Weak consumer spending power and rising operational expenses are forcing restaurants to adopt strict cost controls or even downsize.
In 2024, the Thai restaurant industry faced various challenges including sluggish consumer spending and increased costs, said Sorathep Rojpotjanaruch, head of the Restaurant Business Club.
Average raw material costs surged by up to 20% in 2024.
While these raw material costs are currently stable, Mr Sorathep said the industry needs to monitor hot season weather conditions, as higher temperatures could drive up the price of vegetables.
"This year presents greater challenges than last year, particularly due to rising labour costs and higher electricity prices," he said.
The government raised the daily minimum wage on Jan 1, with the hike ranging from 7 to 55 baht.
Mr Sorathep said consumer spending power is likely to remain weak this year, prompting both small and large chain restaurants to tighten their cost controls.
Chain restaurants may adopt a new model featuring smaller dining areas, smaller kitchens, fewer staff and reduced services, said Mr Sorathep.
The operators are likely to trim their workforce, leading to reduced services during meal times, he said.
This new model may expand in urban areas, both in Bangkok and the provinces, said Mr Sorathep.
This trend might intensify the challenges faced by small and medium-sized restaurant operators who are already dealing with rising costs, he said.
Mr Sorathep has observed this trend emerged since the fourth quarter of last year and expects it to continue.
He advised small restaurant owners to focus on cost management, which could involve renegotiating rental agreements with landlords, reassessing raw material suppliers, and staff reductions.
"They must financially check themselves, otherwise they may find it hard to compete with larger operators," said Mr Sorathep.
Last year, SET-listed Minor International Plc launched The Steak & More, positioning it as an affordable steakhouse, targeting a wider segment of the market.
Dillip Rajakarier, group chief executive of Minor International, said this initiative aims to increase customer visits to the company's restaurants.
The Steak & More could utilise the company's supply chain and cater to wider numbers of customers, he added.
He said that with the current economic conditions, some customers are opting for more affordable options.
This initiative will provide customers with more choices within the brand, he noted.
"We are not aiming to go cheap, we are focusing on maintaining our brand at an affordable premium level," Mr Rajakarier insisted.
Despite facing various headwinds, the industry's street food segment is expected to grow this year, driven by the ongoing recovery of Thailand's tourism sector, said Mr Sorathep.
He predicted 5% growth for the industry this year.