Greedy landlords eat up operators' profit margins
'We were like the last men standing,' Anna Adasiewicz, managing director of FINDS restaurant, says.
Founded by the late actress Colette Koo, FINDS had a huge following and had outlived the closure of several other businesses in LKF Tower in Central.
But after six years in the building, the Nordic restaurant was forced to shut its own doors and move because of a rent rise.
'In Hong Kong, you have no idea if your rent will be increased by 5 per cent, 50 per cent or 500 per cent,' Adasiewicz says.
She compares the lease renewal process to a land auction, with landlords often asking tenants to propose a number rather than vice versa. 'So you are basically going in blind. You never know what your competitors will bid.'
FINDS is just one example of a restaurant that was ousted because the landlord got a better offer. Despite being one of the building's oldest tenants, Adasiewicz's negotiations were futile.
'We found out later that the landlord had already signed up a new tenant six months before without telling us. So all our song and dance was for nothing.'
With the relentless rise in rents across Central, Adasiewicz turned her gaze towards Kowloon. She reconnected with a contact at the GR8 Leisure Concept company and within six weeks reopened FINDS in their Luxe Manor boutique hotel. It was not long before GR8 became the restaurant's majority shareholder.
Today FINDS is thriving in its Tsim Sha Tsui location, but Adasiewicz admits it took time for customers to adjust. 'It was like starting from scratch,' she says. 'We needed to convey the message to the public that we were still the same people behind the same business.'
Moreover, the costs of relocation were substantial and included restoration of the LFK site to its previous condition.
'However, since we moved, our cost structure has improved,' she says. 'Before our rent was consuming a larger proportion of our income, now it's more balanced.' Adasiewicz says she was fortunate to find funds to relocate. With the property market becoming increasingly hostile, many operators do not have the same luxury.
But her biggest concern is the myopic approach of landlords looking to capitalise on the rent boom. 'I wish there were more of them with a long-term vision, actually working in a partnership with their tenants,' she says. 'I always feel sorry for people going into the restaurant industry with their own personal investment. It's a very tricky business.'