A couple days ago, the restaurant association noted that new lockdown measures could put 90% of restaurants out of business in Maharashtra. And while the number does seem a bit exaggerated, it's still pertinent to ask - What's the impact of the new lockdown measures going to look like for the food and beverages industry
The Story
Restaurants have low margins and profitability depends on many factors. So perhaps it makes sense to look at Maharashtra’s new Covid-19 guidelines. According to the state — Bars and restaurants will remain shut, except those housed in hotels. And you’ll have to comply with these strict diktats during night curfews and weekend lockdowns. They can however still facilitate home deliveries and take-aways during weekdays — so long as they’re operating between 7:00 am to 8:00 pm.
On weekends though, there won’t be any scope for takeaways. Instead, restaurants will only be allowed to cater to customers seeking home deliveries. And you have to comply with these guidelines, no questions asked. Even if you don’t, food aggregators like Zomato and Swiggy will make sure you toe the line. So there’s no way you’re getting out of this obligation. And while on the face of it, these restrictions might not look as bad, you still have to understand the complications at work here.
Restaurants make most of their money when people dine out. They don’t make as much money tending to home deliveries alone. Think about it — How does a small eatery shop compete in a marketplace where each patron can choose from hundreds of restaurants without moving a muscle. It’s not easy. Obviously, takeaways help to a certain extent. But when people have to make a choice between takeaways and home deliveries, they almost always choose home deliveries. So restaurants are now stuck between a rock and a hard place. More importantly, if they were selling alcohol and beverages on the side (which most restaurants do) then they’re in for some major pain. Beverages and alcohol are the cash cows after all. Without these items, your profitability starts taking a massive hit.
So when you impose an 8 pm ban when people are already sceptical of spending on food, it leaves restaurant owners with few options — Wind down the business or pray to survive. If you’re a small business operating on a shoestring budget with no rainy day fund, then the situation is beyond reprieve. You have to shut shop. There’s absolutely no way you’ll be paying those high fixed costs including salaries, rentals and utilities — only to see your business crumble right before your eyes.
So does that mean we should start letting customers walk into restaurants when Covid continues to spread havoc?
Well, that’s the problem here
According to the CDC, adults with positive Covid test results were approximately twice as likely to have reported dining at a restaurant compared to those with negative Covid test results. Meanwhile, South Korean Researchers earlier had shown how coronavirus could travel further than the typical six-foot social distancing radius prescribed by the government. And while cleaning and disinfecting frequently touched surfaces could slow the spread of Covid, most restaurants in India simply don’t have the resources to do it on a regular basis. It’s the harsh realities we ignore all too often. And that means these lockdown measures are probably pretty reasonable.
So what does the government do then?
Well, we won’t comment on this any further. Instead, let the industry explain its position in its own words. As one restaurant association official encapsulated — “The Hospitality industry is with the Govt. We will once again support the Govt like we did last year. We are doomed this time around if we are expected to be both, shut for business and not receive any relief. The Govt has to meet us somewhere in between. Shut us but do justice to the owners, staff, and their families. Take care of the salaries. Unburden the owners of the property tax, waive off the statutory fees, don’t generate electricity and water bills until the industry becomes completely operational again. We understand that the Govt has to take measures but it’s coming at a cost that we just can’t bear any more. We have always stood with the Govt and it’s about time the Govt does the same for us.”
And as we had noted in our article earlier, it’s a travesty that not enough people seem to be talking about this. It’s the 3rd largest industry within the services sector in India. It’s 20 times the size of our country’s film industry, 4.7 times the size of the hotel industry, and 1.5 times the pharmaceutical sector. Think about the sheer scale for a moment…
We really hope the government comes through this time around.
Until then…
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