Post Lockdown Blues for Restaurants: Is it All Gloom and Doom?

Coronavirus has brought about a paradigm shift in the way we live. The way we greet people, the way we move around and the way we socialize have all changed.  Masks, social distancing, containment, and sanitization are the new hot topics in the virtual world.  The food and beverage business is one of the businesses which has come to a virtual standstill, and grave predictions are being made about its future. The scenario being painted is so scary that the restaurateurs, chefs, and F&B professionals are rightfully extremely worried about their future. Some that I have talked to have indicated that they are considering shifting to alternate professions. But is the scenario going to be that bad? Common sense tells me it may not be so.

Food is a basic need, a basic requirement for human beings. We eat four times a day, and as per estimates at least 60 minutes every day, or six percent of our active life is spent indulging a food.  Good food has always been a great motivator in a sizeable part of the population, and none of the rituals or celebrations are complete without a feast. Yes, there will be some changes in consumer behavior post-COVID, but it will be for a very limited period and we will bounce back very soon.

Street food places, local cafes, bakeries, and sweet shops will be the first to bounce back. While loitering around the streets during lockdown cannot be supported, a large number of Indians have demonstrated that behavior amply clearly, giving us an idea that a sizeable part of the population does not care too much about the virus. Once the street places open, most of them will flock there for their food, and though initially, the business will be a bit lower than the pre-COVID days I suspect it will reach there in a couple of months. Furthermore, if the support (loan availability) that government promises to street vendors fructify at the grassroots level (usually they never reach the intended though), it will help alleviate the circumstances of many. And my guess is, just like the tea and paan shops, do not expect to see much social distancing in this segment for long. The low-end bars will also do good business in my opinion. 

The segment which will thrive once lockdown is relaxed is the takeaway and delivery.  In a city like Hyderabad, when the food delivery aggregators had been banned, I had been hearing dissatisfied rumblings from many of my friends regarding the non-availability of the ordering option. It has to be also noted that a significant number of young urban professionals love to order in food, and even things like tea, instead of cooking (or preparing) themselves. The COVID crisis would have changed their habits a bit, but the availability of easier options may bring them back in no time. Contactless delivery, nice hygienic packaging will be the USPs of many restaurants and aggregators, but even that will not matter with a large section of food lovers. In fact, young India sees COVID as a disease not affecting their age group too much (given the low death rate in the below-40 segment) and feels that the risks of ordering food home are almost the same as ordering groceries from the e-grocers, an activity almost the entire urban India is doing for the last couple of months. If someone wants to get afresh into the food business now, whatever may be the reason, a cloud kitchen with combos or DIY packs may provide good opportunities. QSR brands like McDonalds, KFC, etc may have an edge for takeaways and deliveries as there is a perception that they are more hygiene conscious. McDonalds is already shifting focus from dining to takeaway/delivery as per a recent report.

The pain, however, becomes much more as we move up the chain to casual and fine dining restaurants, as well as lounge bars and microbreweries. Unfortunately, there has been scant support from the government to the requirements of this sector. It is a fact that it will be quite a bit of time before the middle and upper-class families will feel safe to dine out together. The thought of not exposing the children and elders will play a large role. Big get-togethers will also be initially shunned. Wooing this segment will be tough despite promises of sanitized ingredients, contactless dining with digital menus, and payments. In fact, already the common opinion is that contactless dining is not a feasible idea. However, very slowly (maybe in late 2020) the situation will limp back to normal. Human beings are social animals by nature, and also seeing your friend or neighbor visiting restaurants will slowly entice you to do the same thing. The early adopters in this segment will again be young professionals with disposable income. It is clearly difficult to predict the extent of damage in this segment, the upper end of casual dining as well as fine dining places will bear the brunt of this crisis. 

Where does it leave the in-house dining restaurants in hotels? Their future will hinge on the comeback of the business and tourism sectors. A senior hotel executive was telling me that he expects the future hotel guests to eat much more in-house for some time. Buffets in the traditional form will be discouraged as people will not like to share the spoons and ladles. Specialty restaurants in large hotels may have a tougher time coming back, and many hotels may just operate the all-day dining restaurant. Though some hotels may succeed in weaning over a few new F&B clients due to their inherent spacious outlets – with built-in distancing and cleanliness, their success will depend mostly on the gradual rise in occupancy. Not a rosy picture here? I was hearing a top Marriott executive saying that their hotels in China bounced back to 30% occupancy within 3 months after COVID. I think that is not a bad start given the "fear-psychosis" around.

Many pundits are predicting 40-70% of restaurants will close down. One article talks about the revenues of organized sector restaurants going down by 50% this fiscal. Yes, quite a few will be affected. This is mainly due to the dynamics of the industry, the huge investments, fixed costs, and thin margins. The fat fee of the delivery partners and further investments for the safety of diners (supply side, kitchen as well as the storefront) will not make it easier either. Low volume for quite a few months after reopening will make the situation tough. So for highly leveraged restaurateurs bailing out may be the sensible option. Others will try to evolve into leaner avatars by significant cost-cutting. Renegotiating the rent with the landlord may not be a bad idea, given the fact that if the restaurant vacates now, he will also have difficulty in getting a tenant. The more tenacious will try to survive with a leaner version and it is also my belief that after eight to ten months we will see green shoots of many new players coming into the business. The misconception among many that F&B is an easy business to make money will aid the last point.

And where does it leave the F&B professionals? The need for manpower will shrink for the next few months, after which it will gradually pick up the pace again. Already, quite a few of my friends from the industry are turning themselves into another avatar planning cloud kitchens offering niche or different offerings. Some are moving away from the sector altogether. But most are steadfast in their beliefs that this is their "Karmabhoomi" and the bad times will pass soon.

The situation is definitely tough, but all is not lost. As humans, we have confronted bigger challenges and overcome them. I am sure my brethren in the food industry will finally sail through this calamity like champs. 

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