and Industry Department (TID) provides up to 50 per cent loan guarantee for approved loans taken out by SMEs and the maximum amount of loan guarantee for each SME is $6 million. The SME Financing Guarantee Scheme (SFGS) administered by the Hong Kong Mortgage Corporation Limited (HKMC) also provide guarantee coverage on 50 per cent to 70 per cent of the facility amount to eligible enterprises. Each enterprise or each group of enterprises can borrow not more than $12 million under the Scheme, which guarantees both term loan and revolving credit facility.
In response to the impact brought to the business of Japanese restaurants due to the public's concerns about the safety of Japanese food following the earthquake in Japan in March 2011, the HKMC, in consultation with the Government, implemented a special arrangement on guarantee fee waiver under the SFGS from June 1, 2011 to December 31, 2011 to help local enterprises which are adversely affected by the earthquake, including Japanese restaurants, to tide over the difficult period and provide timely relief.
To support SMEs to tide over the uncertain global economic environment and the possible financing difficulties as a result of credit crunch, HKMC has, with the support of the Government, introduced the time-limited Special Concessionary Measures under SFGS on May 31, 2012 to provide 80 per cent guarantee protection to eligible loan facilities. The application period is nine months and the Government provides a total guarantee commitment of $100 billion.
Moreover, the Support and Consultation Centre for SMEs (SUCCESS) run by TID provides SMEs from various sectors (including catering) with free, reliable and practical information and consultation services. SUCCESS also organises seminars and workshops to help broaden SMEs' business knowledge and enhance their entrepreneurial skills.
The Government will, as always, remain vigilant on the changes in the market and review the various support measures for SMEs from time to time so as to meet their needs.