Dine-in restaurants’ revenue to get dented by half: Crisil Research

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Published: May 15, 2020 12:15 AM

The dine-in segment accounts for 75% of the business within the organised sector, while online delivery/takeaway makes up the rest.

Mumbai and Delhi-NCR account for nearly 50% of the total organised restaurant market.

The organised dine-in segment of the restaurant industry may see its revenues slashed by as much as 40-50% in the current financial year as consumers are unlikely to get back to restaurants after the lockdown is lifted, according to a recent report by Crisil Research. Due to the low demand and social distancing norms, restaurants will operate at 25-30% of their monthly service levels in the first 45 days after the lockdown is withdrawn.

With restrictions on gatherings and public movement likely to be extended again in Mumbai and Delhi-National Capital Region, curbs on dine-ins in the regions will continue or they may be allowed to operate only at low service levels, the report said. Mumbai and Delhi-NCR account for nearly 50% of the total organised restaurant market.

The order volumes for the total organised restaurant sector have dipped 90% during the lockdown with online orders for restaurants also having shrunk 50%-70%. Online orders may, however, pick up in the long run as customers are expected to refrain from dining out.

The dine-in segment accounts for 75% of the business within the organised sector, while online delivery/takeaway makes up the rest. Low utilisation levels are likely to prompt the industry to reduce fixed costs through outlet closure, job and salary cuts, analysts said in the report. According to the firm’s estimates, fixed costs account for about 30-35% of the income generated by the sector.

The Rs 1.5-lakh crore organised restaurant business employs nearly 40 lakh kitchen and restaurant workers, as per estimates by Crisil Research. “Once the restrictions are lifted, restaurants will have to rework their business models and overcome operational challenges. With consumers turning more health-conscious, hygiene protocols at restaurants and supply chain will need to improve materially, which will increase cost,” said Anjali Nathwani, associate director at Crisil Research.

The decline in restaurant revenues will, in turn, impact horticulture farmers, dairy producers, food processors, suppliers and logistics and delivery partners. Unorganised food producers, many of which have high exposure to the restaurants sector, will be hit the hardest due to a sharp decline in bulk demand this fiscal.

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