Oct

5

It is surprising to hear from the Daily Telegraph that business at traditional brasseries and bistros is in a freefall in France. Is it related to current economics, taxation of small business, red tape/licenses associated with owning small business , rent, convenience, demographic changes, Internet/advertising influences… what gives?

However, even if there were a last-minute u-turn at the Louvre, statistics suggest the battle of Le Big Macs has already been lost. France has become McDonald's biggest market in the world outside of the US, according to the chain. While business in traditional brasseries and bistros is in freefall, the fast food group opened 30 new outlets last year in France and welcomed 450 million customers, up 11 per cent on the previous year.

My recollection in 1984 in Sweden and Norway was that McDonald's used slightly different sauces on the Big Mac to appeal to local tastes but not sure if that is done these days and if regional tastes are considered.

Bruno Ombreux answers:

LippI don't have hard numbers, but every day I walk past tens of Parisian food outlets; here are my observations:

- What is specifically declining are brasseries and bistros in their use for the noon meal.

- Cafés and restaurants, when they are well run, are still thriving. The terraces and interiors of those in my section are always full.

- McDonald's has been a huge success, particularly with teenagers. That's nothing new; it has been going on for decades.

My tentative explanations:

- Changing workers' eating habits. Fewer long noon lunches, more take-away and fast food.

- Traditional brasseries/bistros are too old-fashioned. They don't look modern inside so don't appeal to younger people.

- Cost of operating a brasserie/bistro: mainly staff, but also rents in Paris.

- Take-away food was cheaper. It was taxed at 5.5% VAT whereas non-take away food was taxed at 19.6%. But that changed a couple months ago; now VAT is 5.5% for everybody.

To answer your second remark, regional tastes are considered. The food at a French McDonald's is different from the food at a US McDonald's. The meat is of much higher quality and there is a choice of salads. The guy who spearheaded local variation in France did it which so much success that he is now the head of McDonald's Europe.

Horatio Humbert asks:

A cut in VAT tax rate, that is interesting. What kind of "consumer's strike" do we need in the U.S. for a similar capitulation to occur?

Bruno Ombreux replies:

This is a bit complicated.

This idea of cutting VAT for restaurants predates the crisis. It was first tried unsuccessfully by Chirac. It was also a Sarkozy campaign promise.

But France can't cut VAT without an agreement from the EU. I am not sure why, but it must be because part of the VAT is funding the EU. At some point, we had a Polish veto [and a German one]. The Polish president didn't want France to cut VAT! Sarkozy must have threatened him with nuclear strikes and now France can decrease VAT.

I am plenty pleased. The cost of my morning coffee has gone down 12.5% (the café manager has kept part of the tax rebate for himself!)


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  1. William Brauer on October 5, 2009 2:50 pm

    Interesting on the extent of the VAT tax in France. Is the implication that there is no income tax on French restaurants but that they pay only the VAT? This is certainly far more reasonable taxation than US restaurants face, with sales taxation rates alone in excess of France's VAT.

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