Covid crisis: Restaurants staring at closures due to uncertainties over lockdown

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Updated: Jun 05, 2020 6:27 PM

As per Dineout estimates, of the 4,05,000 QSRs (quick service restaurants)/takeaways with CFT (cost for two) of less than Rs 700, nearly 90,000 will shut.

Most restaurants have furloughed or asked their staff to leave citing lack of funds. (Representative image)Most restaurants have furloughed or asked their staff to leave citing lack of funds. (Representative image/ File photo)

Trouble has been brewing in the restaurant industry ever since the start of the lockdown, which has paralysed businesses. Having logged zero sales for two months now and no certainty as to when restaurants would be up and running — no relief has come from the government either — firms are looking to shut outlets unless landlords are forthcoming enough to ease the rental burden.

Priyank Sukhija, CEO at First Fiddle Restaurants that owns brands like Lord of the Drinks and Plum by Bent Chair, said although currently the firm has no plans to shut, there is a possibility of the company closing a few outlets of the 31 it operates, if the landlords do not agree to a revenue-sharing deal post withdrawal of the lockdown. “After lockdown, there will be less business, restaurants will open with restrictions and may operate only at a maximum of 60% occupancy. There is no point in booking further losses for outlets that do not get decent footfalls,” Sukhija told FE.

In fact, Ankit Mehrotra, CEO at restaurant discovery platform Dineout, said nearly 10% of its 50,000 restaurant partners have declared closure, about 20% are unsure of the future and another 10% will shut down some of their outlets where the rents are high and the footfall is not as heavy. Mehrotra said lease cost is the highest fixed cost component besides payroll and energy costs. Nearly 40 lakh jobs will be affected by Covid, Mehrotra said. “Most restaurants have furloughed or asked their staff to leave citing lack of funds. The industry is expecting a revenue loss of nearly five lakh crore in this fiscal year itself,” Mehrotra said.

As per Dineout estimates, of the 4,05,000 QSRs (quick service restaurants)/takeaways with CFT (cost for two) of less than Rs 700, nearly 90,000 will shut. Of the 75,000 casual dining restaurants, pubs and bars with CFT of Rs 700-1500, around 11,000 will close and of the 20,000 luxury dining and five-stars with CFT of over Rs 1,500, around 1450 outlets will shut.

Inderjeet Singh Banga, director at Biggie Hospitality that owns brands like Pirates of Grill and Prankster, said if landlords do not give support, the company will be forced to shut partial operations. Salary cuts between 25% and 50% across different levels would have to be done to sustain business, Banga said.

Movement of migrant labourers back home is another problem for the sector. Mihir Desai, co-founder and co-owner at Corum Hospitality that operates brands like The Bar Stock Exchange, said the firm is left with merely 600 staff from about 1,200 10 days ago. If the lockdown continues for some more time and rents keep on accumulating, there will be no option but to exit those properties where landlords fail to give any leeway in rental payments.

Joy Singh, co-partner at Yeti and Raasta, said the hospitality sector is expecting 60-70% job cuts and staring at large scale shutdowns. “If the current situation prevails, we will need better policies, support and relief packages to sustain,” Singh said.

A recent survey by community social media and consumer platform LocalCircles showed about 74% citizens said they will not be visiting their favourite restaurants in the next 30 days even if they were open.

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