The economy in Quarantine – Most affected F&B restaurants, Tourism & Aviation, Retail
The coronavirus pandemic has affected the economy and the International Monetary Fund has declared that we have entered a global recession.
Most of the sectors are badly affected especially Tourism, Aviation, Retail, Real estate, travel retail, hospitality sectors like F&B restaurants.
With the majority of countries under lockdown for a couple of months, some are limping back towards normalcy.
Economists are predicting lasting changes in the way we live our life, work, and eat after we surpass the coronavirus pandemic.
The restaurant and dining out culture will also see a new transformation of demographics and new consumer habits.
My article is my attempt to suggest the F&B owners about the activities that could help them increase their sales and cope up with the current crisis. (even though my specialization is in Fashion and Beauty retail, but it is my honest attempt to understand F&B retail).
Challenges being faced by F&B Restaurants
Lack of Industry & landlord forums
F&B industry does not have a dedicated platform wherein both the restaurant operators and the mall owners could come together under one industry banner, supported by the local authorities.
Currently, the F&B restaurant owners are fighting for their survival, trying to negotiate their leases with landlords or rent relief packages.
learn about the business model of food aggregators, click here.
Reopening with the occupancy restrictions.
While the COVID-19 lockdown reduces the risk of transmission, it has also meant that revenues dropped to zero, with businesses struggling to find the cash to pay their employees and make rent.
Perhaps the pandemic is merely exposing the cracks that already existed.
Around the world, restaurants have been forced out of business.
Even the partial opening of the malls in the Middle East region is not going to resolve the issue since the restaurants have been capped with a 30% occupancy limit.
Ironically, the rent remains 100% whereas the projected sales are 70% lesser than the pre-covid19 periods.
Most of the restaurants have taken a call to remain shut as it would be impossible to meet operational overheads with the cap of 30% occupancy.
The need of the hour is the long term rent-free period (ranging from 4-6 months) to F&B restaurant sector.
Changing consumer’s behavior
With a long duration of lockdowns, the probability of consumers developing new habits like less dependence on dine-out vs ordering food online.
People are scared to venture out in crowded places and that’s going to affect the business of fine dining restaurants.
High service charges and commissions charges from the food delivery app aggregators are further adding to the restaurant owner’s pain points.
See the invoice illustration as below (this illustration has been circulating off lately on social platforms)
Rebuilding diner’s confidence
Restaurants have a more urgent task of rebuilding confidence.
Compliance with authorities on the health & safety guidelines, social distancing protocols.
Restaurants will need to invest in contactless deliveries and develop delivery-specific menus.
They will also need to think about packaging more innovatively, since most of the time, packaging for home delivery is just an after-thought,
The big challenge would be for coffee shops wherein the customer visit for socializing more than for having a cup of coffee.
Now with new distancing norms, how the consumer’s behavior changes will be a thing to study.
Check a few innovative concepts that F&B restaurants are implementing in their concepts complying with the social distancing norms.
Restaurants Post covid19
The ways to cope up with the challenging times.
Innovate your services- Go Micro (Go local)
As diner’s become more conscious about the health & safety standards, the restaurants would have to comply with stringent checks like temperature checks, contactless servicing.
Third-party delivery companies and restaurant concepts will have a stronger focus on a touchless customer service customer experience.
To drive footfalls, F&B restaurants would have to use Micro marketing approach i.e.
Micro social media marketing focused on community-based advertising to reach out to customers.
For example, homeowners associations, next-door neighbor sites, city blog pages.
Future of Restaurants – Rise of Drive through concepts
Restaurant concepts will invest in a drive-thru or pick-up window options in construction designs.
Concepts will reduce the dining room footprint as they continue to see a trend of more takeout and delivery.
Speeding up of Digitization Initiatives by restaurants
Many QSRs that built their own online-ordering mechanisms on their websites or mobile apps are working to make sure these can handle an increase in demand.
Meanwhile, companies that don’t have their own online capabilities are partnering with call centers, delivery aggregators, and other third-party providers.
Though serving customers through such partnerships yields significantly lower margins (because aggregators, for instance, typically take straight cut of 25 to 30 percent of the value of each transaction plus other marketing fees & returns if any, which totals to approx. 65% of the order value).
Restaurants collaborating to manage last-mile deliveries.
Most of the F&B operators are collaborating amongst themselves to develop their own fleet of delivery vehicles rather than depending upon food aggregators.
The aim is to have a lesser dependence on food aggregators.
Check the news article published in Gulfnews
Learn more about the last-mile delivery, click here.
Innovate to develop new revenue streams – Do it yourself meal kits.
During this crisis, consumers have become more willing to have a broad array of food products delivered to their homes. For example, beverages, bread, and fruit—products that consumers have historically preferred to consume in restaurants or buy in grocery stores—now increasingly appear in restaurant-delivery orders.
Some restaurants are therefore expanding their delivery menus, giving customers more choices in both fresh and prepared foods and even, in some cases, offering meal kits that customers can put together at home.
Innovative communication campaigns – FMCG Food brands
With people spending almost all their time at home, FMCG Food brands are shifting their marketing spend to home-based channels, such as TV or online, and from sports channels to news outlets.
Some of the celebrity chefs have started their online cooking videos from their homes as well.
Rise of virtual kitchens entering the B2C segment.
‘Chef ME at Home’ (www.chefmeathome.com).
The aim of this platform is to provide unique access to top restaurants’ quality ingredients to consumers – cooking enthusiasts and home chefs – at a very affordable price with a wide and exclusive offering.
Always remember, every challenge brings with it an equivalent opportunity for growth.
To end my article, let me narrate you a couple of inspiring stories of staying resilient in tough times.
George Bell, then, CEO of m/s Excite, refused to buy Google for $750,000
Today: Google is now worth more than $498 billion (and where is Excite?)
Ross Perot refused to buy Microsoft for $ 60million.
Today: Microsoft is worth $ 507 billion & growing daily (and nobody knows where Ross Perot is?)
I hope the article may provide some insights to F&B operators to thrive amid crisis.
Special thanks to my friends in restaurant businesses to share their insights with me during the drafting of this article. Mr. Anoop Ravindran, thanks for your insights shared.
References: www.caterermiddleeast.com ; www.mckinsey.com ; https://techcrunch.com/2020/03/16/the-hidden-cost-of-food-delivery , www.thenational.ae ; CEOs survey ; www.qsrmagazine.com ; Retail ME magazine , Gulfnews.
About the author:
Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion, and fragrances retail & FMCG sector. He believes in empowering business owners with his wisdom & experience of around two decades in the industry.