Knowing When and How to Exit Your F&B Business

From its mouth watering delicacies to its fine dining establishments and restaurants, Singapore has seen its food and beverage (F&B) sector take an ascent as one of the greatest food industries in the world. Perhaps this explains the rising number of Singaporeans venturing into entrepreneurship; bringing novel concepts, international flavours, remarkable interiors, and other fresh ideas to the game.

It is a truly heartening thing to see many entrepreneurs invested in contributing to one of the pillars of Singapore’s social identity — food.

But even with the excitement that surrounds its fabled food culture, it is hard to deny the intense competition and other challenges that the F&B industry is facing today. Apparently, great food alone no longer serves as a recipe for success.

The fact that only 60% of minor F&B businesses make it past 5 years and that 28% of similar outlets get replaced yearly begs the question, why the plunge?

Well, we can attribute 40% of micro food enterprises that barely make it beyond the five-year mark to a couple of challenges that the sector faces, including:

  • A shortage of manpower that results from tight foreign worker quotas and changing career aspirations for younger Singaporeans locals.

  • Rising manpower costs as a result of late adoption of machinery and automation — the cost of labour has grown faster as compared to revenues at 8.6% versus 7.3% yearly, over the last five years.

  • A low barrier-to-entry that encourages innovation and entrepreneurship — this is great, but it also means that many businesspeople dive into the sector without adequate preparation and understanding of the industry.

  • Maintaining customer loyalty — Hong Kong diners have less dining options as those in Singapore. As such, F&B operators often find themselves in competition for the palates of critical and selective consumers, necessitating solid customer value propositions to appeal to consumers and retain them.

  • The rising cost of renting and real estate — Supply of commercial real estate in Singapore is adamant. However, the desire for suitable locations has resulted in some competition among operators leading to an overall increase in real estate costs.