Goods and Services Tax (GST) is one of the greatest tax reforms introduced in India from 1st July 2017. It is a value-added tax levied i.e. tax is only paid on the value added during Read more…
Empty Chairs at Empty Tables
Remember the time you could just walk into a restaurant—on a date or for a business meeting or just because? It was just a few months ago but it certainly feels like another era.
The NRAI said it expects its members to lose up to $10.5 billion in 2020, with more than 2 million people facing the loss of their jobs and one in four restaurants unlikely to reopen in near future.
Restaurants across India are empty. People are preferring home cooked food and takeaway. Restaurants companies are already piling on unsustainable levels of debt and with threats of a recession looming large, it’s only logical to presume that the industry might not survive for long.
However, this is a rather simplistic prognosis. Industries don’t disappear overnight. They simply evolve.
In the short term, Restaurants will have to make a few adjustments. Customers may no longer prefer eating out in packed spaces anymore and hospitality companies might have to reorganize their space (wherever possible) to reassure customers. They might also have to look at other things like ventilation, best sanitary practices and dining policies. Earlier you could waltz into a hotel, pick a table and start ordering along and nobody would bat an eyelid. But since people are particularly sensitive about touching foreign objects these days, maybe the ground rules will have to change a bit.
But changing ground rules isn’t all that simple.
That effort could include everything from higher-quality air filtration systems to more-powerful cleaners. Every surface — including door handles, light switches, countertops, cutlery’s and many more — will have to be dealt with. This shift could also include the addition of things like copper fixtures, fabric that retains fewer germs and can more easily be cleaned, more space in kitchens and bathrooms, as well as more attention paid to how far liquids can splash. Some companies could even use UV lighting to disinfect restaurantspace at night or in between uses, a practice that’s increasingly common in hospitals.
And these things cost money. But it won’t stop there.
Right now most restaurants work on a rather simple premise. They lease buildings after tying themselves into multi-year contracts and then operate a restaurant . This isn’t a problem so long as you have new customers walking in the door all the time. However, during a pandemic, your short term cash flows dry up and those long term lease arrangements devolve into major liabilities — both literally and figuratively.
Most companies take on more debt to tide over the crisis. But this only bloats your interest expense. And if you can’t secure funding from some of your early backers, you’ll be in a tight spot. So in effect, tweaking your business model in a post-COVID world can be challenging as well.
And that leaves us with a rather sombre reminder — “Maybe dine-in is going to die”
Well, not all Restaurants are made equal. Some adapt quickly. Some take time. Some are too big to move. Some, very nimble. To club them all together and make bombastic predictions about their future without considering other events might not serve you well. If history is any reminder, restaurants companies like other companies elsewhere will emerge from this crisis one way or another. It’s quite possible that some of them will go bankrupt during this time. It could be that most companies might not bear the same look two years from now. It’s also possible that they might halt expansion and focus on the bottom line. But the industry, in all likelihood, will survive.
The question that remains, is will you be able to pick up the fork without thinking twice that who has used it before you? Popping up that bottle of your favourite beer, and not thinking twice whether it was sanitised?
Published By: akash On 03/31/21 8:47 AM