Restaurants on expansion spree as sales revive

“We had 39 outlets before COVID but we shut down a few in the last few years and now have 31 outlets in the country. The plan is to take this to 60 outlets by the end of this year,” said Rahul Singh, founder and CEO, The Beer Café.

New outlets in metros will be owned by the company, while those in smaller towns will be run by franchises, he said.

K Hospitality, the owner of popular eateries such as Copper Chimney, Bombay Brasserie, Irish House and Josh, has plans to expand all of them. Copper Chimney has opened its first outlet in Delhi-National Capital Region (NCR), where it plans to launch six more soon. T

The Chocolate Spoon Company, which runs Sassy Teaspoon and House of Mandarin besides other restaurant brands, plans to expand Sassy Teaspoon pan-India, with initial stores to be launched in Delhi-NCR.

“We had started expanding our brands before the pandemic but then COVID disrupted our brands. But now we are looking at expanding at a much larger scale,” said Rachel Goenka, founder and CEO, The Chocolate Spoon Company.

Revenge dining

The expansion plans come as restaurants witness a revival in demand with the return of normalcy. According to Kabir Suri, co-founder and director of Azure Hospitality and president of the National Restaurant Association of India (NRAI), most restaurants across the country reported sales at near pre-Covid levels in March.

“Restrictions such as 50 percent occupancy were lifted in March and wearing masks was not compulsory in the month. These factors contributed to generating revenge consumption in March,” said Suri.

According to Suri, the quarters ahead would finally restore growth in the industry.

Food deliveries, which had seen a significant jump during the last three waves of the pandemic, have subsided a bit. “The drop is, however, very slight and we believe it will remain strong going ahead as deliveries do not eat into the dine-in business,” he added.

A recent survey conducted by the Retailers Association of India showed that quick service restaurants grew 21 percent in the March quarter compared to the same period last year and in comparison to the pre-COVID period, the segment expanded 3 percent. During the last quarter of FY21, the segment contracted 15 percent compared to the year-ago period.

Inflation soars

Even as the restaurant industry emerges out of the crisis posed by COVID-19, it is confronting another as rising prices of commodities and food items bloat costs.

“We are facing inflationary pressures today with the increasing cost of goods. The supply of oil and certain food grains has been affected due to the war (in Ukraine) and COVID. Also, farmers and certain industries in the food and beverages space were not prepared for consumption to rebound in this manner, and these things are leading to disruption in supply,” Suri told Moneycontrol on the sidelines of the Cloud Kitchen Convention in Mumbai.

According to Suri, operational costs for the industry have jumped by 10-12 percent due to inflation. Most restaurants so far, he indicated, have not passed on the costs to the consumers, apprehensive that it would hurt demand. Tthe industry will implement measured price hikes going ahead.

“It all depends on how the forces in play, such as the war, pan out,” Suri added.

Inflation could also have an impact on the expansion plans of restaurants. Prices of commercial real estate are also climbing with an increase in demand. Retailers from across industries are on an expansion mode and are actively scouting for locations. Shopping malls, which had seen the exit of many retailers during the pandemic, are now back in demand and have hiked rentals.

“Location is very important for restaurants and with real estate bouncing back, shopping malls have increased prices and occupancy rates have gone up by 10-15 percent,” said Reetesh Shukla, business head, Charcoal Concepts, K Hospitality Corp.

Restaurant owners are also looking at high street spaces, which have gained popularity during the pandemic, as an alternative for opening outlets given the high rentals in shopping malls.