Thursday, May 5, 2011

Location, location, location...

Photo: Felipe Leon / NBC News
Rolando Hernandez stands in the middle
of his restaurant, Las Margaritas, last night.

Hard lessons in capitalism for Cuba's fledging restauranteurs
By Mary Murray, NBC News

HAVANA — When Cuba’s Communist government recently eased restrictions on “mom and pop” businesses, Rolando Hernandez decided to pursue his lifelong dream of starting a small restaurant.

Regrettably, he never learned the business axiom “location is everything.”

Hernandez sunk his life savings into the business, even selling some of his personal belongings such as his computer, TV and his living room furniture to raise the start-up capital. In February, the 46-year-old waiter quit his job and opened Las Margaritas, a family-style restaurant in Habana del Este, a working-class neighborhood in Havana where Hernandez has lived most of his life.

The restaurant is one of the few operating in Habana del Este, so Hernandez thought that alone would work in his favor.

“I imagined business so brisk that no one here would have the time to sit down,” he said.

Unfortunately, sitting down is basically what Hernandez’s employees find themselves doing most nights. Business perks up a bit on Saturday and Sunday.

The restaurant boasts an intimate dining room, pleasant and tastefully decorated, with a large, clean kitchen full of experienced staff. Like Hernandez, everyone else working at Las Margaritas recently quit their jobs working in state-run hotels to try their luck in Cuba’s private sector. The few customers who have been to the restaurant report that the food is good and the portions are generous.

Hard lessons in capitalism
So what, Hernandez asks, is he doing wrong?

When he has a little more money, he plans to put a sign up outside the building. At this point only a psychic or someone with a great sense of smell could venture to guess there was a restaurant behind his wooden doors.

As far as advertising goes, there isn’t any. Even if he had the money, there are no independent newspapers or radio stations in Cuba where a restaurant like Las Margaritas could place an ad. So, Hernandez relies mostly on word of mouth.

The restaurant has also only been open for two months – admittedly a very short period of time for a startup to see a profit. Still, Hernandez said he expected to recover his initial investment by now.

Possibly the biggest challenge to Las Margaritas’ success is its location. Habana del Este lies east of Havana’s harbor, miles from the city’s tourist zones, and Las Margaritas is squeezed in between square Soviet-style apartment buildings, constructed after Fidel Castro came to power in 1959.

No money to go out
The neighborhood is home to working people like Lidia Nunez, who scrimps by on a nurse’s salary. For most, it takes a special occasion for a family to spend their hard-earned wages eating out.

Like a daughter turning 14. Nunez said she saved for two months to have the money to splurge on a modestly priced birthday meal.

That takes a certain kind of sacrifice, but you hear stories like that all the time in Cuba.

For the last 20 years, the loudest complaint many Cubans have had is the inadequacy of their paychecks. On the books, people are earning more than ever before, but in reality, the Cuban peso buys less than it did two decades ago.

After the Cuba economy went into a free fall, from 1989 to 1993, the level of what’s called “real” wages collapsed – those are wages adjusted to inflation rates. Research by Cuban economist Pavel Vida found that while real wage levels began to steadily increase after 1994, people continued to seriously struggle to make ends meet.

Today’s real incomes, Pavel estimates, hover just around a quarter of their 1980s levels – making it all the more astonishing that a single mom like Nunez would ever be able to save enough to treat her daughter to a birthday meal.

Nunez calls that resourcefulness.

The same kind of resourcefulness that sent Hernandez back to his business plan when business was too slow for his liking.

Now, in addition to offering formal dining, Las Margaritas has a scaled down take-out menu more in line with what his customers may be able to afford.

“Las Margaritas could turn out to be my dream or maybe my nightmare,” Hernandez says with a shrugs. “Only time will tell.”

© 2010 msnbc.com

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