The major cities of India are under a lockdown with the Covid cases rising all over the country. The second wave of the virus was an unexpected hit towards the country causing a lot of casualties among the citizens and a lot of businesses going down. With regards to it, the National Restaurant Association of India has asked for a rental waiver. Let’s look at the further details and analyze the performance of the restaurant industry during the year 2020-2021.
Announcement by NRAI
On 19 May 2021, the National Restaurant Association of India (NRAI) has asked the owners of the malls to reduce or provide extra time for rentals during the lockdown phase in the country. They have also asked for a renegotiation on the commercial terms going forward as the malls are closed and this would further affect the restaurant and beverage, industry owners.
The concerns raised by NRAI
In a statement, the NRAI had conveyed that it had written to the mall to urgently solve the various commercial concerns that are faced by the restaurant and beverage industry owners. They have mentioned that in the letter the association has mentioned about two concerns which are waiver on rental charges and a revised model for revenue sharing.
The association has communicated that the mandated lockdown has forced the owners to shut the shops and prevent the malls to allow the entry of guests and customers or even staff and suppliers. It mentioned that it is a typical situation and would require the rental charges or the common maintenance charges during the phase of lockdown to be waived off completely.
It has communicated that the future agreements on rent have to be made keeping in mind the crisis that is faced due to Covid and the duration the business would take to reach normalcy. The shaping of the model of the post Covid era is expected to be based on a totally variable model.
The association has communicated that the revenue sharing model would interlink the fortunes of the mall owner and the restaurant owners and they would reach a situation where both of them wouldn’t profiteer from each other but support one another.
What is Revenue Sharing Model?
The retailers and the restaurant owners are found to be in talks with the mall owners to waive off the rentals during the phase of lockdown and would want to renegotiate their terms to continue in the future through a revenue sharing model as the road ahead is uncertain.
Restaurant owners are also trying to seek help from the government. The food and beverage industry employs around 7 million people and they fully depend on daily walk-ins which have caused a severe impact on the business due to the lockdown.
The president of NRAI, Anurag Katriar conveyed that they would not be able to operate on old costs with less than half of older revenue. He added that therefore he feels that the revenue sharing model is a very fair model where even if we see an increase in the business volumes at the early stage the malls won’t lose out.
Restaurant Business Post lockdown
The business will recover post lockdown when the social distancing measures and the concerns of consumers about the crowded place would reduce. NRAI also communicated that they do not expect the business to increase as soon as the lockdown is lifted.
They have conveyed that the business would just expect a volume of 30-40% of what they have been received the pre lockdown face and this would be possible by lowering the fixed costs of the restaurants.
The industry body had mentioned in its letter that considering the proportion of fixed expenses in the F&B industry, the businesses are expected to face huge operating losses as the fixed expenses are really high and this would be controlled only if the major expenses such as the rent would be converted into a variable expense.
Performance of Restaurant Industry 2020 to 2021
The restaurant industry had a huge downfall at the beginning of 2020 as there was a nationwide lockdown and moreover, it was totally unexpected and a new concept faced by the businesses. The normal restaurants have tried to manage their operating costs due to the food delivery startups keeping the orders in demand.
However, they also wouldn’t be able to increase their profit compared to the pre lockdown phase as walk in provide higher revenue for the restaurants. While comparing to the food and beverage industry in the malls they had faced huge losses as they were completely shut.
As soon as the lockdown was raised and the restaurants and the public started moving around with fewer restrictions. The restaurants and the F&B industry in the malls had seen a revival in their businesses but soon the second wave had hit the country and the major cities of the country are undergoing a lockdown.
Is restaurant business profitable in India?
Restaurant business is a lucrative business which if planned properly the profit margins can be up to 40% per month.
How many restaurants does India have?
India has about 53,000 hotels and 70 lakh restaurants in organised category.
What are five segments of the restaurant industry?
There are five restaurant segments, Family dining full-service, Casual dining full-service, Fine dining full-service, Quick-service(fast foods), and Quick-casual.
The road ahead for the F&B industry is going to be hard as the country would take some time to reach normalcy. Since there is also a new epidemic in the country named Black Fungus the future has become so unpredictable. The NRAI has also taken into consideration to raise concerns towards the food aggregators and the individual landlords.
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