Business - French Bistros file record bankruptcies as Le Big Mac Reigns

Ladka Bauerova

Oct. 21 (Bloomberg) -- It's lunchtime in Paris and the packed restaurant has neither checkered tablecloths nor carafes of red wine. It's a McDonald's and the French are lovin' it.

While rising prices and record low consumer confidence drive the French to throw their culinary pride to the wind and embrace le Big Mac, traditional bistros are hurting. About 3,000 independent French restaurants filed for bankruptcy in the first half, a record 27 percent higher than the same period a year earlier, according to Paris-based statistics office Insee.

``A hamburger patty and fries in a bistro around the corner from my office costs almost twice as much,'' said Alexandre Cavanel, a 27-year-old computer programmer, as he tucked into his 8 euro ($10.70) double cheeseburger menu meal with colleagues at a McDonald's in Paris's Opera district.

McDonald's, accused by Jose Bove -- the activist farmer who ran last year for president -- of serving ``malbouffe,'' or junk food, said French revenue will increase 12 percent this year. In contrast, the fate of traditional French restaurants may worsen as a slumping economy drives more people to swap offerings such as duck dish ``confit de canard'' and ``blanquette'' of veal for hamburgers and fries, economists said.

France may have slipped into its first recession in more than 15 years in the third quarter, Insee said Oct. 3. Consumer spending will stagnate for the rest of 2008 as employment and the real estate market deteriorate and credit for new investment dries up, the statistics office said.

``Clearly, the current economic environment speaks in favor of cheaper products,'' said Dominique Barbet, an economist at BNP Paribas SA in Paris.

Wine for Lunch

That trend is evident also in other industries. Retailers including Carrefour SA and Casino Guichard-Perrachon SA report consumers buying unbranded products and switching from supermarkets to discount chains. Groupe Danone SA, the maker of Activia yogurt, last month introduced cheaper products to offer shoppers alternatives.

Many French restaurateurs and cafe owners are concerned that rising prices and growing unemployment together with the global financial crisis will stop people from dining out.

``Fewer people eat in restaurants now, and when they do come they don't order like before,'' said Clara Vega, a manager of La Cote d'Azur cafe on Rue Quatre Septembre in central Paris. ``They used to order an appetizer and a meat dish with a glass of wine for lunch. Now they buy a crocque and wash it down with a carafe of tap water.''

A crocque is a popular French snack similar to a grilled cheese sandwich. A steak with fries costs 13.70 euros while a crocque goes for 5.20 euros in La Cote d'Azur.

Rising Bankruptcies

Falling consumer spending and a ban on smoking in cafes have eroded business, resulting in more restaurant bankruptcies in the wealthiest Paris neighborhoods as well as in less affluent ones, court records show.

``L'Instant de Plaisir,'' in the 12th arrondissement, met with the same fate as ``Manhattan'' on the Champs Elysees and ``Le Consul II'' on the opulent Avenue Friedland in the past six months, according to the Tribunal de Commerce.

``We are disturbed by the rise in bankruptcy filings and fear the consequences for our businesses,'' Union des Metiers et des Industries de l'Hotelerie, a hotel and restaurant association, said in a Sept. 25 press release. ``Restaurants, particularly cafes in rural areas, have seen a brutal decline in their business.''

Meanwhile, France has cemented its position as the biggest earner outside the U.S. for McDonald's Corp., accounting for about 13 percent of total sales.

Cheap Meals

``Logically, people are switching from restaurants to fast food,'' said BNP's Barbet.

McDonald's, which is based in Oak Brook, Illinois, and opened its first French restaurant in Strasbourg in 1979, is doing better than ever. Sales at the company's 1,115 outlets in France will rise this year to a record 3.35 billion euros, McDonald's said this month. The company is opening 29 new restaurants in France this year.

``In the short term, we will probably benefit from the current economic crisis,'' Jean-Pierre Petit, chief executive officer of McDonald's France and southern Europe, said in an interview. ``Offering food at accessible prices and correcting our negative image helped us win over clients who used to eat only in traditional French restaurants.''

Still, even McDonald's is wary of the economic morass.

``It's never good to have an economic crisis because sooner or later it will catch up with you,'' Petit said. ``That's why we aren't just offering cheap meals. We are also offering a wider selection of products.''

`Malbouffe'

Since becoming CEO of McDonald's France in 2003, Petit has added salads, Danone yogurts and bite-sized snacks to the menu, overhauled interior design and opened about 30 outlets a year. While there are fewer McDonald's outlets in France than in Germany, they generate more revenue per customer, he said.

At the McDonald's Opera restaurant, Cavanel's friend Jerome, also a computer programmer, said he enjoys eating at McDonald's even though it makes him feel a little guilty.

``I know it's malbouffe, but malbouffe can be good every now and then,'' he said, declining to give his surname. ``We eat differently from the Americans. We eat less, and only at meal times. And we can't afford a proper lunch every day.''