The Restaurant Scene in Cuba: Paladar La Guarida

By Mario Rodriguez Graniel, MBA’15.

For years, Cuba’s restaurant scene was dominated by lackluster, drab state-owned restaurants. However, recently, there has been a shift in the country’s culinary scene due to the increase in privately-owned restaurants, or paladares. Paladares, which are usually family-run restaurants in people’s homes, first appeared during the 1990s, when the fall of the Soviet Union and consequent economic crisis forced the Cuban government to make economic reforms including allowing ownership of private businesses. Unfortunately, due to stringent regulations put in place by the government regarding quotas on the amount and type of products offered, limits on the number of seats allowed (only 12), and strict labor hiring rules, only a few paladares survived.

In May 2011, in an effort to shift toward a more free market economy, President Raul Castro’s government announced a new reform plan allowing some state-owned businesses, such as barbershops or restaurants, to become private. Havana currently has almost 2,000 private restaurants, a drastic increase from 2010, when the state reported only 74 private restaurants in the country’s capital.

View of Old Havana from La Guarida

A best-in-class example of a successful cooperative in the restaurant industry is La Guarida, a leading paladar in Havana. Opened in July, 1996, La Guarida resides in a magnificent early 20th century building, which used to be the owners’ multifamily residence. While the restaurant received early recognition due to its portrayal in the Fresa y Chocolate movie, its success was hampered by the series of regulations imposed at the time. Limiting seating to 12 customers at a time and only allowing family-member hires influenced the business’ growth potential and its scalability. Therefore, the owner decided to move to Miami with his family in order to open a restaurant there instead.

Years later, when the government decided to loosen the regulation for private enterprises, the family decided to move back and invest in the business. The seating regulation now allows owners to have two licenses, permitting 50 customers at each sitting, and restaurant owners can now hire any employee without government interference. The restaurant has received numerous prizes and certifications and prides itself from offering the most elegant and highest-quality cuisine in Havana, which is reflected in it being fully booked for months and years at a time – mostly by foreigners given that locals cannot afford such a restaurant experience.

We had an incredible time when we visited the restaurant. We were hosted by the founder and enjoyed the most succulent meal we had in Cuba and maybe in general. You should definitely go enjoy both the food and the venue!

Cuba’s Entrepreneur

By Mario Rodriguez Graniel, MBA ’15

A vibrant, independent private sector is emerging in Cuba, following recent government reforms allowing private enterprises to develop more freely in the country. After decades of state dominance, more and more Cubans have opted to become entrepreneurs or join a startup as a way to replace or supplement the reduced, fixed income from government-related jobs. Bed and breakfasts, restaurants, barbershops, and service-related businesses in areas such as technology and construction are flourishing. The implications of this phenomenon on the development of a middle class in a socialist regime are both, substantial and exciting. However, while the progress is tangible, so are the challenges. After meeting with a few entrepreneurs during my academic visit to Havana in March as part of an international seminar at Columbia Business School, I learned first-hand about issues related to access to capital and burdensome taxation, which often prevent some of these operations from getting off the ground or growing into larger companies. Yet, these obstacles only fuel the innovative thinking and impetus of these budding entrepreneurs and their hopes for redefining a new Cuba.

During my visit to 02, a one-of-a-kind wellness center in Havana’s Nuevo Vedado neighborhood, I had the opportunity to learn about the drastic tax structures connected to revenues and number of employees, which can surmount to tax rates of 150% for larger businesses. In response, entrepreneurs like the twin sisters Omara and Odalys, founders of 02,have developed an effective model in which they lease the different rooms of the center to their employees, which creates many small separate tax-paying entities operating under the same space. The hairdresser leases the salon and so does the spinning instructor and the spa’s masseuse with their respective areas. Another inspiring story was related to their launch marketing strategy. Given the low penetration of Internet access and bans for street advertising of private enterprises, the twins liaised with their neighborhood’s mailman and attached a small flier to different pieces of mails that would be delivered that day.

02 Spa Services
02 Spa Services
The 02 Gardens are rented for events and operate as a separate business entity
The 02 Gardens are rented for events and operate as a separate business entity

It remains to be seen whether the Cuban government will continue to move towards greater liberalization of new businesses and regulations that support not only their existence but also their expansion and partnership with state entities, in what could become a successful “hybrid” market economy. What is undeniable is the exceptional hope, enthusiasm, and creativity with which these entrepreneurs rise and fight for their business ideas and the wellbeing of their families – lessons that young entrepreneurs in countries, such as the US, which facilitate the opening of new businesses, should adopt and apply.