5 February 2020

Running your food business! But where to get the money from?

GastroFinanz offers financial support for independent restaurateurs

GastroFinanz is METRO’s latest hospitality service with the aim to support gastronomes with quick and easy access to money. In partnership with auxmonex and iwoca, METRO is testing funding solutions where credit requests up to €100.000 can be granted via an online service.

An interview with Bianca Maley and Micheal Zyber

There’s a lot of talk about promoting entrepreneurship. But in the food service industry in particular, financing is viewed as extremely difficult. What’s behind this, in your opinion?

Bianca: Restaurateurs are primarily small entrepreneurs and they face enormous economic challenges. In terms of financing, it already starts during the start-up phase when they wonder: where will I get my seed capital? And then it continues during day-to-day operations. When you run into financial difficulties, who helps you out? In the food service industry, these are things like: the combi steamer is out of order and needs to be replaced quickly to keep the business running. Where can I get €5,000 to €10,000 at short notice to replace this appliance?

This requires financial products tailored to the food service industry, but which until now have not been offered by established players like banks because restaurant owners are not part of their core target group. And this is what makes financing so difficult, especially for restaurateurs.

On top of that, the 2008 financial crisis was without a doubt one of the reasons why the regulation of financial products has become more stringent. With the introduction of Basel III in particular, the financing situation for small borrowers has become more difficult. But we also see – and this is a positive aspect of regulation – that there can be regulation that also allows for deregulation. One such example is the recently enacted PSD2, the Payment Services Directive 2, which paves the way for sweeping changes in the banking sector. We are confident that new solutions can be developed to provide independent restaurateurs with better financial support in the future.

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We are confident that new solutions can be developed to provide independent restaurateurs with better financial support in the future.

Bianca Maley, Head of Business Building & Communications GastroFinanz

But there are also state-sponsored financing options, such as a loan from the KfW development bank. What makes you think that’s not enough, Michael?

Michael: Things move quickly in the food service industry and not everything can be anticipated, but as a business owner I have to be prepared to go into action: I receive a request at short notice for a catering event and have to pay for goods and personnel in advance; a kitchen appliance malfunctions and I need an immediate replacement or I won’t be able to keep the business up and running; or the month simply didn’t go so well, but I still have ongoing overhead costs that I have to cover. We intend to support our customers in situations that require short-term, flexible financial solutions with no red tape. This is an area where we can see that the existing offers are not yet specifically tailored to the needs of our customers.

And how does METRO’s role as a wholesaler fit into all of this?

Michael: First, there has always been a close connection between retail and finance, which is why we would like to integrate our financing solutions into the existing sales processes in the stores and the online business as a means of simplifying things for our customers. Second, we see METRO not just as a wholesaler that simply meets the demand for goods, but increasingly as a partner that strives to provide solutions for the food service industry. METRO is adopting a new strategic approach with ‘Wholesale 360’, and with GastroFinanz we intend to add financial services to our new range of offers.

We’ll start out with our financing offer. But over the medium term it’s our goal to support restaurant owners in achieving economic success by providing them with a tool that makes it easier for them to manage their businesses. This could be, for example, a simple overview of their current financial status, an estimate of upcoming tax payments or an assessment of potential savings in areas such as energy, insurance and telecommunications.

And what exactly distinguishes GastroFinanz from other financing services?

Michael: GastroFinanz is precisely tailored to the food service industry. We at METRO know the industry and customer needs like no one else in the market, and we enjoy a reputation as a reliable business partner thanks to our long-standing business relationships. And let’s not forget: we also have access to our customers. Through our established sales channels, including our stores, sales force, online channels and customer newsletters, we have an opportunity to inspire as many customers as possible with our range of products and services.

So restaurateurs have much better access to loans through GastroFinanz than through a bank. What’s the process behind this?

Michael: It’s basically very straightforward: they go to the gastrofinanz.de website and, after a few clicks, customers will be forwarded to a partner website, where they will receive a custom offer from one of our partners. But from late March, the credit application process will be directly handled by gastrofinanz.de. Customers will go through a simple, red tape-free process that takes about 30 minutes. Afterwards, they’ll receive an immediate response that indicates whether a loan has been granted or not. If the response is positive, the money will be transferred to their account within 24 hours. So it’s actually very simple and fits into each of our customers’ busy schedules.

We intend to support our customers in situations that require short-term, flexible financial solutions with no red tape. This is an area where we can see that the existing offers are not yet specifically tailored to the needs of our customers.

Michael Zyber, Director GastroFinanz

Sounds simple and the restaurateurs must be delighted. You’ve mentioned it earlier: METRO has many years of HoReCa expertise in the traditional retail business. How can this help with the granting of loans?

Michael: We want to adapt the products that already exist today so that they better meet the needs of our customers. Urgency, flexibility, the amount of money involved and language – these are soft factors that we can contribute to the process based on our knowledge of the industry. Furthermore, when restaurateurs go to a bank or apply for a loan somewhere else, they are often new customers. That means the financial institutions don’t know them at first. For us, these are usually existing customers with whom we have maintained long-standing business relationships. We’re working on integrating our customer information into the lending process for the benefit of our customers, so that as many restaurateurs as possible have access to liquidity that they wouldn’t obtain elsewhere.

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We’ve also talked about regulation and related policies. In conclusion, if you had 3 wishes that you could address to politicians, what would they be?

Bianca: During the course of our product development, we’ve had hundreds of discussions with restaurateurs in which it was apparent that independent entrepreneurs in the sector feel somewhat neglected by the government. This also has to do with the extremely fragmented nature of the hospitality sector. It’s definitely quite difficult to find a uniform solution for such a highly fragmented target group or to establish regulations for them. On the other hand, we shouldn’t forget that these small and medium-sized independent businesses, our core target group, are also an important pillar of society. So our wish to the politicians would be, first and foremost, to raise awareness of the actual problems and challenges facing the hospitality sector. In addition, it would certainly be worthwhile to consider, in direct discussions with restaurateurs and similar groups, how we can make a more unified effort to advocate the interests of the sector – also with an eye to ensuring a diversity of tastes in future.

Basel III

With Basel III, the largest economies (G20) reacted to the global financial crisis in 2007 and 2008. The regulations under Basel III provide stricter regulation of the banks and were first published in 2010. In the EU, they came into force in the form of a new equity capital directive in 2014. Basel III aims to create a comprehensive protection mechanism, which ensures security in times of crisis. Furthermore, financial support from governments for banks become unnecessary. The new regulation means more protection for consumers. The taxpayer shall not be responsible for rescuing the banks in times of crisis, just as little as the public institutions.

PSD2

As of January 13, 2018, the new PSD2 (Payment Services Directive 2) was implemented in the national law of Germany. The PSD2 is an EU directive for the regulation of payment services and payment service providers, with the aim to increase security in payment transactions, strengthen consumer protection, promote innovation and increase competition in the market. For consumers, PSD2 means more security when transferring payment information via online transactions. For trade, the PSD2 means more choice among providers of online payment methods. Merchants can offer their customers a wider range of payment methods when shopping online.

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