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Rigid food regulations starve eateries

International restaurant franchisers doing business in Slovakia are finding that government regulations and an immature domestic market are slowing their growth, as companies such as IKEA Restaurant and McDonald's Slovakia are struggling to maintain their business profile along with their profit margins.
The word "profile" is the food franchising industry's buzzword for product quality and consistency, whereby Kôttbullar (Swedish meatballs) in Malmo are indistinguishable from those found on IKEA's steamtable in Bratislava. Philippe Echenard, project manager for McDonald's Slovakia, calls it "an easy concept. When you go [to McDonald's] in Bratislava, in New York, in Geneva or in Paris, you know what you're going to find," he said. Both IKEA and McDonald's, however, have found their "profile" difficult to maintain in Slovakia.

International restaurant franchisers doing business in Slovakia are finding that government regulations and an immature domestic market are slowing their growth, as companies such as IKEA Restaurant and McDonald's Slovakia are struggling to maintain their business profile along with their profit margins.

The word "profile" is the food franchising industry's buzzword for product quality and consistency, whereby Kôttbullar (Swedish meatballs) in Malmo are indistinguishable from those found on IKEA's steamtable in Bratislava. Philippe Echenard, project manager for McDonald's Slovakia, calls it "an easy concept. When you go [to McDonald's] in Bratislava, in New York, in Geneva or in Paris, you know what you're going to find," he said. Both IKEA and McDonald's, however, have found their "profile" difficult to maintain in Slovakia.

Scaling down

At IKEA Restaurant in Bratislava, managers have also found it difficult to provide the Swedish company's usual wide range of high-quality, inexpensive dishes at prices Slovak consumers can afford. Marek Boda, a manager at IKEA Restaurant in Bratislava, said he has found it necessary to "cut down on the designated range" of meals and favor items like meatballs, french fries and salads. "Profit margins have required" that some Swedish homemade dishes not be offered, as in IKEA stores in Austria, he added.

Robbie Norton, the manager of Bratislava's Dubliner Irish Pub, claims on the contrary to have had a relatively easy time bringing in foreign substances into Slovakia, namely the Irish favorite Guiness beer.

Without a rigid 'profile' to adhere to, Norton has defied what seems to be the odds for restaurant entrepreneurs.

However, setting up food service may prove tougher than tapping a pint of Guinness. Dubliner's kitchen comes on line in a month. "I've been so busy I haven't had time to think about it," Norton said.

Nurturing local producers

No restaurant venture can enjoy long-term high profit margins without domestic suppliers. But some are willing to take a hit to nurture local producers to churn out foodstuffs that match their quality standards. McDonald's, which currently imports all of its meat, french fries and buns, falls into this category.

But Echenard said with the size of McDonald's investment, the company simply cannot afford "in the beginning to have a local supplier." While saying that he is very satisfied with local producers, Echenard conceded that it is "very difficult to find a partner who is ready to ...keep [standards of] quality, because we want to have the same quality from the first of January to the 31st of December."

Boda also has mixed feelings about local suppliers. He agreed that it can be too expensive for a small bakery to produce a special line of buns exclusively for IKEA or McDonald's, but added that when he approached local outlets and said IKEA was "willing to pay extra money for good quality and flexibility," he was rebuffed. The problem, he intimated, may lie deeper than reluctance to take business risks; rather, Boda thinks that producers are not willing to experiment because "every change that happened in this country in the past brought something bad."

Government regulation

While local producers sometimes decide not to contribute, new changes brought up by Slovak governmental bodies make bringing in food products burdensome, franchisers said. Boda ticked off seven ministries, institutes and inspectorates that have to be cajoled into issuing documents before an import license for food can finally be procured (see related guide, this page).

The original of this precious licence, Boda said, must by law be kept on the restaurant premises, and be presented to the customs office by each truck that comes to the border.

"It's no secret that bureaucracy is very difficult," Norton said. "There is a lack of communication between bodies. It can be very annoying sometimes." Echenard said McDonald's has adapted to the circumstances by establishing a "distribution center" which takes care of certification and importing.

Inspectors also make the rounds to make sure restaurants are complying with policy. According to the Dubliner's bartender Daniel Danc, the pub was inspected four times in the first two and a half months by Ministry of Health inspectors, although inspections normally are held quarterly.

Echenard said he has no problem with inspections, but differs with what officials choose to inspect. For example, he mentioned a regulation governing the precise weights of cuts of meat served to the public, a measure he finds absurd: "How are you able to cut a piece of meat to 100 grams?" Echenard asked himself. "We are talking about another world. We need a free market."

Not to be outdone by its executive bodies, parliament has also contributed a sizzling chapter to the fire of business regulation. A law from January 1, 1996, requires that all imported products bear a label identifying the date of their manufacture, in addition to the "best before" notation. This means that special labels have to be designed for the Slovak market and laboriously applied by hand at IKEA.

"The new law was a real kick in the bottom" Boda said grimly. Danc recalls a visit from health ministry officials, during which it was proposed that the new labels be individually taped around the cap of each bottle so that they not be disturbed by openings and closings. "I think the regulations are changing at a very fast pace" said Norton soberly. "[But] I find them very strict [now]."

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