As food businesses in the country scramble to reconstruct and retrofit their operations to suit consumer demand for hygienic products & services, industry stalwarts throw light on the fate of the traditional brick and mortar eateries and alternatives for survival in the new normal
The hospitality industry, known to be one of the largest employers, is facing the brunt of the Covid-19 pandemic and the subsequent lockdown with the demand for the services of hotels and restaurants nosediving since March.
Recording minimal to no business in the past three months, the foodservice industry continues to struggle to get back to operations. Most restaurants have not been able to negotiate favourable rentals and hence have shut shop to never open again. Events & catering related F&B is another segment that has been virtually shut and shows no signs of revival for the next one year.
“We don’t know the extent of the problem, whether it’s going to take one or four months to restart. Things will take time to get back on track and given the current situation, restaurants have very little appetite to reopen only to lose even more money. Fixed high rentals, unavailability of staff and the soaring cost of raw ingredients are making the survival of the F&B industry tougher every passing day,” expressed Rohit Aggarwal, director, Lite Bite Foods.
Pawan Shahri, managing partner at Butterfly Fly, The Bigg Small Café + Bar, & Oi Kitchen and Bar, said that he personally doesn’t see things coming back to normal in the near future, as the industry has been in lockdown for over three months, considering the cash flow in the industry which works on a hand-to-mouth business model.
Contactless dining – a buzzword?
Aiming to entice customers to dine out in the new normal, restaurateurs have cosmetically as well as operationally, revamped and retrofitted their eateries with tech-enabled operations and safety and hygiene SOPs including app-based menus, digital payments, and following social distancing norms at the dine-in area and the kitchen, etc.
When asked about the new buzzword, ‘contactless dining’, the industry experts believe that though the industry is doing its bit to reinstate consumer demand for dining out, their initiatives including the contactless dining model is still in its nascent stage to drive the demand to a great extent.
Hitesh Keswani, owner, Silver Beach Hospitality feels, “Everyone out there is scared, I don’t think anyone really likes any contactless experience personally but let’s just say they feel comfortable with it and much safer and understandably so. Guests are opting for contactless deliveries over offline payments to avoid any human interaction. I have to say, it is and will be the buzzword for a while!”
“The coronavirus pandemic has changed consumer behaviour forever, or at least until there is a cure/vaccine. ‘Contactless dining’ seems to be the buzz of the future given customers’ hesitation for sociable activities and being more cautious about their health. The situation demands all of us to keep safety and hygiene standards as the highest priority. Restaurants will have to re-engineer their menus, work on the logistics and hygiene costs to make the business profitable. Contactless dining includes removing high-touch elements at any F&B establishment. It can be done by adopting a full-stack tech-enabled dining experience from digital menus to pre-ordering options and contactless payments,” explained Aggarwal.
50 per cent reduction in seating capacity means a 50 per cent haircut in sales and with increased costs of sanitisation, hygiene, similar rentals and other Covid-19 induced expenses, would directly mean the road to profitability is under construction for the near future.
Vouching on the operation model, however, many restaurateurs have not pulled the plug but instead spared the extra buck to optimise their eateries to adhere to the new fool-proof operational standards.
“With ‘contactless dining’ in mind, we are constantly working on revised service patterns and customer experience once they enter the outlet, which includes a lot of technology in our business, this means right from ordering your food, to making the payment can happen through the app so our servers will only come to the table only when serving food and water or when they are called specifically,” noted Shahri.
At Lite Bite Foods, Aggarwal said that they have revamped their menus thoroughly in the lockdown period. “Although, all the high sellers and most of our specialities have been retained but the overall menu size has decreased. This is to ensure that our chefs also maintain proper distancing at the workplace. We have also reworked our GFY concept (Good For You) which focuses on the dishes that are good for your health, at least 20 per cent of menu items have GFY ingredients. We will have to trade in a new way for a year or 18 months with minimised operating costs after we restart. To be future-ready, the industry has to work on a revenue-sharing model with the landlords. Digital technologies will take centre-stage in the post-Covid era. On the hygiene part, we are already good with that and it goes beyond keeping sanitisers. But now it’s time to play it up in front of customers by giving them a glimpse into how we prepare the food to regain their confidence,” he observed.
Shifting verticals – the real fix?
With the announcement of Unlock 1.0, though the government has allowed eateries to open with limited diners, the only operational vertical in F&B space during the lockdown period was the delivery only or cloud kitchen format – on which many are still vouching for, considering its low operational costs.
While operating this vertical has been impacted as well, reports point to a significant decline in orders on the major aggregators. Though online food ordering and deliveries have continued, it is undeniable that consumer behaviour has been significantly altered, say industry stalwarts.
Expenditures on food orders from restaurants and the likes are discretionary spends. These are typically made when consumers have free liquidity. “With the state of our current economy, not many people have been coming to popular aggregators and ordering. It would be unwise to state that due to the pandemic a restaurant going consumer has migrated to delivery formats. The economy is in contraction and there is a severe demand constraint, and most are rightly worried about a demand failure. The cloud kitchen industry is bound by the same economic pattern,” stated Mayank Singh Negi, co-founder, Cross Border Kitchens.
Sehaj Singh Kukreja and Tushar Anand, co-founders, Cheferd Foods – parent company of Pizza On My Plate, Burger in my box and Deli Salad Company, said, “Though the last two months have been a slightly dull period of the entire industry as people were scared to order in, however, we managed to sail through it owing to our extremely loyal customer base that trusted our level of hygiene. Hygiene is a very important trust-building factor. Food delivery outlets will have to adapt to working with a smaller team keeping social distancing rules in mind. Since we have always operated on a delivery-only model, our sales weren’t majorly affected. On the contrary, we recorded our highest ever sales in the month of March (saw peak after the lockdown was announced).” From a business point of view, keeping fixed costs low through this period of uncertainty is the key, voiced, Aggarwal and Kukreja & Anand, unanimously.
The online food delivery segment in India is believed to be growing at around 12 per cent annually with Covid-19 accelerating the consumer shift to online ordering. Moreover, the cost of opening and running a restaurant has inched up with increased costs of sanitisation, hygiene, fixed rentals and other Covid-19 induced expenses. As social distancing regulations continue to keep diners away from restaurants, eatery owners are preferring to stick to the take-away and delivery model for the foreseeable future, Aggarwal believes.
“Cloud kitchens segment is certainly the answer to cater to the skyrocketing demand for home delivery of premium foods with minimal operational cost. Lite Bite Foods is constantly seeking new avenues to grow and the new acquisitions and innovations further strengthen this vision. With the current scenario giving it a boost, we are investing approximately Rs 25 crore in LBF Cloud Kitchens and will roll-out 36 kitchens over the course of three years, targeting a turnover of Rs 100 crore,” added a positive Aggarwal about the cloud kitchen model thriving in the new normal.
Shyam Narayan Thakur, founder and CEO, Momo King, also said that although the Covid-19 lockdown reduces the risk of transmission, it has also dropped the revenues to zero. “With this situation, our bread and butter is solely dependent on takeaway orders or home deliveries. Post the upliftment of the lockdown, we have reassessed our entire business system and are continuously planning for contingent actions, in order to continue business operation effectively and smoothly. We have realised that home delivery will be the new normal in the post-pandemic world and considering the same, we are planning to launch cloud kitchens and expand our operations across Delhi NCR by launching more outlets soon,” he added.
“A lot of restaurants opened up this month but are contemplating shutting down again due to poor footfalls and a ban on serving alcohol. We don’t see a lot of restaurants coming back soon or forever as the costs of opening and operating a restaurant has surpassed the cost of keeping it shut. For food delivery we are bullish as it is still considered a safer option than going out, the levels of orders right now stand at 60-70 per cent of pre-Covid sales but we expect them to pick up as soon as number of new Covid cases start going down. Overall food delivery stands to gain from people opting to not going out to eat, this would mean in the next few months we might be in surplus in terms of orders and revenue,” pointed out Kukreja & Anand.
As nobody knows how the situation pans out moving forward, Shahri thinks the best steps a restaurateur can consider is to adopt a new perspective of operating. “No restaurant has more than one week to ten days of cash reserves. That means, the daily functioning and sale of goods are highly necessary for the business to sustain. While the cash-flow crunch has affected us in ensuring we pay all our dues in time, we’re trying our level best that all our staff, extended team and vendors get as much support as possible from our side. The best thing to do now is to step back, relook at our business and form a new perspective to operating. Look back into micro-finances and create a low-cost relaunch plan. The idea now for the next few months will be sustainability over profitability. We need to ensure that the business operates in a model that adapts to the current situation and manages to float well,” concludes Shahri.