The noose is tightening around restaurateurs. Employees pay the price - voila! money

Empty restaurant. In many cases, withholding employees' wages is the easiest "solution" for a restaurateur who encounters difficulties/ShutterStock

"As long as the business worked well and the restaurants were full, I allowed restaurants to withdraw merchandise on a 90+ basis, but the days have changed, and there are almost no restaurants to which I give such credit. I can't take that risk."

These words, spoken to us by a large food supplier in the restaurant industry, largely reflect the deterioration in risk of the restaurant industry in Israel, and the other front that restaurateurs must deal with – paying suppliers. Unlike many other industries in the economy, the restaurant industry is still considered a very problematic industry in normal times, which dictates a particularly tough credit policy for the Israeli banking system.

A significant proportion of restaurateurs, let alone new ones, who are not supported by investors, are forced to roll over without receiving credit from the bank. In a few cases, credit is granted, but the interest rate, which reflects the level of risk, makes the transaction clearly unworthwhile. In light of this reality, the food suppliers, utensils and equipment of restaurants in Israel have become a kind of credit provider.

"The vast majority of restaurateurs will enter the bank branch and receive a complete refusal, so the restaurants actually live on the credit that the suppliers give them," notesShai Berman, CEO of the Israel Restaurant Association. However, in recent months, in the shadow of the gloomy economic horizon, the protests, and the poor social mood, there has been a decline of at least 20% in the volume of turnover of restaurants in Israel, which has led to a worsening of credit terms provided by suppliers.

"It's risk management, and as far as I'm concerned, even restaurants that paid all these years on time are now being examined with a magnifying glass. For many of them, I allow cash withdrawals only. Very few now receive current 60+ conditions," explains a large restaurant merchandise supplier with whom we spoke. "I take into account that there are restaurants that will close the gate because of the change in conditions, but it's better than me going bankrupt."

A deterioration in the prevalence of wage withholding. Haim Molcho/PR

The near future does not bode well for the restaurant industry. "I think we haven't reached the bottom yet and we can expect quite a few more difficult months," Berman adds, "First of all, it's economic distress of customers who are having trouble spending money, and also a matter of mood – our business is built on emotional moment."

The expectation of a decline in restaurateurs' revenues worries suppliers, but not only. On social media, there are lively discussions among kitchen workers, who raise fears that the restaurant door will close abruptly. "It has happened to me, more than once, that I arrived at work in the morning and the door was closed.

Even then, just like today, I see the same red flags – fewer and fewer customers, and a drop in orders," writes a hotline worker at one of the restaurants. Another worker writes, "I haven't been retired for three months. The boss said it would be dealt with next month, but I see the state of the restaurant, and I know he just has nowhere to pay from."

"We see some deterioration in the prevalence of wage withholding in the restaurant industry, and also in the bar industry, this is a very reliable indication of the cash flow difficulties of businesses in the industry, and the situation is quite worrisome," notesHaim Molcho, CEO of Oketz Systems, one of Israel's largest companies in the field of providing computerized solutions in the field of manpower. According to him, the restaurateurs are between the hammer and the anvil:

"On the one hand, they have sharply raised the cost of raw materials, and at the same time, they cannot pass on the full increase to customers. At the same time, the cost component of employing workers now reaches 40%, a figure that jumped after the pandemic, due to the manpower shortage in the industry. Their overheads have skyrocketed and turnover has decreased."

At the same time, Molcho notes that unlike what happened years ago, most restaurants have aligned themselves with the language of the law and case law, and the industry has undergone a process of regulation: "Phenomena such as dismissal from one day to the next without a hearing, non-payment for apprenticeships or charges for fractures or deficiencies, these are things that have almost disappeared from the view of restaurants, certainly the largest and most serious ones."

"Unlike in the past, workers do not hesitate to demand what they deserve, restaurateurs must be very careful and very strict in providing pay slips in accordance with all legal requirements."

• More on the subject:
• Restaurants
• Workers' rights
• Salary withholding