Under the Blows of Iran War, Plates Serve Up Defiance

For the past two months, the armed conflict initiated by the United States and Israel against Iran has complicated and increased the cost of operating establishments in the hospitality industry. In the kitchens, professionals are adapting, fighting back, and searching for new, makeshift solutions.

© Saifee Art / Unsplash

The closure of the Strait of Hormuz has caused oil prices to skyrocket and, through a domino effect, the prices of energy, maritime freight, and air transport. This situation is unevenly impacting the business performance of the hospitality sector by inflating supplier bills as well as the cost of raw materials. To mitigate the rise in operating costs, some restaurant chains have had to reduce their staff, inventory, and menus.

From the Middle East to Europe. In the United Arab Emirates (UAE), which imports more than 80% of its food, the war is disrupting Dubai's restaurants, Reuters reports. These thriving pillars of leisure and tourism are located just 200 km as the crow flies from the areas of military strikes. Foodservice operators in the UAE are experiencing an average 27% drop in demand compared to last year, according to a Juniper Strategy/Global Restaurant Investment Forum survey representing four hundred establishments.

In France, over 80% of professionals surveyed reported a negative impact on their business, with nearly 63% considering it significant and very impactful, according to the Union of Trades and Industries in the Hotel and Catering Sector (UMIH). This is compounded by the double blow of increased fuel costs, which are impacting travel and consequently, customers' spending outside the home. According to the UMIH survey, 62% of professionals are also seeing a slowdown in bookings as the summer season approaches.

Financially, food service entrepreneurs are not all competing on a level playing field. Some establishments are demonstrating greater resilience, while others are deploying contingency strategies, even within large fast-food chains. "The rapid rise in gas prices has strained the budgets of low-income consumers, who make up our company's core customer base," acknowledged Michael Skipworth, CEO of Wingstop , on Wednesday, adding that the chicken wing specialist was working to attract more higher-income customers.

At burrito giant Chipotle , while sales slowed in March when the conflict with Iran erupted, they rebounded in April, CEO Scott Boatwright said Wednesday. The Mexican food chain will raise its prices by about 1.5% in the second quarter, following an increase of about 1% in the first three months. The conflict with Iran could obviously delay restaurant openings in the Middle East, but the region has potential for "hundreds" of new locations, the CEO added.

Elsewhere, in more modest kitchens or behind more sophisticated stoves, some restaurateurs do not touch the price but their chef adapts the menu, turning to regional or more accessible products.

New recipes, new formats, new targeted promotions. Customer traffic is down, and creative ways to address this are needed. Clearly, perishable products imported from distant regions are a luxury. Menus would naturally gravitate towards more locally sourced ingredients.

Crises serve as stark reminders, sometimes painfully reviving pre-existing structural challenges in the foodservice industry. Excessive fixed costs, over-reliance on tourism, and fragile supply chains force difficult decisions.