The Current State of Restaurants

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Going out for a meal, hosting a party in a fancy hotel is a great social exercise. We enjoy the idea of going outdoors and spending quality time with friends and family over a delicious meal. Restaurants and hotels fancy their revenues on large gatherings, parties, and dates. Even enjoying street food has its charm. But will we be able to enjoy these outings the way we used to before coronavirus impacted our lives?

The pandemic has forced social distancing and has thus adversely affected the restaurant industry. The idea of visiting restaurants and hotels that are frequented by various people seems dangerous. Numerous restaurants across the globe have shut down permanently because of no business during the past three months. There already existed many flaws and loopholes in this industry. The pandemic is now giving exposure to such defects.

The restaurant industry is service-oriented. With social distancing norms, the service will have to undergo drastic changes. As everyone is adjusting to the new normal, the restaurants are struggling to stay afloat. For instance, nearly 40% of restaurant establishments in New Delhi’s Khan Market shut businesses after being unable to cope up with the losses.

The restaurants have costs associated with inventory, workforce, rent, operations, and licenses. Rent alone takes about half the chunk of revenues. The consumers value experiences, and cafes nowadays have live performances. It explains the overpriced menu that we see at the rate chart of the majority of the restaurants. The proportion of fixed operating expenses is very high here and adds to the risky nature of this business.

The food delivery platforms that were supposed to supplement the revenue stream of restaurants have now become the only source of revenue. These delivery aggregators ask for a commission of 20%-30% of sale value, thereby leaving very little for the restaurant partners. The terms and conditions of such deals mostly favor the aggregators.

The human element cannot be taken away from the hospitality sector as it is the very backbone of this sector. Amidst social distancing norms, high hygiene factors and, rising consumer apprehensions, the very idea of limited human interaction is not a possibility. Some restaurants have already begun experimenting by segregating tables and seats by transparent fiber sheets. The idea of two people sharing the same cocktail will cease to exist in the near future.

The lockdown after the pandemic forced restaurants to dump kilos of inventory. The lifting of the lockdown has also impacted the supply chain of these businesses. Until the situation restores to normal, there will be high costs associated with the entire ecosystem surrounding the hospitality sector.

Restaurants and hotels need to make serious investments in innovation that fits the new normal. Contactless deliveries, innovate menus and work on models to generate sales. It requires building trust and confidence in people to induce them to visit the restaurant. It is quite an uphill task, but with the shrinking market, this is the only way ahead.

Written by - Harshit Somani
The Current State of Restaurants The Current State of Restaurants Reviewed by Harshit Somani on June 21, 2020 Rating: 5

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