Some estimates of the damage to the restaurant sector in the UK suggest that when the Covid crisis ends, something like 40 per cent of all restaurants may not re-open.
The fatalities fall into three categories. There are much loved small restaurants whose owners have been financially wrecked during the lockdown. Then, there are the chain restaurants whose corporate parents have decided to close them. (Such familiar names as Carluccio’s will be hard to find in the UK from now on.) And then there are the top restaurants that have decided that you cannot do fine during within the health restrictions imposed after Covid. The three Michelin star Chef Daniel Humm has said that he is not sure fine dining will survive the crisis. And the Ledbury, one of London’s best restaurants, will close because Brett Graham, its chef-owner says he cannot run it the way he would like with the new social distancing rules.
If you think that’s bad, consider the advantages that the UK restaurant sector has had. The government stepped in to help the sector soon after the crisis hit and paid part of its wage bill. There is talk of delaying taxes and landlords have generally been willing to renegotiate rents downwards during the crisis.
There is also a move to modify the physical distancing rule. In parts of Europe, the authorities have decided that two metres is too much and have asked restaurants to keep one metre distance between guests. The UK’s restaurant industry has been pressing for something similar and Prime Minister Boris Johnson has said that he supports the move.
And still, the UK restaurant sector is wrecked!
Contrast this with India. The government has pretended that the restaurant sector does not exist. There has been no talk of helping with any wage bills; tax waivers or delays have not been considered; and many landlords are being unreasonably stubborn about adjusting rents.
Nor is there any imagination on display. In the UK, restaurateurs have received widespread support for a proposal to alter the character of Soho, London’s restaurant district. The proposal envisions turning four streets into a pedestrians-only district. With no cars on the road, the space that would be opened up could be used by restaurants to set up outdoor tables to get around the space constraints created by the physical distancing rules.
The restaurateurs do not want this to be a permanent change. They suggest that it should be done during the summer months when people will enjoy sitting out in the sun (on the days when it does not rain!) and a festive atmosphere will be created to mark the re-launch of the London’s restaurant sector, one of the most vibrant in the world.
That’s never going to happen in India. Neither the states nor the central government has demonstrated any imagination when it comes to thinking of the restaurant sector.
Take for instance, the ban on hotel restaurants in Delhi. The state government has said that it may need to take over hotels if cases rise so much that extra beds are required.
Fair enough. So it makes sense to ensure that hotel rooms are available when the cases rise. But what about the restaurants?
As that day – when cases rise so much that hotel beds are required ---- is not yet here, why do the restaurants need to shut?
Assume, for the purposes of argument, that the state government decides one fine day that tomorrow it will sequester all rooms at a hotel. How will it matter if the restaurants are open when the announcement is made? The hotel will simply close them and let the state government take over the whole hotel.
You could argue that it is important that the guest rooms are kept unoccupied. That way, if the hotel is taken over, no guests will have to be suddenly evicted. But that does not apply to restaurants. Nobody lives there full time. If the hotel is taken over, there will be no overnight guests in the restaurants who will need to be thrown out.
The hotels have pointed this out. But so far, no one is listening.
What we have, instead, is the worst of all possible worlds. Restaurants are allowed to open but because of social distancing, they can only work at fifty per cent of capacity. Nor can they really open for dinner. The Centre has imposed a mysterious curfew from 9 pm which means that guests have to leave by 8 pm to be sure of getting home.
Actually, even 8 pm makes life difficult. It takes a restaurant at least half an hour to wind up, get the washing-up done etc. And restaurant staff usually live further away than the guests do. So they may need more than an hour to get home. That means that, for all practical purpose, restaurants cannot take last orders after 6.30 pm to be sure of getting staff home by 9pm.
Whichever way you look at it, the dinner service cannot go on. And for many restaurants, dinner is 75 per cent of the total business.
Even in good times, rare is the restaurant that is 100 per cent full every day. The most a successful restaurant can hope for is 75 to 80 per cent occupancy. Divide that into two because 50 per cent of the tables are not on sale. That gives you under 40 per cent.
Can any restaurant afford to pay rent and salaries on (at best) 40 per cent of what it would normally earn at lunch? Dinner is out of the question so restaurants have to manage with 40 per cent of 25 percent of the total revenues. (Given that the 75 percent it earned at dinner is now gone.)
No restaurant can break even on this basis, let alone make anything approaching a profit.
Till about a fortnight ago, restaurants had decided to grit their teeth and see this phase through because they believed that Covid would soon be under control. The government’s own projections (from Niti Ayog) were that the number of cases would peak around 15 May and then start dropping. This convinced restaurateurs that by 15 of June, something like normal life could resume.
Now, it is clear that in some big cities (Mumbai, Chennai, Ahmedabad and especially Delhi), the government has lost control of the pandemic. Defying every prediction made by every official health expert and every minister, the cases continue to rise at an alarming rate.
And yet, just as the lockdown has bankrupted small businesses, it has also caused a huge dent in the government’s tax revenues. So we have been forced to open up on not much more than a prayer.
This time around, nobody is offering any assurances about when the pandemic will be controlled. The head of AIIMS says the peak is two months away! That means the numbers will keep going up till August and there won’t be any kind of near normalcy till September-October.
In the middle of the confusion and ineptitude, the restaurateurs don’t know what to do. Should they keep their restaurants open with 50 per cent capacity and only lunch business and continue to lose money?
Will the senseless curfew be withdrawn soon, offering them at least one more revenue source in the form of dinner business? Or should they just close down again (or not re-open) because there is no clarity on when they can at least break even?
I feel for the restaurant industry because India’s restaurant sector is just collateral damage in the panic and confusion that have gripped all governments, whether Centre or State.
Some restaurants will do takeaway and delivery but while these will offer some consolation, they will not give them anything like the revenues they need to keep paying their rents.
The restaurant body, the NRAI, is said to be working on a WhatsApp service that will accept delivery orders for the industry. This is a welcome and worthy initiative but the truth is that the NRAI went down to a humiliating defeat when it last took on Zomato. Will it have much success at a time when even well-organised giants like Zomato and Swiggy are reporting lower revenues and laying off staff?
The conclusion is inescapable. Like the UK, we will have to accept that Covid will cut a lethal swathe through the restaurant business. There are already reports of at least six restaurants in Delhi’s Khan Market shutting down. There are similar reports from Mumbai. And these are just the restaurants that get talked about.
The people who will really be damaged in this pandemic are the smaller restaurateurs who run not-so-fancy places. Their margins are not large and the moment you make them reduce capacity by half and hit their dinner business, they are already on the verge of bankruptcy. If these restrictions continue --- as I imagine they will --- then this part of the restaurant sector cannot survive. Which is doubly sad because not only do such restaurants feed those parts of the middle class that cannot afford to go to Khan Market, they also have much better food than many of the so-called upmarket establishments.
There are ways out. The silly night curfew (imposed by the Centre) must go. The government can afford to offer tax waivers to a sector that is on the verge of collapse. Arvind Kejriwal must allow hotel restaurants to open. All governments should show more imagination.
But will this actually happen?
I hope it does.
But if the present situation continues, then by the time we find a Covid vaccine (probably next year), much of the existing restaurant industry will have died.
And no, it won’t rise like a phoenix again. Investors will be frightened of putting money into restaurants having been caught in the bloodbath of 2020.
It’s a tragedy in the making. And nobody is doing anything to avert it.
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