Industry Brief
Indian food service industry is the largest service sector in India after retail and insurance. It is 20 times of the film industry, 4.7 times of hotels and 1.5 times of the pharmaceutical sector. The Food Service industry is evolving rapidly with India being the youngest country with internet and tech-savvy consumer base, having a high disposable income with little time to cook indoors.
The market is then expected to grow and reach $154.34 billion in 2023 at CAGR of 11.51%.
Industry Disruptions gifted by Pandemic
Due to pandemic & nationwide lockdown, customer’s priorities & needs are changing and this industry has been impacted a lot. While online food deliveries were allowed even through the lockdown, they were only operational in selected cities. Moreover, only 20% of the restaurants listed on online platforms were open for deliveries and they were also operating only at 40% of their normal sales volumes. Currently, there are two challenges for the restaurant industry. First, nearly 25% of the restaurants will shut their operations and second, nearly 40% people within the industry will lose their jobs.
Challenges faced by the restaurants
Getting people back into restaurants and regaining their confidence once the lockdown is over is likely to be the next big hurdle in reviving the industry. The fear of COVID-19 among customers and a hesitation to spend might prove to be a death knell for eateries. Following are the major obstacles that the industry may face in the near future:
Operating hours need to revive: With latest change in the norm of Sunday being a complete lockdown in some cities, restaurants lost another 30% of the sale as majority of the businesses were coming on weekends. Also, on weekdays early closing of restaurants is also a major drawback as generally people step out after 8 pm
Hiring and retaining employees: Restaurant industry employed highest number of people & also the staff turnover is high in the market, with increase in hiring costs. Now the restaurants need to think upon the recruitment strategy & also dedicate time & money towards employee retention activities.
Managing Operational Cost: Some of the restaurants have resumed their operations but there is not much sale due to guidelines as well as fear of eating out is still prevailing among people. In all this circumstances, managing & covering up the operational expense is very difficult for the owner especially rents of the outlet.
Recovery of losses: The restaurants may take a while to make up for the losses occurred during the shutdown period. They may have to pay their employees for the lockdown period despite no business being done.
Less people will visit restaurant: People will refrain from coming to restaurant due to fear of safety & will rely more on Online delivery platforms. Generation Z consumers were already enthused by the chef-led delivery brands that provided high-quality food cooked in cloud kitchens and home-delivered. Restaurateurs may want to channelize on such ideas in future that don’t need large capital for investment.
Increasing competition for restaurant business in India: New Restaurants or takeaway outlets will pop up in the market & there are chances people may switch to new restaurants as they want to try new things every day.
Future of Restaurants
As the country begins to open up in a staggered manner post-lockdown, the restaurant will need to look at two or three different streams of revenue, considering low chances of people visiting the outlets. During lockdown, delivery of food increased & due to which even 5-star hotels are thinking it as an alternate revenue but of course it will be less compared to dine in. Owners need to rethink on the business model as the consumers preferences are changing. Below are some trends that restaurants can adopt:
Hygiene
It is one of the factors where consumers are more concerned. Restaurants can add CCTV’s in the kitchen or develop a Glass walled Kitchen, where consumers can see their about the food preparation which helps in re-building trust amongst the consumers
Pre-booking
It should be made mandatory for all the visitors which can help the restaurant to maintain social distancing as well as can adhere to the guidelines published by the government. Seating arrangement should be changed in order to maintain Social Distancing as restaurants will be allowed to operate with 60% capacity
Seating Arrangement
Restaurants need to rearrange the outlet layout due to social distancing. They can add shields around the table or put some soft toys and increase the gap between 2 tables
Safety Measures
It should be made mandatory for all the employees as well as the consumers. The outlet should be sanitized every 4 hours and tables should be sanitized after every use. PPE equipments should be mandatory for all the employees. Also, a sanitization station should be kept at the entrance
Menu revamping
It should be done due to unavailability of certain raw materials. Also, Consumers preferences are changing as they want to have something which is healthy and organic which helps in improving their immune system
Increase in Delivery
Due to less footfalls in the restaurants & increase in delivery, there is an opportunity for existing as well as new restaurateurs for developing a new revenue model through Cloud Kitchen as people will still order food from outside & will refrain from dine in experience. People are still willing to pay for healthy & hygienic food.
Due to corona, Delivery Model will take its speed & restaurants will invest in contactless deliveries and develop delivery-specific menus. Brainstorming on innovative packaging should be done by keeping safety parameters in mind
Gourmet Street Food
India is known for its street food and people love it. However, with hygiene and cleanliness being the primary area of concern after COVID-19, street food is not going to be people’s preferred option for eating out for months to come post the pandemic. Thus, we will see a rise of many gourmet street food brands in the organized sector that can provide great taste coupled with hygiene and convenience of delivery
Technology Adaptation
Restaurants will adopt technologies for increasing the safety & building trust among the consumers. Guest-facing technology that minimizes contact — mobile wallets instead of cash or credit cards, QR codes for menus on personal devices will improve the dining experience & will become more isolated.
Even online delivery partners Zomato, is planning to add a feature of contactless order & payment while dine in from their application.
Some restaurants have adopted Robot technology as well in car dine in to reduce the human contact
Re-building Customers confidence
Restaurants need to showcase their procurement & food development process which can give confidence among the consumer & ultimately can come order from the restaurant
Various technologies will evolve in the restaurant industry for minimizing human touch:
Author:
Saloni Surani, a Strategic Business Consultant who pursued her Masters in Management & has an eclectic experience in J.Hirani with various industries like Manufacturing, Real Estates, Hospitality, FinTech, etc. She is a keen observer who silently achieves her goals and happily surprises everyone with the results. Adapting & learning new things has been her forte, which helps her in getting new idea always, anyone who wants to refresh their values – just look at her.
About J.hirani: J.hirani is a Strategic Transformation team which works as a growth partner for different organisations in various industries by providing services like Agile transformation, Scenario mapping, Strategic alignment, Balance scorecard, Digital transformation, Incubating new ventures, Operation excellence and Aligning human capital.
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