Unfavourable economic conditions and the government's tougher rules on migrant workers are major reasons forcing about 2,300 small restaurants nationwide to close this year, according to the Restaurant Business Trade Association (RBTA).
The situation is worse than last year when some 1,000 Thai-owned restaurants, all non-chain businesses, shuttered their shops as a result of the weak economy.
RBTA president Ladda Sampawthong said amid weak sentiment, people are opting to cook their own meals and cut down on dining out.
More importantly, the rapid growth of restaurant chains have impacted local food shops adversely, she said.
An RBTA found about 1,300 foreign-owned restaurants went out of business in the first half this year and the number could reach 2,300 by end of this year as the economy has yet to recover fully.
She said that the new decree on foreign labour, which introduces strong penalties on illegal workers has also resulted in closures despite enforcement being deferred to January next year.
"Over 70% of the workforce in local restaurants are from neighbouring countries," said Mrs Ladda.
The government issued a new labour decree in June, which resulted in a large number of foreign workers panicking and returned to Cambodia, Myanmar and Laos for fear of punishment as most of them did not comply with Thai labour laws.
According to Mrs Ladda, staff represents about 20% of total operation costs for a restaurant. She believes the new decree will mean higher costs to businesses due to expenses involved in the labour registration processes.
RBTA reports that of those 1,300 restaurants that went out of business in the first half this year, 700 shops were in the Northeast, 300 were in the North, and the rest from other areas.
There are over 200,000 restaurants operating in Thailand.
The Kasikorn Research Center says that the restaurant business in Thailand was worth 382-385 billion baht in 2016, a 1.9-2.7% rise over the year before.
Of the total 382-385 billion baht, restaurant chains were worth 114-116 billion baht and small and medium restaurants comprised the remaining 268-269 billion baht.
Sales of small and medium restaurants last year expanded by 1.1-1.5% year-on-year, lower than restaurant chains, which showed 3.6-5.5% growth.
"The competition in Thailand's restaurant business is intensifying every year thanks to new foreign brands that continue to set up chains, while existing brands keep expanding their outlets," Mrs Ladda said.
Small and medium-size Thai-owned restaurant operators formed the RBTA in February last year, hoping the body would assist them in dealing with obstacles.
The association has about 50,000 members.
Mrs Ladda said that the most urgent problem is labour shortage and the association will act as a neutral body to help recruit foreign workers legally, especially from Myanmar.
The association plans to sign a memorandum of understanding with the Islamic Bank of Thailand for the bank to provide financial support to restaurant owners.