The restaurant industry was severely impacted by COVID-19, and this was evidenced by job losses and restaurant closures. As restaurants had to pivot to an online-only model to survive, many closed down, but while evidence so far was anecdotal, a report published by the National Restaurant Association of India (NRAI) on Tuesday, October 25, showed that in FY21 (Apr 2020 to March 2021), the Indian Food Services industry declined by 53%.
It added that the pandemic led to the closure of over 25% of food business operators, and it led to nearly 24 lakh jobs lost, out of a total workforce of roughly 73 lakh. The report does not record the number of people who were temporarily unemployed for months or were paid only a part of their salaries.
The overall employee count had reduced by 32% post-lockdown, and even after the second lockdown, the figure stands at a similar 31%, the report said. “This might increase to some extent as the situation improves further but is not expected to go back to Pre-COVID levels, due to business closures, and businesses moving to leaner structures & accelerated automation of processes and IT adoption Post-COVID,” it said.
The report said that the industry was estimated to be with Rs 2 lakh crore in FY21, down from Rs 4.23 lakh crore in FY19. However, it expects to recover this fiscal year to 85% of pre-COVID estimates. It has recovered considerable ground during FY2022 (April 1, 2021, to March 31, 2022), but earnings are still less than the projections made for the financial year in 2019. The sector is expected to notch up a combined revenue of Rs 4.72 lakh crore in FY2022, but it will be still less than the projected Rs 5.46 lakh crore.
The NRAI said that the south, west and north were more severely impacted as compared to the east. Kerala figured in the high impact category, whereas Bengaluru was partly in moderate impact and partly in high impact.
“Bangalore & Kerala were highly impacted too, witnessing restaurant closure and restrictions in timings and capacity throughout,” the report said. Cities like Chennai, it said, recovered faster than Bengaluru, largely dependent on COVID caseloads and the opening of food services.
Revenues of restaurants took a beating due to the pandemic, and according to the report, the average revenues of restaurant after the first lockdown was down by 46% as compared to pre-pandemic levels.
Presently, after the second wave, there is an increase in business as compared to after the first lockdown, it said.
“Revenue Post Lockdown 2, hence saw a growth of 33% compared to Lockdown 1; though overall the industry is still to get back to Pre-COVID levels as Revenue Post Lockdown 2 is still at degrowth of 28% compared to Pre-COVID levels, i.e. it is 72% of Pre-COVID levels,” the report said.
Average profit of restaurants was down by 88% to pre-COVID levels after the first lockdown compared to pre-COVID levels, and after the second lockdown it is by 33%, the report added.
“...the costs occurring to the business increased due to implementation of COVID protocols. Businesses had to pay for employee salaries, PFs, Health insurance etc, along with Rentals and Licence Fee to operate, among other costs,” it said.
Delivery took off during the time period, with the report showing that pre-COVID, 10% of restaurant revenues came from food delivery, it was 29% after the first lockdown and 33% after the second lockdown. The average order value for deliveries has increased as well.
The return of diners may be the reason why the report is bullish about the years ahead, predicting that the organised sector will achieve a compounded annual growth rate (CAGR) of 8% to crank up a total turnover of Rs 6.21 lakh crore in FY2025.
For the first time, the share of the unorganised market has dropped below 50% – it is pegged at 46.3%. This is in comparison 53.7% share of the organised sector, of which the standalone restaurants account for 35.3%, chain restaurants 16%, and restaurants in hotels stand at 2.4%.