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Covid-19 second wave: Job losses, pay cuts back to haunt restaurants

The second wave of Covid-19 has hit the restaurant industry hard since lockdown-like restrictions have led to eateries only being allowed to offer home-delivery and takeout services.

April 23, 2021 / 02:28 PM IST
Restaurants shut amidst COVID-19 second wave lockdown

Restaurants shut amidst COVID-19 second wave lockdown

Sangram Tomar, a 47-year-old vendor selling parathas, naans, chapatis and curries at his eatery near IIT-Delhi, had just returned to the city in March. He had spent the last year holed up in his village in Saharanpur, Uttar Pradesh, where he had gone following the lockdown imposed in April 2020.

Business was showing signs of picking up at his restaurant but the lockdown announcement on April 21 came a shocker. “The sudden lockdown in Delhi means that my business comes to a grinding halt. I am currently staying at my sister’s house nearby but cannot be unemployed for long. I am hearing that the lockdown will be extended. I employ five people and cannot pay salaries to anyone for another month,” Tomar told Moneycontrol.

While home delivery of food has been permitted, Tomar’s eatery is not on any food aggregator website. He said he neither understands how the technology works nor is willing to part with any commission.

In India, 7.3 million people (according to the NRAI Food Services Report, 2019) are employed in restaurants across India. Of these, about 3.7 million people are employed by the organised sector, with the rest in the unorganised sector.

The organised restaurant segment was among the worst hit with close to 70,000 people either losing their jobs or facing steep salary cuts (of up to 60 percent). From October 2020 onwards, this industry slowly started limping towards normalcy.

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However, the second Covid-19 wave has again hit the restaurant industry hard. Weekend lockdowns have been imposed in places such as Karnataka, Tamil Nadu (Sunday lockdown) and Kerala, while Maharashtra and Delhi have imposed lockdowns till the first week of May 2021.

In this situation, only home-delivery and takeaway services have been permitted at all eateries, leading to economic stress. HR officials estimate that at least 10,000 jobs at are risk in Delhi and Mumbai at restaurants and another 30,000 will be severely impacted (job cuts and pay cuts) if the lockdown if extended till June.

What are the concerns?

Anurag Katriar, President, National Restaurants Association of India (NRAI), told Moneycontrol that when there is no business, jobs would be impacted and salary cuts would also be implemented by the sector.

Katriar and Tomar are unanimous in declaring that online food delivery cannot replace in-dining revenue.

“There is this misconception that restaurants can manage by offering home delivery. That is a clear misnomer. Delivery cannot replace the dine-in business and it is unviable. At present, the delivery businesses constitutes only 10-15 percent of the overall revenue of restaurants, while the rest comes from dine-in,” said Katriar.

Restaurant owners are also of the view that they should have been permitted to allow in-dining with adequate social distancing.

At an Udupi food chain in central Mumbai, which is completely empty despite online orders being allowed, the manager gets angry when quizzed about home delivery.

“I had 10 employees and all of them have gone back home. We are tied up with a food-delivery company but who will cook the food now? One was supposed to be back this week but hasn’t turned up,” said the manager.

Ayesha Ahmed, who owns resto-pub Tantra Gold Lounge in Bengaluru, has similar views. She said 50 percent of the staff in her 18-member team have returned to their homes in other States.

“When it comes to places that offer alcohol, customers prefer coming to the place and drinking. We cannot deliver alcohol or cocktails home and that is where a majority of the business is lost,” she said.

The NRAI Food Services Report of 2019 pegged the organised segment’s market size at Rs 4.24 lakh crore in FY19.

This is projected to touch Rs 5.99 lakh crore by FY23. The organised segment comprises standalone restaurants as well as food chains. The standalone market has a share of 75 percent with an estimated size of Rs 1.10 lakh crore in FY19.

What does the industry want?

Katriar said that currently customer sentiments are down because of the lockdown and hence enhanced consumption through home delivery is not a reality.

He explained that economic incentives in the form of an economic package will help restaurants across the country.

“If the government can help infuse liquidity into the sector through banks and other financial institutions, it will help restaurants survive. We are a stressed sector and need a real moratorium with good interest rates. Only post that will there be a revival,” he added.
M Saraswathy is a business journalist with 10 years of reporting experience. Based in Mumbai, she covers consumer durables, insurance, education and human resources beat for Moneycontrol.
first published: Apr 23, 2021 02:28 pm

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