COVID-19 | The restaurants will take time to turn on the lights

Arun Janardhan

While the spread of COVID-19 is threatening almost all businesses and industries globally, the food and beverage one would be among the top of that list.

Irrespective of when life crawls back to normalcy — or our version of it based on past experience — dining out is likely to be the last to get back on its feet, because, at its core, this is not an ‘essential service’.

Since restaurants cannot function without people working in close proximity to each other, many hands touching the same things and customers walking in and out, the health risks arising out of this are high.

Moreover, hygiene now has a different connotation to before. It’s not just about the kitchen anymore; but brings into question the clean practices of the whole supply chain, including the chefs, kitchen assistants, vendors, distributors, loaders and transporters, all the way to the person who plucks the basil leaves in a farm.

The restaurant industry in India, by most accounts, has over 7 million employees, one-third of it in organised restaurants. The food services industry, estimated at about $60 billion (or approximately Rs 4 lakh-crore), till before the shutdown, was projected to grow at a compound annual growth rate (CAGR) of 9-10 percent over the next few years to reach Rs 5.5 lakh-crore by 2022. Mumbai and Delhi alone contribute to 22 percent of the market, according to the report, Indian Food Services Industry: Engine for Economic Growth & Employment, done by Technopak for the FICCI.

However, what happens in a post-COVID-19 world?

Already, by mid-March, when restaurants began shutting shop in India, their business had fallen by over 50 percent (according to some estimates, about 80 percent of restaurants in the organised sector die in under three years anyway). Some will not survive the lockdown — the popular Le 15 cafe in Colaba, for example, has announced its closing down.

With the costs of staff salaries, high rentals (especially in a city like Mumbai), utilities, licences, taxes and supplies etc. this is a high bleeding business. Even a well-regarded, celebrated restaurateur like Atul Kochhar had to close down two restaurants at the Bandra Kurla Complex (BKC) in just three years — an indication of how tough the business is under normal circumstances.

Four out of every 10 restaurants are likely to shut post-COVID-19 in the absence of a government bailout and the broader impact will be even more severe. The report quoted a National Restaurant Association (NRAI) of India estimate of a nearly 70 percent fall in food delivery business. The bigger the restaurant chain, the greater will be the repercussions, says Narayan Poojari, who runs 18 outlets of the fast food joint Shiv Sagar in Mumbai, Pune and Mangaluru.

Dining out will take long to recover post-lockdown also because spending will be low in the wake of salary and job cuts. While Pojari’s chains may recover somewhat because the Udipi-style of vegetarian eateries for the masses follow a low-cost model, higher-end ones may not bounce back as easily.

Going forward, technology, hygiene and safety would be the top drivers of changes and better-known brands would have a better chance to emerge out of the crisis alive. The entire business model will need to change to account for lower sales. If that doesn’t happen, even the restaurants that survive this lockdown may not be able to reopen once the lockdown ends, says Karan Kapur, executive director of K Hospitality Corp that runs brands such as Copper Chimney, The Irish House, among others. No one can be expected to pay rent for a restaurant that has to operate at 50 percent capacity.

For starters, restaurants might have to get into the system of tracking the whole supply chain — from the moment someone plucks the cauliflower till it comes to the table to ensure accountability and safety norms.

Customer responses, like on social sites Zomato or Tripadvisor, might become more valuable — or, on the flipside, more damaging. Comments would no longer be just about the food and service — it would also be on how anti-virus effective an establishment is.

Eateries would need to build more space between tables, which would reduce the number of covers they have, thereby affecting their revenues. After the lockdown, over the next 18 months, restaurateurs foresee sales settling in between 40-60 percent of previous levels, based on distancing norms required.

Sanitizers, wet wipes etc., would become permanent features, maybe even replacing the customary bowl of anise at the exit. Menus, which pass through many hands, might change from the physical book to something more digital. The salt/pepper shaker and tub of ketchup might go, perhaps replaced with sachets. Customers may not be comfortable handing their credit card to someone else, maybe leading to bigger spending limits on contactless cards.

Perhaps that gent who eats his dosa with a fork may not end up as the butt of jokes because everyone is tired of washing hands now.