Food for thought: Caterer survey results revealed
100 restaurateurs give their take on the industry
That the impact of the coronavirus has been devastating for the F&B industry in the Middle East is clear to see. Restaurants have been closed for weeks, customers have been locked down in their houses, and there’s no sign that a return to normality will happen anytime soon.
But just how much of an impact has it had? To get an idea of the scale of the crisis and to see where restaurateurs were hardest hit,sister publication Caterer Middle East surveyed 100 restaurateurs on some of the most important aspects of their business.
Mostly UAE-based, but with contributions from across the GCC, the restaurateurs were taken from across the spectrum of F&B but with a slight slant towards premium-casual and fine-dining rather than fast-casual and fast-food.
While all respondents gave their answers and commented under the condition of anonymity, some agreed to be interviewed and go on record with their insights.
The survey can be roughly segmented into five parts: Landlord/rents, delivery, staff, hygiene/social distancing, and hopes for the future.
When asked what area they would like to see more help from the government, the runaway leader, with 84% of participants agreeing, was on rent.
Despite the closure of restaurants and concerns that social distancing and therefore reduced numbers of customers in restaurants may go on for some time, only one respondent had been offered a long-term reduction in their rent. The most common answer (28%) was payment deferment, which many decried as simply moving the debt along and not helping the situation, and the second most common response (22%) was even worse – no help at all. This means that half of all restaurateurs will still be paying full rent for these months, either now or eventually, despite being unable to operate, or operating under severe restrictions.
Other offers from landlords included adjusting rent from fixed rate to variable, and one operator was offered one month for free when they renew their contract.
But the current situation could begin to force landlords to forge better connections with their tenants, says Glee Hospitality Solutions managing director Abdul Kader Saadi, moving away from the previously one-sided affairs where landlords held all the power.
“I see the relationship improving actually, as landlords will have to be more understanding, going as far as offering turnover rent, making it more viable for tenants – if the tenant is surviving or profitable and landlord still getting paid then it can only be a positive in the long run.”
At the very heart of the hospitality industry, and the core of any business, is its staff, and unfortunately, during the coronavirus pandemic it is them who have been hardest hit. Amongst the restaurateurs surveyed, a third have been forced to make redundancies to their staff already. With 60% putting some of their workforce on unpaid leave or reduced pay, it means less than 9% of business have been unaffected by the current situation and have been able to continue at full pay for their staff.
Some restaurateurs said they had so far managed to only cut the salaries of managerial positions and keep their line staff on full pay, while others had moved staff to a rotational basis.
Aswan Shiv Prasaad, managing partner of Socialicious Restaurant & Café, has kept all his staff on, saying it’s like they are a part of his family. “As much as it’s financially viable to run the business, I will keep them employed,” he says. “We haven’t reduced their salaries, rather we’ve given them 1.5 extra off days per week which helps us temporarily reduce the salaries by about 10-15%. Reducing the salary package might affect the morale of the people and their commitment to the industry.”
While others have continued to pay full salary for now, there was a general consensus that should the current situation drag on for too much longer, that will soon become impossible.
One of the most contentious areas of debate over the past two months has been around delivery – and delivery aggregators in particular.
With restaurants closed for dine-in, delivery became a lifeline for many and 25% of operators said they had either started delivery because of the closures, or were in the process of doing so.
Of the seven restaurateurs who said they had no intention of doing delivery, while some said it was because they couldn’t replicate their dine-in experience on the road, the majority said it was because of high costs associated with it.
When asked to rank delivery aggregators out of five stars, the majority of respondents didn’t hold back, with one star being the most common response, followed by two. Indeed 69% of restaurateurs had a negative opinion about delivery aggregators, with only 9% rating them above three stars.
While trying to be understanding of the situation aggregators have found themselves in, Ahsan Kahlon, co-founder of Reif Kushiyaki Restaurant in Dubai, says they should have done more.
“I understand that it’s a difficult time for all but in the face of adversity we should show solidarity. It’s not the aggregators’ fault that restaurants are now solely reliant on deliveries to cover their operating costs but a discount from their previous rates to show we’re all in this together would have been greatly appreciated.”
With 84% of restaurateurs saying they geel they have no choice but to use a delivery aggregator because it’s where the customers are, they are a “necessary evil”, said one.
But as Kahlon highlighted, the vast majority of restaurateurs believe the commissions that aggregators are charging are far too high.
85% of respondents said they were paying more than 20% commission on each order, while the same number believed that commission should be capped at less than 20%, with a third saying it should be under 10%.
Unfortunately, the fact is that delivery platforms such as Talabat and Zomato have spoken out and said they have no intention of reducing their commissions any time soon, which is perhaps why 82% of restaurateurs said there should be government regulation on the issue.
The likes of New York and San Francisco have seen caps put in place, but the Middle East has made no such moves yet.
With complete lockdown over and restaurants beginning to operate again – with 2m social distancing in the UAE – does this mean they will be returning to profitability any time soon?
“Absolutely not,” says Ryan Fourie, cluster general manager at Nakheel. “The restaurant industry has notoriously low profit margins as it is. There are a few restaurants which are lucky enough to be able to take the hit financially, but in the long run it's just not sustainable. Many restaurants rely on events and specials, and cannot survive without that.”
While 68% of restaurateurs said they had reopened at least some outlets at 30% with social distancing in place, some complained that that there was a still a significant lack of footfall around their locations.
“The message to the public is confusing,” said one. “We are opening malls and restaurants but it’s important to stay home. How does that make sense?”
With only 21% of respondents expecting to see their outlets operating at full capacity before 2021, the magnitude of the problem is clear. 76% of the restaurateurs we surveyed anticipate that they will have to close outlets permanently if the current situation continues for more than three months.
For restaurants to make money and stay in business, it is absolutely vital they are back to capacity as soon as possible. Otherwise, Kahlon says other bills must be massively discounted.
“If we cannot be allowed to operate at full occupancy (taking into account restaurants are not going to fill up overnight), then rents, licensing, fees, taxes etc. all need to be drastically reduced and back dated to when the lockdown started in March.”
One restaurateur said he expects closures to “come every month now” and only “ones with deep pockets and serious investors will make it through”.
The big question on everyone’s lips is when will we see the region’s F&B industry back at pre-Covid-19 levels and operating as we have become accustomed. Unfortunately, our restaurateurs paint a fairly bleak picture.
Only one person believes it will happen this year, with two believing it will never recover, and 27% not expecting it to happen until 2022 at least.
According to Prasad, that would have a devastating impact. “If the Industry takes until Q1 of 2022 to recover, only 15-20% of the current F&B industry will remain alive,” he predicts.
Omar Shihab, general manager of Boca DIFC, says things will be tough, but he has hopes for a brighter future.
“Rebuilding what we have lost financially will be hard and will take a long time. Perhaps what will be harder will be to use this as an opportunity to learn and rebuild a more sustainable future for our industry; one where we don’t have to be one of the worst affected when a catastrophe of this level hits. One where hospitality professionals are valued, and the industry is viewed with higher regard within society. A future where the industry is prized for its contribution to the economy. I am not sure how that will be done but I know that it will take a huge shift in mind set by all, most importantly by us industry professionals.”
Despite the doom and gloom surrounding potential restaurant closures, almost three quarters of restaurateurs say they are optimistic about the future of the industry.
Sweetheart Kitchen’s global brand and marketing director Adib Samara chooses to focus on the good deeds he has seen around him. “In Dubai we have seen individuals, businesses and government entities come together to develop volunteer networks and to support those in need, creating inspirational videos and spreading messages of love and hope.”
No matter how long the coronavirus continues to ravage the F&B industry, not just in the Middle East but globally, there is a light at the end of the tunnels, believes Kahlon.
“I’m optimistic because we are a social species and crave human interaction. After this pandemic ends it will take time but people will venture out and want to see friends and family, enjoy good food and have fun. Restaurants have always been and always will be a place for people to meet. I also think this crisis has served as a wakeup call for many in the industry to review their businesses and to make sure they are better run and prepared for the future.”