Serving RELIEF: Unless rental costs go down for restaurants, many won’t simply survive Covid

By: |
August 21, 2020 5:45 AM

The Covid-19 pandemic has already meant curtains down for many dine-in restaurants, and is pushing many others to the brink.

At an average of 14 people per restaurant, a back of the envelope calculation based on Zomato’s projections gives a loss of 2.8 million direct jobs.At an average of 14 people per restaurant, a back of the envelope calculation based on Zomato’s projections gives a loss of 2.8 million direct jobs.

Zomato’s State of the Restaurant Industry in India report talks of opportunities for food-delivery players, there is a grim takeaway, too. The Covid-19 pandemic has already meant curtains down for many dine-in restaurants, and is pushing many others to the brink. As per the report, just 17% of the dine-in restaurants in cities where restrictions have been listed are functional, and, as per Zomato, 10% have shut down permanently while 30% will likely not reopen. There are over five lakh restaurants registered with the National Restaurant Association of India, employing 7 million people directly. At an average of 14 people per restaurant, a back of the envelope calculation based on Zomato’s projections gives a loss of 2.8 million direct jobs. It is not hard to imagine the spillover effects on the value-chain.

While business would not have been brisk for all before the pandemic, even the ones operational at present are likely to suffer huge losses given they will not be able to function at full capacity till the pandemic is over. Apart from distancing requirements, demand may remain depressed as people cut back on eating out, out of fear of contracting the disease and because of job-losses and reduced pay. One way to perhaps lessen restaurants’ pain, given rental costs are quite heavy, is for landlords/property lessors to get into rent relief arrangements with restaurant owners—closure and loss of rent surely is worse than a temporary lowering of rent? Otherwise, the economic recovery of the business segment will be a weak one, with ripple effects in other related segments.

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