Restaurant Business Model in Times of Novel Corona

The organized dine-in restaurants of our country are expected to have a 40 to 50 percent downslide in revenue due to the disruption caused by the COVID-19. It has led to the closure of eateries and dine-in outlets, loss of jobs, and a poor impact on the food supply chain. It is estimated that the business accounts to 1.5 lakh crore and thus it’s going to take at least a year after the lockdown to recover. 

The organized restaurant chain in India accounts for 35 percent of the dining business and amounts to 4.2 lakh crore in 2019. On the other hand, dine-in accounts for 75 percent of these organized restaurants, and the rest is made up of takeaway and online delivery. Public entertainment spots and dine-in restaurants have been shut down since March 2020. Online delivery was available in several cities like Kolkata, Bangalore, Mumbai, Delhi-NCR, and Bhubaneswar at low service levels. 

The gradual recovery

Since the lockdown has started, organized eating houses have seen a 90 percent reduction in their sales figures. As it is not operational, the figures for online orders have also reduced to a great extent. With the lockdown being lifted up, this rebound is going to take a long time. This is particularly true in cases of metropolitan cities that make up most of the organized dine-in business of the country but have also been deemed as Red Zones contributing to 30 percent coronavirus cases in India.

But the positive side is that the process of recovery has already started. Though the demand is on the minimal level and social distancing and hygiene norms must be strictly followed, the industry will have to operate at a meager 25 to 30 percent of their previous monthly figures. Also, there are stringent restrictions on free public movement and social gatherings which means the curtail on their business is likely to continue. 

It goes without saying that all these would likely affect the financial condition of the restaurant business. Still worse, the 40 to 50 percent decline in profit margin may even cause a negative operating margin in the present financial year.

Surging costs and reducing income

Mang restaurants and dine-in outlets have sought resort to deferring their rentals or feasible concessions. Those who have immersed in high debt may even have to face a lot of pressure and shut those outlets which are not earning much revenue for raising money. Even though the condition of the big players with minimal debt will be able to earn handsome revenue, the question of reviving their business stands unanswered. 

Perhaps the best means of overcoming this undeniable crisis is to shift the attention to remodeling the business structure for doing away with operational challenges. As consumers are likely to become more health-conscious, disinfection and hygiene protocols have to be carefully maintained which, in turn, will shoot up cost. As revenues from restaurants will start to fall, vegetable and poultry farmers, dairy producers, fishmongers, food processors, delivery partners, and logistics systems are all going to suffer irreparably. The worst situation will arise for those unorganized suppliers and food processors as they will not have any bulk order at least for this fiscal year. 

Challenges in the operation

As already highlighted, the operational challenges after the lockdown has been lifted may also cause the business model to be modified. For example, volumes of the order will see a reduction as consumers are becoming more cautious about how much they spend and on what. Plus, in an over-populated country like India, the social distancing norms are sure to cause business operations using a lesser number of tables, minimized working hours, and high-end ventilation systems. 

As a result, HVAC operational cost is going to increase and with the consumers focusing on hygiene, both dine-in and restaurant supply chains will have to bear the cost. Many big players are thinking of introducing contactless dining where the customers can place their orders from a smartphone rather than the menu card touched by numerous hands. 

Dine-in business is, therefore, facing very stiff competition both from the supplier and delivery side. In this condition, it is crucial to retune their business model as consumers might not be interested in queue up for a commonplace dinner. Thankfully, the restaurant industry is taking up a number of measures so that they can tide over it and acquaint with the new normal. Also, the dine-in segment is thinking of introducing healthy meals and safe deliveries. 

Conclusion

Thus, it can be said that the dine-in industry of our country is perhaps facing its worst existential crisis. It is because though the shutdown has allowed no chance of transmission of the virus, it has also caused the revenue to hit the zero mark and businesses are striving to pay the rent and salary to their employees. 

 

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