The silent crisis of fast food restaurants

In one of the most touristic places of Denmark, fast food businesses are struggling to survive.

by Aggelos Andreou

Photo: Daphne  Henning

Will fast-food last in Denmark? Photo: Daphne Henning

There is a paradox going on in Aarhus for the last six years. The demand for fast food services has risen by 25%, according to the stats provided by Experian.

But if you expected the supply to follow the same increase, then you will be surprised to know that the sector is experiencing bankruptcies, low profits, and unemployment.

In 2009, approximately 144 fast food restaurants in Aarhus City were registered as active businesses in the area. By 2014, only 45 of them remained active, while a large proportion were forced to close down or change hands and function under different owners and names.

“The average surviving period for fast food stores is two years max”, says to Jutland Station, the president of Denmark’s Restaurant and Cafes Association, Jacob Niebuhr. “It seems that in Aarhus take away businesses stand no chance, as most of them close shortly after their foundation”, he adds.

In 2010, following the European economic downturn, Aarhus couldn’t stay untouched. That year, at least eight restaurants filed for bankruptcy, which triggered an immediate response from the tourism businessmen of the city. “Things are getting better and better since 2013”, claims Steffan Trie, owner of Café Ziggy.

But things are not so bright for the fast food sector. The crisis does not seem to have an end, or a start whatsoever. “In fast food restaurants the situation is more complex”, admits Trie.

For a start, exotic flavors seem to attract more and more Danes. “The classic burger or pizza restaurants are squeezed by more sophisticated businesses that offer foreign dishes for the same prices”, says Rune Risom, CEO and Marketing Manager of Hungry.dk, an online delivery service.

“Danes are experimenting and have changed their eating habits a lot lately. They rather order Thai or Chinese than paying for a traditional pizza plate”, he adds.

Plus, the line between fast food restaurants and cafes has become very thin. “The temptation to just eat something in a café, a burger, a sandwich, while enjoying a beer or a coffee is driving people away. And this derives by the conviction that cafes have much more quality products than a take away restaurant”, says Jorgen Konigshorf, representative lawyer of DRC association.

The competition keeps the prices low, which benefits consumers but destroys companies. Low prices mean low profit, since the taxes exhaust most of small businesses. Owners have to pay at least 70% of their profit to taxes. “For instance, there is a sales tax at 25%, a business tax of 23%, the employer’s contributions, etc. Unfortunately, the strongest survives as always”, says Niebuhr.

In this catastrophic equation one must add two more parameters. First, the leasing contracts are getting higher in Aarhus area. “It’s no secret that rents have skyrocketed the last few years. You can’t possibly run a small business having to pay so much money in renting a store”, says Konigshorf.

On the other hand, bureaucracy is becoming “the death penalty” of every aspiring businessman.

“In Denmark, it is difficult to start a business, even if you have a decent initial capital. Bureaucracy is the first serious obstacle. You have to fill out endless forms, and it is not always easy to know all the rules to get a license. You have to hire and pay a lawyer, or to do it by yourself, meaning that you will spend months to figure out what are your rights and obligations, and when to do which”, says Neibuhr. “And people are not informed that they must go through this procedure, so their initial capital has already been spent, when they start their business for real”, he adds.

Mark, a 34-year-old Italian cook currently working in the Russian restaurant, Matreshka, started his own small business back in 2011 with a lot of expectations. “Students were my target group and I wanted to provide quality but cheap fast food. I opened a store in Brabrand, but had to close after six or seven months. It is insanely expensive to maintain a sandwich store here in Aarhus”, he admits.

“There is a silent crisis that no one seems to have taken very seriously”, says Risom of hungry.dk. “We can clearly see an increase in delivery ordering, but not a hint of growth in fast food restaurants”, he adds.

Aggelos Andreou is a Greek reporter and a student in the Erasmus Mundus Journalism Master’s program, and Jutland Station contributor.