How the second wave impacted an already fragile restaurant industry

The Federation of Hotel and Restaurant Associations of India (FHRAI) expects 50% of restaurants across all industry segments to remain closed after restrictions are eased.

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For the restaurant industry across India, the last 18 months have been a never-ending roller coaster. After restaurants were forced to close suddenly during the first months of lockdown, many saw a glimmer of recovery towards the end of the year as customers started dining in droves again. But in April, those hopes quickly faded as the second wave forced the country indoors. And some industry experts say the prognosis may be alarming: A lack of activity over the past two months, along with predictions of a third wave, could permanently close a significant percentage of food establishments across the country.

Although there is no official number of restaurant closures yet since the lockdown is still ongoing, according to Pradeep Shetty, honorary co-secretary of the Federation of Hotel and Restaurant Associations of India ( FHRAI), they expect that 50% of restaurants in all industry segments will remain closed after the easing of restrictions. Previously, the association said 30% would remain closed after last year’s lockdown. The National Restaurants Association of India has estimated that between 30% and 32% of restaurants will close permanently.

According to PC Rao, chairman of the Bangalore Hotel Association, of the approximately 24,500 hotels in the city, 6,000 have closed. While large hotels have struggled due to a lack of events and meetings, smaller restaurants with a handful of employees have also struggled to stay afloat, particularly if they are not connected to platforms. e-commerce and food apps, he said.

Recovery under duress

After September last year, when restrictions were lifted and diners were allowed to eat in restaurants in limited numbers, it was a slow but steady climb to some semblance of recovery. As TNM reported earlier this year, many restaurants in Bengaluru recorded almost 70% of pre-COVID revenue in December, and even more in some cases as the city entered 2021 with low numbers of COVID-19 cases. coronavirus. A higher recovery tended to favor outdoor restaurants and those in commercial areas, while localities like Whitefield and Sarjapur, with its high demographics of transient IT workers, saw weaker gains.

But even for those who appeared to be successful, the task of reopening a restaurant after several months of closure was not just a difficult challenge, but a huge financial burden, according to Misha Pamnany, owner of Salt and Pepper F&B Consultants. Basically, this involves having significant working capital to get the establishment up and running, from contacting suppliers to rehiring the workforce, many of whom had left the cities due to the lockdown. .

There was still significant potential for the industry to repair itself soon enough. However, the second wave plunged the country into crisis, as thousands of people contracted and succumbed to the virus. Meal restrictions across the country have been swift. “People were still losing [last year] with the hope that good days were coming,” Shetty said. “With this disruption [of the second wave]it’s a snakes and ladders board game where you’re back to square one.

This story is part of the TNM COVID-19 reporting project. To support this project, make a payment here.

Second wave impact

As the closures continue, many restaurants have reverted to a delivery-only model, although Anurag Katriar, president of the National Restaurants Association of India, noted that in the range of F&B businesses, very few can sustain themselves from this way. Fine dining restaurants, catering businesses, nightclubs, bars, pubs and restaurants require in-person dining experience to manage expenses. An additional problem will be the lack of private capital injected into the system due to the current uncertainties hanging over an already risky business. “The share of fixed operating expenses in our business is quite high. Which means you need more cash to fund losses than you would, say, in another line of business,” he said. “The scarcity of resources has therefore become the main reason for the maximum closures.”

And while the period after the first wave allowed companies to recover some of their losses (although according to Shetty the recovery was closer to 30% of the pre-COVID figures nationally, but was higher in major cities) according to Katriar, this may not be enough. A potential third wave will also likely shorten any recovery period after the second wave.

“You may be able to survive and not fund losses, but you can never save some resources for a rainy day,” he said.

One of the main indicators of restaurant closures has been posts in Facebook groups such as “Secret Sauce Behind a Successful Restaurant,” where new restaurant space and equipment went on sale after just six months to two years in the making. ‘activity. “It takes a lot to get up twice and fix the situation,” Pamnany said.

Signs of optimism

Last week, the Reserve Bank of India announced a liquidity window of Rs 15,000 crore for the hospitality and tourism sector, as well as aviation ancillary services, providing desperately needed support to affected hospitality businesses. by the pandemic. The window is open until March 31, 2022 with terms up to three years at the repo rate. While the move was welcome, the associations saw that it might not be enough in the long term and urged the RBI to consider extending the term.

“The cash injection will provide much needed liquidity support to cash-strapped hospitality businesses without which the industry could not have survived. However, we request the RBI to extend the term for at least 5 years. A term of 3 years is simply not enough to recover from the financial turmoil the industry is going through,” said Gurbaxish Singh Kohli, Vice President of the Federation of Hotel and Restaurant Associations of India ( FHRAI) in a statement.

Some states have also begun including restaurant workers in the frontline category to prioritize COVID-19 vaccinations, which many restaurant industry players had been actively calling for.

And not everyone sees the situation as totally untenable. According to Pravesh Pandey, operations director at Byg Brewski, which has sites in Hennur and Sarjapur, the signs that the industry has rebounded quickly from last year’s lockdown are important for the year ahead. While some restaurant categories, such as those without outdoor spaces and those that rely on large-scale events, “strong brands with a better emotional connection to their customers, great food … Meals centered on health [and] organized and well-funded actors” will succeed.

“I’m sure we should see a rebound time of 1.5 to 2 months when things get back to 80% normal,” he said.

The TNM COVID-19 Report Project is funded by our readers. We would like to thank the following people for making this story possible: Ashwin A, Vani Saraswathi, Yatish Shetty, Abhishek B, Rohit Raghavan, Robin BE, Sandeep, Ganesh, Sudharsan, Abhash Kumar, K Bhaskar, Ganesh Chakravarthi, Krithika Muthuraman, Nishant Radhakrishnan, Abhirami Girija Sriram and many more.

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Cecil N. Messick