Top restaurants struggle as covid takes a bite out of business3 min read . Updated: 17 Jun 2020, 11:37 PM IST
- Some companies are pivoting towards cloud kitchens, while others are even shutting shop
- High rentals and uncertainty over long-term viability have been blamed for some closures
The food business is supposed to be recession-proof. After all, the logic goes, people don’t stop eating during a downturn. But accepted theories have been turned on their head by the coronavirus pandemic.
In Mumbai, Pooja Dhingra learnt it the hard way. The popular patisserie chef shut the Le15 cafe in Colaba, one of her two restaurants. “High rent, lack of tourists, monsoon, social distancing and the covid-19 lockdown are all equal contributing factors. Restaurants and cafes don’t run on high margins and when you play around with the variables so much, it doesn’t make business sense to continue," Dhingra said.
As restaurants reopen after more than two months of lockdown, the challenges of adjusting to the post-covid world seem daunting. Footfall has nearly vanished, socializing has been replaced by social distancing, opening hours are restricted, and high rentals and low sales make it all but impossible to keep the doors open.
The eating out market is seeing a shakeout. And high-end restaurants—even popular ones—in upmarket neighbourhoods are showing a greater degree of vulnerability. A handful of popular restaurants have already been forced to shut.
Earlier this month, restauranteur Riyaaz Amlani, chief executive and managing director of Impresario Handmade Restaurants, said he had shut the Smoke House Deli outlet in Delhi’s tony Khan Market.
The decision, Amlani said, was made because of hefty rentals and uncertainty over long-term viability. “In light of the pandemic and its subsequent fallout, we have made the difficult decision to close Smoke House Deli’s outpost in Khan Market," he said.
Others too are staring at closures.
And those that have reopened have to deal with a plethora of restrictions: they can’t use more than half their seating capacity, they have to shut at 9pm, serving alcohol is banned, and bars are shut nationwide.
Restaurants are left with just 15-20% of pre-covid business, said Inderjeet Singh Banga, who owns Prankster in Gurugram. “At this rate, you cannot continue paying those rentals for the next six-nine months; we need a sustainable model," he said.
Covid could ravage “category B restaurants and those with a paid-up capital of less than ₹1-2 crore", said Abhishek Sharma, director, retail at Knight Frank, a realty consulting firm.
Dine-ins account for 75% of the organized restaurants, with online delivery and takeaways making up for the rest, said a May report by Crisil Research.
Even those that are open could see a 40-50% fall in revenue this fiscal, Crisil said. With an eye on financial viability, not all restaurateurs have moved to open their outlets—some only offer takeaways and deliveries.
Lite Bite Foods has resumed operations at only 10% of its more than 200 outlets. “We will shut any outlet where we can’t reach an agreement on rental," said Rohit Aggarwal, director at the company, which runs Punjab Grill, Zambar, You Mee and Tres.
Restaurants are now looking at launching new delivery-only formats or do-it-yourself (DIY) meal kits as the future of dine-ins remains uncertain.
Lite Bite Foods and Zorawar Kalra’s Massive Restaurants are planning new cloud kitchen brands. Speciality Restaurants, which owns brands such a Oh! Calcutta and Mainland China, will launch cloud kitchens under the Speciality Kitchens brands, chairman Anjan Chatterjee has said. Others like CAARA, a catering firm that runs upscale restaurants with lifestyle stores Nicobar and Ogaan, have expanded to offer gourmet groceries. Popular chef Ritu Dalmia’s Riga Foods too is selling DIY kits for gourmet Italian dishes.
And Kalra, who runs the high-end Masala Library in Delhi, has come up with an entirely new concept. “Masala Library will be recreated at home," he said recently. “We will send servers, chefs, and food to curate in-home experiences for connoisseurs."
Avantika Bhuyan contributed to this story.