Covid's devastating blow to India's restaurant industry

Indian restaurant industry shrank 53% in 2021

Restaurants account for approximately 3% of India’s GDP; they employ 7.3 million people according to the National Restaurant Association of India. And in 2021, the Indian restaurant industry shrank 53%. Nearly 2.4 million people lost their jobs and 25% of the food business operators permanently shut down. Restaurateurs and the operators in the industry faced unprecedented levels of heat in the history of the industry.

There’s none better to learn from what it felt like running a restaurant on fumes than a passionate restaurateur, Chef James Ford, who gained popularity inspite of the pandemic. James moved to Bengaluru with a dream to bring British cuisine to India. He launched Britalian Kitchen in October 2019, merely months before the pandemic hit. The cafe serves one of the finest English breakfasts in a city that is deprived of authentic European kitchens. Jacked potatoes and Yorkshire pudding are just two of the rare delicacies on a menu that is truly a class apart from the average European fare in Bengaluru.

Within 5 months of the launch, the cafe garnered glowing reviews from the customers and became highly rated. Bengaluru’s renowned food bloggers, Chilly Studio and JustBeans listed the place as a must-try in their curated list of cafes. Shortly after, customers from all over the city landed there to try James' sophisticated, stunning, and sparkly desserts and baguettes — if you are fortunate, you could find them lined up right as you step into the charming European style cafe with the 90’s vibes. But, all that changed swiftly when the pandemic hit.

As the first lockdown came into effect, Britalian Kitchen had to close its doors in Indiranagar. The hip and swanky neighborhood that is known for its cozy cafes filled with gentrified crowds also meant steep rents. Forced to shut the cafe, James had to cut costs to protect his dream. What was initially thought to pass in a few weeks lasted months. Realising the situation is not temporary anymore, he packed up everything and moved it into a storage unit. It was as if James' wings were clipped even before he could start flying. And he was not alone. During the first wave of the pandemic, restaurant sales plummeted 90% since the lockdown began on March 25th 2020 — according to CRISIL Research, a leading independent research organization, this was partly because India’s lockdown was globally one of the strictest.

A few months later, when restaurateurs slowly started to get back in business, James felt that it was time to take a fresh crack at it. As he prepared to reopen Britalian Kitchen, he received a call from the previous owner at the Indiranagar location. Even though he was offered a 50% reduction in the rent, the price no longer made sense due to wafer thin margins and uncertain market conditions. Alongside restaurants, many small businesses that went belly up were forced to terminate their rental agreements. Commercial property owners certainly felt a pinch, especially if they solely depended on rents for survival. The tables had turned between property owners and renters. Owners sought out novel methods to mitigate losses — revenue-sharing agreements with restaurants and timed discounts on rents.

By February 2021, James found a new home for the Britalian Kitchen in Jayamahal. This time, at a rent less than one-third of the previous location. Not even a month passed after the successful reopening, a second lockdown was imposed. The first wave left the small business owners bleeding. But, it was the second wave that knocked them out of the blue — before they had any chance to gather themselves.

By the time James reopened the cafe for the third time, the pandemic downtime had depleted most of the hard-earned operating capital and profits that James had pooled in for years —including his personal savings from decades. Recounting the turbulent times during multiple shutdowns, James felt bogged down from all the hiring, firing, rehiring, and training the operating staff; every time he spent months training the personnel, all the effort went down the drain as they were laid off shortly after. It was both mentally and physically taxing.

Today, James is selling Britalian Kitchen and is moving back permanently to the UK. With what happened to half the industry, he is concerned it might be the end of the road for his cafe. According to Bengaluru Hotel Association, more than 2,000 restaurants out of 5,000 were permanently shut down in 2021. P.C.Rao, President of BHA said, “There are no buyers even if we are ready to sell the restaurant set up for half the price. Government is not even waving off tax on us, no subsidies and no compensations either.”

While the governments in the west offered grants and subsidies, the Indian government barely made any moves to exhume the dying small businesses. Neither did the insurance companies cover such events. Nor did the banks display any mercy towards small business owners—they clamoured over owners for outstanding monthly instalments inspite of the grave business conditions. Failing to make the payments on time, businesses faced suspension of payment infrastructure, thereby bringing operations to a standstill.

However, humanity did come to restaurants' rescue—customers who had an emotional connection with the businesses came together to support their favourite restaurants. Tech enthusiasts launched sites to pool donations online. Many bought vouchers that could be redeemed at a later point. This helped a few restaurants maintain the cashflows during a time when deliveries and takeaways were the only recourse to stay afloat.

Though the upscale restaurants had better capital structures to keep their cashflows in check, they found it challenging to justify the prices during the take-away-only times. Bengaluru’s popular fine dine restaurants like Salt, Toscano, and The Reservoire came up with delivery specific menus with comparatively lower prices than the dine-in options. New combo meal options were launched exclusively to delivery apps. To compensate the prices for the missing in-person hospitality and ambience, chic packaging became a mode to deliver luxury and finesse. When the orders came in slow, a few tech-savvy chefs got creative with virtual cooking classes over zoom for families looking to cook together at homes.

However, not all the upscale restaurants remained formidable enough during these challenging times. Arvind (name changed to protect identity), who was a manager at one of these upscale Italian restaurants, Italiano (name changed to protect identity), with multiple branches said the pandemic turned his life upside down for more than two years. If you found the plight of restaurants to be bad, the operating staff in the industry had it worse. Prior to joining Italiano, Arvind worked as a senior bartender at a reputed high-end restaurant in Kolkata. He lost his job along with everyone else the restaurant was laid off as the first wave of the pandemic hit. As the sole breadwinner of his family of four, including elderly parents, he had to find a way to make ends meet.

Inspite of being trained in hospitality management from Taj Hotels and a professional with 3 years of experience in bartending at popular restaurants, Arvind struggled to land a job in the industry. Though he felt dejected, he joined the State Bank of India (SBI) customer support team to survive. Narrating how he went days without food and lived with 5 people in a single room, his eyes were swell with tears. But, his determination to get back to the restaurant industry was unwavering. He jumped at the opportunity when his previous manager at Kolkata referred him to Italiano.

Arvind was so excited that he sold his laptop to purchase a flight ticket to Bengaluru from Kolkata and joined Italiano overnight. Only when he received the offer letter did he realise that he was going to be paid half the salary offered during the interviews. Partners of the restaurant reassured him that it was a temporary situation until the pandemic subsided. Arvind stayed put because resigning only meant more problems. But, as time passed, things only looked downhill. Italiano’s staff of 80 was cut back to 7. Arvind was the swiss army knife managing the entire place, costs, and the kitchen. He was running on fumes while getting paid a salary that hardly covered his bills.

Unable to bear the atrocity any longer, Arvind quit his job and moved back to take care of his parents. Fortunately, a month later, he landed a new position as a captain at one of the better-established microbreweries in Bengaluru. Arvind’s story is only one in 2.4 million people laid off—most of them faced some of the most gruesome experiences of their lives. Some of those people returned to their ancestral homes to farming. And some others found odd jobs at construction sites. Those who managed to divest and find jobs in other unaffected sectors survived. But, those that never worked outside the restaurant industry felt decimated as they remained unemployable—the emotional turmoil they experienced due to the pandemic is indescribable.

That said, the operating staff that was relatively less constricted worked for the restaurant conglomerates with large treasuries. Some restaurant chains retained half their staff while asking the rest to stay home. Those who stayed back home didn’t receive any benefits and received their salaries from the trust fund instead of the company’s account. One of my sources that worked at multiple chains revealed that his peers at McDonald’s were only paid 70-80% of their regular salaries. And Domino’s often delayed the payroll by months.

While it seemed obvious that the small business owners incurred catastrophic losses, one might think that the restaurant and coffee chains remained unassailable. But, the conglomerates took equally heavy blows to the chin. Thanks to their deep pockets, The only difference they were able to weather the storms. Coffee chains such as Starbucks and Cafe Coffee Day closed tens of stores across all major cities in India. Especially, the stores in malls fell prey due to high rents and maintenance bills inspite of remaining shut. It’s evident from Starbucks' move to renegotiate rental agreements with property owners that the chain is trying to cut back on losses incurred due to the pandemic. The larger conglomerate reportedly took a $3 billion hit in revenue due to the pandemic.

Especially, coffee chains and restaurants in commercial areas that depended on the office crowds were found deserted during the height of the pandemic. Due to mandatory remote work, many of their regular customers left the city. As remote work turned into a new norm, they fear the chances of bouncing back from this dire situation. Catering services that depended on offices and large gatherings faced extinction within weeks into the pandemic. Even though the restrictions eased, the malaise with gatherings spread amongst people.

Amidst all the desolation and chaos, there were a few restaurants that managed to bounce back to their former glory. Amongst them is the much talked about weekend destination of Bengaluru, The Bier Library. Prior to the pandemic, one would be fortunate to find a place here during weekends as it was almost always buzzing with full tables. The Bier Library is a place that excels on every dimension: ambience, food, service, drinks and speed. The beautiful microbrewery was built on the family-owned property of Hemanth Reddy, who is one of the three partners. Hemanth was all smiles as he says that the business is as usual after the lockdown. Though the place was shut for a few months during the lockdown, he says the business quickly recovered after they reopened. It’s important to note that The Bier Library is also the third highest-grossing hangout in the city by numbers.

Though the effects of the pandemic on the restaurant industry feel like a lot to take in, there is a silver lining. Minimised physical interaction lead to accelerated adoption of technology. From hygiene being a kitchen conversation, it evolved into a decisive factor for anyone looking to dine out. Mandatory face masks, gloves and temperature checks became the new norm and hopefully, here to stay much after the pandemic situation. Some luxury hotels like The Roseate installed cameras in their kitchens for anyone to ensure transparency and trust in the operations. Digital menus with table specific QR codes, food orders and payments done digitally not only reduced the physical interaction between the customers and restaurant staff but also improved efficiency in placing orders—it reduced the overhead the staff experienced during peak business hours. Dotpe was a widely adopted solution to take the restaurant operations digital.