Most restaurants have seen a decline of 2-6% in sales in the first quarter of 2020
The restaurant industry is among those worst hit due to the ongoing Covid-19 pandemic. While the lockdown ordered restaurants to shutter, it has had a severe impact on online food deliveries, too. Quick-service restaurants (QSRs) such as McDonald’s, Burger King and KFC have found few takers, as consumers are wary of eating ‘outside’ food.
According to Rajat Wahi, partner, Deloitte India, most restaurants have seen a decline of 2-6% in sales in the first quarter of 2020, which is substantial considering the 25-30% growth they witnessed during the same period last year. Food aggregators have seen a 50-60% decline in orders being placed on their platforms, he adds.
With consumers cutting down on their discretionary spends, fearing an economic downturn, restaurants may not see the situation improve. A recent online consumer survey by Nielsen revealed that as many as 64% of respondents intend to spend less on restaurants and movies in theatres.
Experts say QSRs need to realign their strategies towards online deliveries and takeaways. “In the pre-Covid times, most QSRs used to get 20-30% of their revenue from deliveries. They need to take this to 50-70% now, as restaurants will continue to see low footfalls,” says Pinakiranjan Mishra, partner and leader, consumer products and retail, EY.
Social distancing on the menu
Most QSRs are gearing up for this change. Burger King, for instance, besides deliveries through food aggregators such as Zomato and Swiggy, plans to introduce its own app soon. Srinivas Adapa, CMO, Burger King India, says, “We plan to have a tech-enabled omnichannel approach from now on. Our app will not only help customers get contactless deliveries at their homes, but will also feature a ‘zero contact dining’ feature. Using this, they can visit our restaurants, and order and pay directly through this app, avoiding queues, cash payments or any sort of physical contact.”
“When we reopen our restaurants, social distancing will continue to be our focus,” says Arvind RP, director – marketing and communications, McDonald’s (West and South). The company is also planning to introduce contactless dine-in and store pick-up options.
Meanwhile, KFC India, which had stopped taking delivery orders through its app and website, plans to restart them soon. Currently, it is servicing customers through Swiggy and Zomato. The company, Moksh Chopra, CMO, KFC India shares, is devising changes in its restaurant design and processes to enable contactless dining, going ahead, including signage and floor stickers to help delivery riders maintain a safe distance while waiting to collect orders.
Burger King India, on the other hand, has already put in markers on the floors, chairs and tables across its restaurants for customers to maintain social distancing. These QSRs are also mulling servicing customers via contactless takeaways, when they are allowed to resume operations fully. Tata Starbucks restarted operations in eight cities recently, where it is offering contactless delivery and takeaway. The company has also introduced grid marks and designated waiting areas in its outlets.
The move towards online could bring a fair share of challenges for these brands, primarily that of converting the in-store customer into an online customer. They would also need to rethink their dependence on food aggregators since the bulk of the business for these restaurants will come through home deliveries, going forward.
“They will have to build their online delivery capabilities. If they are dependent on food aggregators, they won’t be able to understand their customers to target them more effectively. They would also have to pass on the margins to food tech companies. In the current scenario, they need every penny that comes their way,” says Mishra of EY.
QSRs pay 15-20% per order to food aggregators for deliveries through their platforms.
Paying high rent for restaurant premises even as business continues to be slow could also be tricky for these companies. Wahi of Deloitte is hopeful that things will “get back to normal in about two months, as has been the global trend”. He says, “China and parts of Europe are reopening after two months, and seeing about 30-50% customers back in restaurants. We may see a similar pattern here.”
However, strong communication on hygiene and safety measures taken by restaurants, experts say, will be imperative in bringing customers back.