Money-Growing: Secrets of Outdoor Catering

“As it gets warmer many cafes and restaurants expand outdoors by adding extra dining spaces installed on a fenced territory in immediate proximity to the establishment. Such sidewalk cafes make it possible to increase the dining area and the number of seats,” says Sergei Lobkaryov, head of commercial real estate at MIAN-Nedvizhimost realty. Summer cafes help their owners to attract more visitors and boost publicity.

Open-Air Catering Restrictions

“Most street cafes are no independent establishments - they open at restaurants already operating on the site,” says deputy head of the Novy Gorod realty Alexander Geniyevsky. In summer of 2006, there will be 1,586 sidewalk cafes operating across the city, deputy chairman of the Moscow Consumer Market Department, Valentina Varfolomeyeva, has reported. 990 cafes will be launched by restaurants that are open all year round. 25 percent of summer cafes will provide children's playgrounds; 15% will be family-oriented.

“Summer cafes fall under provisions of the Russian Federation law on consumer rights protection, the RF law on general principles of self-government and public catering regulations, sanitary standards for public catering enterprises, charter documents and other legal acts,” says Alexander Skobkin, leading marketing analyst at Doki real estate agency. That list also comprises two decrees by the Moscow city hall. The city hall decree of Dec. 28, 2005, on measures to observe legal acts of the RF on government control over sale of alcohol, bans the sale of alcohol at autonomously operating summer cafes.

The second decree, of Apr. 25,2006, also imposes a number of restrictions on outdoor catering outlets. In line with that document, a summer caf? is a temporary catering outlet open from early April to early November, operating either at a permanent catering enterprise or independently, without registering title to land. The outlet must be dismantled after the season is over. Properties built of “brick, construction blocks and slabs” and plugged into underground engineering lines do not fall into that category, the decree reads.

The Letter of the Law

To open a summer caf_ its owner is required to gather a set of documents. Market operators advise filing an application in February, if a dining spot is to open in May. “Requirements set by local governments are quite harsh. To begin with, a summer caf_ must be situated at a certain distance from residential blocks. Secondly, the territory of a caf_ must be equipped with utilities, garbage cans toilets, and have entry driveways. Furthermore, entrepreneurs are to commission a sanitary checkup of the project and submit its results to the authorities, sign a deal for waste disposal and provide for illumination. Besides, they are to observe sanitary regulations, including noise restrictions,” says Sergei Lobkaryov.

Alexander Skobkin has reported that applicants are also required to obtain approval of what is called the project plan. “The project file includes a land certificate, issued by the district administration, a copy of the general urban development plan, a draft, a map of engineering equipment and technical specifications, a menu, etc.,” he says. “The project will have to be negotiated with the district officials, sanitary authorities, the communal department of the district administration, the commodity market committee, architectural authorities and other organizations,” he says. In Moscow, the body overseeing commodity markets is the Russian Consumer Rights Protection Inspectorate (Rospotrebnadzor).

Many market operators have reported that restaurant owners are also required to apply for having their future establishments included into what is referred to as a 'situational plan', which comprises all outdoor cafes across the city. That document is a list of all addresses of future outdoor diners, which enables the city hall to inform the public of the exact number of open-air catering outlets in advance. If a caf? is not included in the plan, the government will not sanction the project. Besides, the project must be examined and approved by the Moscow Architecture Committee. Finally, there is a greenery requirement, which may prove to be yet another stumbling block for an applicant. District authorities demand that each sidewalk caf? feature elements of greenery, for example, flowerpots.

Market operators report that quite often an owner of a mall or an amusement center, where the caf? is situated, rents an additional plot adjacent to the building, with a view to open a summer dining terrace. In this case, the caf? owner is not required to enter into a lease deal with the city government. Where a summer caf? occupies a municipally-owned plot, the parties sign a lease agreement.

For the Sake of Publicity

Complicated registration procedures aside, a summer caf? may prove a rewarding business, market experts believe. First and foremost, this pertains to outdoor dining areas at permanently operating establishments. “Opening an outdoor facility does not only expand the dining area thus increasing attendance but is, in the essence, a perfect ideal publicity stunt,” says Marina Markarova, managing director at Blackwood. “Quite often pedestrians feel like entering a caf? when they see people sitting at the tables, feel the atmosphere, perhaps, even, the pleasant aroma, and they get the impulse to take a seat for a while.”

“In summer, public catering establishments report lower takings, which fall by 30 to 40%, as people move to the countryside or go on vacation elsewhere. That is why a summer caf? launched at a continuously operating restaurant offers a good opportunity to ensure stable returns, especially since it is much more pleasant to have a snack and relax outdoors than indoors,” says deputy head of commercial real estate department at Miel-Nedvizhimost realty, Elina Zanina. “A summer caf? adds more dining spaces, increasing the number of seats by 25 to 30%, or even by 40 to 50%,” notes NAI Global's Vladimir Zhuravlyov. Restaurant owners often invite other companies to hold advertising campaigns at their outdoor cafes, says Sergei Lobkaryov. “Quite often seasonal cafes invite breweries to promote their beverages on the site,” he adds.

Making an Acquaintance

In addition to their obvious advertising advantages, outdoor dining areas help attract new visitors, some of which are quite likely to become patrons of the establishment after the summer is over. “Undoubtedly, a summer caf? at a busy location helps boost takings due to higher turnover of guests. But a summer spot also helps to solve the threshold problem when a potential visitor is reluctant to enter an unfamiliar establishment, for a summer caf? is an open format, you can see the staff, the public and feel the atmosphere at once,” says Yanis Zhukov, head of commercial real estate at RIGroup. “A visitor is more likely to enter an open summer terrace than an indoor restaurant.”

One more thing that contributes to awareness of the permanent restaurant is the fact that indoor and outdoor dining spaces have the same interior design. “In most cases a choice is made in favor of a design solution that conforms to the general concept of the restaurant,” says Vladimir Zhurvalyov. “The number of dining seats and layout of tables outdoors also corresponds to the format of the establishment. To deal with the shortage of workforce restaurant owners either introduce extra shifts or hire seasonal waters.”

In summer months outdoor dining seats are more popular than indoor tables. “When the weather is warm but not hot visitors prefer outdoor tables and if all tables are occupied they move on to find seats in other establishments, instead of going indoors,” says Marina Markarava. “Of course, I am not talking here of loyal patrons.” “Table outdoors are popular with people seeking a relaxed atmosphere, which is not always possible inside where tables are laid, and you feel obliged to observe the rules of etiquette, whether you want it or not,” Alexander Skobkin adds.

In the summer of 2006, over 600 outdoor cafes will be operating in central Moscow, according to a Miel report. With competition that strong, caf? owners resort to original design solutions, seeking to attract more visitors. “Especially attractive are fenced summer cafes, fully covered with an awning, masterfully decorated with plants and flowerpots,” says Elina Zanina. “A caf? may be decorated in country style, for example, what matters is that the interior design should be in harmony with the menu.” Quite often, caf? owners install gas heaters outdoors and provide visitors with warm rug in the evenings, Marina Markarova says. Visitors at Gogol Caf? in Stoleshnikov Side-street are allowed to use rugs for free.

“Of course, original design solutions and a beautiful view attract more visitors. The choice of dishes offered and the cost of snacks and beverages available, too, play an important role,” says Yanis Zhukov. As an example, he cites a project by RIGroup in Sergiyev Posad. In July, the company plans to open the Torgovyye Ryady market in Sergiyev Pasad. The project will feature a summer caf? with a view of the Troitse-Sergiyeva Lavra.

Another example of a successfully located project is the summer terrace at Fasolka caf? (formerly known as Ogorod) where guests may enjoy a view of the Moscow State University Botanic Garden and take a stroll through the park with exotic plants.

Success Factors

Location is the key to success and profitability of any real estate project. “The rate of return on an open-air catering project depends chiefly on the environment. There is a restaurant on Chistyye Prudy (Clean Ponds), featuring a waterside verandah. Of course, dining there is a pleasure,” says Alexander Geniyevsky. “But it hardly makes any sense to launch a caf? on a busy street.”

Marina Markarova believes that “if a prestigious indoor restaurant is situated on the Garden Ring, it is unlikely that its outdoor dining area will be popular, given heavy traffic, noise and gas pollution.” “That is why it is better to open cafes at the restaurants located in quiet Moscow side-streets, in courtyards or pedestrian areas,” she adds. In Moscow, there are several main “summer zones”, she says. Those are Kamergersky Pereulok (Side-street), operating over 10 outdoor restaurants, the Hermitage Garden and a restaurant zone in Starovagankovsky Side-street. “Open-air cafes in recreation zones, in a park or on the bank of a waterway are especially popular with city-dwellers,” Yanis Zhukov adds.

The number of seats is another factor that matters. “The number of seats is restricted through the size of the area reserved for the purpose, e.g. a sidewalk, and usually stands at around 30,” says Elina Zanina. “Outdoor dining area may help increase proceeds by 20 to 30%,” says Alexander Skobkin.

Experts report that restaurant owners may earn up to 100,000 rubles per week pro table, provided an average bill per guest is 500 rubles. Thus, a summer verandah with 10 tables is likely to add $150,000 to overall monthly earnings. Net profit in this case is estimated at $45,000 on average, as the lion's share of proceeds is usually re-invested, experts say.

Who Opens Open-Air Cafes?

“Sidewalk cafes fall into a great variety of categories, ranging from mobile cafes on wheels selling fried sausages to upscale restaurants,” says Alexander Geniyevsky. “The interior design of those establishments corresponds to their status; some offer a special summer menu, most hire waiters for servicing the outdoor area,” Marina Markarova adds.

Outdoor dining places fall into three categories, she says. The first category comprises summer verandahs operating at restaurants, most of which have their own courtyard. As an example she cites the Japanese-themed Dzhusto Caf?, not far from Tretyakov Gallery, and the Dacha caf?-club.

“Cozy cafes are to be found near the Chaika swimming pool on Ostozhenka Street, for example the Oriental-style restaurant Oranzhereya,” Marina Markarova says. The second group, according to Markarova, are sidewalk cafes operating on the premises of indoor restaurants, whose owners, instead of expanding the dining space, transform existing facilities into open-air dining rooms by removing glass panes from the walls. An example is the Cotton caf? on Pushkin Square. “The latest fashionable trend is summer cafes on the roofs. Such verandahs are to be found on Lubyanka, e.g. the Loft caf?, at Nautilus shopping center. Dining spaces on the roof deck are available also at Pushkin Caf? and Zhyoltoye More restaurant on Bolshaya Polyanka, she adds.

“Sidewalk cafes are most common at fast-food outlets, such as McDonald's or Elki-Palki, as well as pubs and pizzerias,” says Sergei Lobkaryov. “Open-air verandahs are also to be found at more expensive restaurants.” But, despite their diversity, “over 80 percent of sidewalk dining areas are operated by moderately-priced restaurants,” says Vladimir Zhuravlyov. “Thus, the owners of small bars in commuter areas and large caf? chains (Coffee House, Shokoladnitsa, Kruzhka, etc.) seek to increase the number of seats.” More expensive restaurants operate outdoor dining areas on the roof or in closed courtyards, he adds.