India's restaurants are struggling as pandemic scare keeps customers away

Online takeaways are not enough to keep the businesses afloat and many remain closed amid weak demand for dining out

Chefs prepare food as they stand in boxes marked out to assist social distancing at a New Delhi restaurant. Bloomberg

Business has never been so bad for Banjara Restaurant in Mumbai.

Like so many millions of eateries and cafes across the country, the restaurant was forced to close its doors to dine-in customers in March, as the coronavirus pandemic gripped the country of 1.3 billion people. New Delhi enforced arguably one of the world's strictest lockdown in a bid to restrict people's movements to contain the spread of the virus through Asia's third-largest economy.

Although the economy is opening up gradually despite a rise in the infection rate, many lockdown restrictions still remain in place in Mumbai. India's financial capital has the highest number of cases and Banjara, the multi-cuisine restaurant, is only offering delivery options via popular online apps including Zomato and Swiggy to try and keep its staff and customers save. However, the business it is generating through online sales is not even enough to cover the costs. The pandemic caught everyone off guard, says the management.

“This is a situation which we had never anticipated ... so we were not ready,” says Subhadeep Datta, the general manager of Goldfinch Hotel, which houses the restaurant. “We're trying to adjust to the situation as the months pass by. We don't know when the restaurant will be able to open [for dine-in customers].”

Even online orders are tough these days because of concerns that delivery staff might be infected, and a preference for cooking at home to limit potential exposure to the virus. The restaurant's current online orders are only at about 40 per cent of its online business before the pandemic, he says.

Banjara, however, managed to avoid laying off its staff. But to keep the business afloat, the management has cut the pay by 30 per cent, says Mr Datta.

The National Restaurant Association of India says about 2 million people in India's restaurant industry are at risk of losing jobs because of the current situation.

"The reasons for the heartburn aren’t difficult to fathom,” according to Crisil, an Indian ratings and research firm, which is part of Standard & Poor's. “The organised restaurant sector has seen a 90 per cent reduction in sales since the lockdown. And when the lockdown is lifted, the rebound is expected to be only gradual.”

Although many restaurants chose the use of online apps to keep business ticking over during the lockdown, their revenue is a far cry from pre-coronavirus levels. Online orders, according to analysts, have slumped 50 to 70 per cent before the pandemic gripped the country.

Crisil forecasts that once India's lockdown ends, it will take a year for the restaurant industry to recover, and some may not have the financial muscle to survive that long.

Half of the country's restaurants are already seeing serious stress in their balance sheets, it adds.

Organised outlets account for 35 per cent of India’s restaurant industry, with their revenues estimated at 4.2 trillion rupees (Dh202 billion) in the 2019 fiscal year, according to the consultancy.

“India’s organised dine-in restaurants are on course for a 40 to 50 per cent cut in revenue this fiscal [year] because of the disruptions caused by the Covid-19 pandemic,” the report says.

Restaurants in some states including Delhi have been allowed to reopen in June, as the central government is permitting a gradual easing of lockdown, should the individual state governments consider it appropriate to do so. Restaurants that have reopened have to follow a strict set of guidelines issued by the government, including keeping tables six feet apart, using disposable napkins instead of cloth napkins, thermal screening of staff and operating only at half of their seating capacity.

Prime minister Narendra Modi's government is eager to revive the economy, which like so many others across the globe, has taken a serious battering by the pandemic and resultant lockdowns.

That is the reason why New Delhi is willing to ease restrictions despite a rise in the rate of infections in the country. However, despite the partial easing on restrictions, the pickup in restaurant business is not what the policymakers were hoping for, as customers remain wary.

“The restaurant industry is one of the sectors that's hardest hit by the lockdown,” says Sachin Bhalerao, the founder of Walktails Events and Rest-o-bar Consultancy, based in Mumbai. “The fear of Covid-19 among customers is much more deep-rooted than anticipated.”

India continues to see record daily spikes in the number of Covid-19 cases, with confirmed infections edging closer to 395,048 and fatalities nearign 13,000, according to Johns Hopkins University, which is tracking the disease globally.

It is a challenge to balance the health crisis and limit the slowdown in the economy. Investment bank Goldman Sachs forecasts India's GDP growth to contract 5 per cent in the current financial year, which runs until the end of March, in the aftermath of the pandemic.

"Many people in India have lost their jobs or they haven't been paid for two or three months, so no one has money to spend unnecessarily on eating out," says Radha Shinkre, director at Sincro

Many businesses, including restaurants, have opted not to open up despite permission to restart operations. Weak demand and in some cases, labour shortages have forced them to keep the shutters down, as most migrant workers have returned to their home towns and villages during the lockdown.

Sincro restaurant in the coastal state of Goa, which specialises in coastal cuisines, is among those keeping its doors shut to dine-in customers, despite having the permission to entertain them.

“Our restaurant is only open for takeaways with a very limited menu ,” says Radha Shinkre, director at Sincro. “People are not going out to eat in Goa because of the [pandemic] scare.”

The situation is so bad that the restaurant is doing only three to four takeaways a day. Before the pandemic, the restaurant would serve about ten times the number of takeaway orders and it could seat 100 customers at a time.

“Many people in India have lost their jobs or they haven't been paid for two or three months, so no one has money to spend unnecessarily on eating out,” says Ms Shinkre. “We really don't know when we'll reopen [fully].”

Anurag Katriar, the president of the National Restaurant Association of India says “responsibility lies with states, restaurant operators, [their] landlords and other stakeholders to come together and collectively ensure that the guests get a hygienic, safe and familiar experience as they step into their favourite restaurants”.

He also adds that to help make reopening financially viable for eateries, “keeping in mind that the business volume is expected to be very subdued for quite some period, it is very critical for landlords and operators to arrive at fresh commercial [and rental] terms at the earliest”.

The sector can benefit from measures taken by the government and central bank to help ease the financial stress, such as a moratorium on loans and a automatic loan scheme for small and medium-sized enterprises. However, industry players lament the absence of a financial package specifically for the hospitality sector.

Many restaurateurs are concerned about how long it will take for their customers to return to the culture of dining out.

“Everything's so changed,” says Mr Bhalerao. “People don't want to [take] risks."

Some restaurants are trying to adapt to the new realities and are trying to come up with solutions such as digital payments, pre-booking of meals, and guaranteeing enhanced hygiene measures to win the confidence of customers.

But all this requires investment by restaurant owners, which in turn will drive up costs for customers too.

“Restaurants will have to rework their business models and overcome operational challenges,” says Anjali Nathwani, the associate director of Crisil Research. “With consumers turning more health-conscious, hygiene protocols at restaurants and supply chain will need to improve materially, which will increase cost.”

It is a difficult thing to do when revenues are down and most restaurants are already running on fumes.

“To manage liquidity constraints and cash flows, many restaurants are already seeking concessions or deferment of rentals,” Crisil's analysts write in a recent report. “Players with high debt levels will face pressure to shut unprofitable outlets to save costs and raise money. While large players with low debt will be able to raise money, business revival remains a big question for them, too.”

Crisil points out that a weaker restaurant industry has a knock on effect on several other sectors, including “farmers, dairy producers, food processors, suppliers and logistics and delivery partners”.

Mr Datta says that although there is no clarity on when his Mumbai restaurant will be able to reopen for dine-in customers, the team has already started to put a strategy in place to adapt to the new reality.

The restaurant was well known for its buffet meals, but he says those will have to be done away with when the eatery reopens because of the contamination risks.

“We have redesigned out restaurant, reducing the number of covers [tables] so that the social distancing can be maintained,” says Mr Datta. “We're also planning to launch digital menus that people can view on their personal phones instead of printed menus. We want to make things as contactless as possible. The staff will wear masks and gloves. There are changes and we're trying to adapt to the new normal.”