A lot of people are thinking the restaurant industry must be hit the least due to COVID-19 since governments are allowing takeaways and home deliveries.
If you’re one of them, think again – because the COVID-19 has had devastating impacts on the restaurant industry.
The problem, the restaurant industry doesn’t just depend on its customers – it depends on supporting industries like agriculture, transport, and labor and with everything being shut down, how will they function?
A number of businesses, both big and small, have had to completely shut down for the safety of their employees.
While some businesses can afford to keep employees on payroll, others have had to make the tough decision of lay-offs in order to remain afloat and minimize losses.
As the restaurant COVID-19 battle gets worse, let’s take a look at the factors affecting restaurant profits and day-to-day operations?
Disruptions caused by COVID-19
- Market and farm prices
Hoarding and price gouging have been one of the biggest problems faced by industries all over the world – be it sanitizers, protective equipment or food supplies.
While many governments, local authorities and departmental stores have made efforts to prevent this – its the simple law of supply and demand.
The demand has risen sharply within a span of 2 months and control is completely within the hands of suppliers.
But that’s not the only reason why prices are going up. There’s also a shortage of supply in the market.
The epicentre of the virus was Wuhan, China so other countries did not predict that the virus would hit them so brutally as well.
3 months ago, everyone thought, “Oh, it’s just the flu”. Keeping that in mind, most governments did not prepare for the unprecedented increase in demand.
A local supermarket in Denmark came up with a brilliant idea to stop hoarders:
The idea received appreciation across borders and is, in fact, a great way to ensure that all customers receive essential products equally.
However, the shift in demand and supply remains disturbed as those in desperate need of products are willing to pay extremely high prices to purchase it.
Other supermarkets are putting restrictions on the quantity of an item purchased by each customer in order to restrict hoarding which is ultimately one of the leading causes of price gouging.
- Supply chain slowdown and shortages
The biggest reason behind this is the sudden halt of transport – both domestic and international.
Imports and exports are banned, lockdowns and curfews restrict movement and even where there is leniency in the movement of goods, there are a number of hurdles including police checking, disinfection of vehicles and goods etc.
All of this is leading to slower transport and shortages of goods that cannot reach markets and thus, restaurants.
The best thing businesses can do in this case is to eliminate intermediaries by getting a direct supply of products and stock up on non-perishable, non-essential items to reduce employee exposure to crowds and have the necessary food items readily available.
- Day-to-day operations
The businesses in the food industry which haven’t already shutdown need to take extreme measures in order to avoid employees falling sick.
Since the virus began spreading in a seafood market in Wuhan, there was a myth going around that COVID-19 could be transmitted through food, especially uncooked items.
According to the CDC and CNN, there is no evidence that COVID-19 is transmitted through food items; thus, bringing relief to many restaurants.
Unfortunately, due to the initial scare, many consumers stopped eating takeout food and still continue to do so because of misinformation that we receive daily through social media.
While the fast-food industry still remains running, seafood restaurants saw a huge dip in sales.
This, coupled with government restrictions, lead to much slower working days.
Many governments worldwide have allowed restaurants to continue takeaway and home delivery in an attempt to reduce crowds and save the drowning economy which comes as a relief given many industries that deal with mass production and manufacturing have completely shut down.
However, slower working days still mean that extra employees are laid off.
Moreover, at the start of the day, most restaurants are carrying out routine check and disinfection on employees i.e. a temperature check, change of clothes or disinfection of existing clothes, personal protective equipment in the form of masks, gloves and disposable suits and sanitization of the hands, feet, and face:
Not only does this amount to a substantial increase in overheads due to a hike in the prices of PPE but it also takes up a good half an hour or an hour of the entire business day.
Apart from routine guidelines, WHO and local authorities are urging businesses and homes to disinfect high-contact surfaces within their premises at least 3 times a day.
This is another added process that takes up time, effort and business resources.
A timeline of COVID-19’s devastating effects on restaurants
January 2020: Chinese restaurants lose sales
At the start of the coronavirus outbreak, Chinese citizens and their businesses faced severe discrimination all over the world.
With a span of 2 weeks of the outbreak, fear was created after people saw the speed at which the virus grew.
This and the fact that the outbreak started from a seafood market made people hesitant of Chinese restaurants in different parts of the world.
The virus broke out just before the Chinese New Year, a time at which Chinese restaurants see a surplus of customers celebrating.
This year, however, they saw a sharp decline.
According to Eater, in 2019 there was an increase of 56% in Chinese restaurant searches on Yelp just 2 weeks before Lunar New Year.
In 2020, however, there was only a 38% increase in searches while in Manhattan and Chicago there was actually a decrease in searches!
Restaurant owners in Manhattan and Chinatown reported more than a 50% drop in sales while many expressed discrimination against them, despite the fact that they had grown up and lived outside of China for most of their lives.
This came at a time when there were little to no cases of the coronavirus in the US.
This unfortunate drop in sales forced some owners to completely shut down their restaurants.
February 2020: Restaurant reservations get canceled all over the world
Fast-forward to 1 month later and the virus has spread in more than 160 countries. The WHO has declared it a pandemic and the entire world is scrambling to socially distance themselves from one another in an attempt to save themselves from the deadly virus.
With that in mind, people cancel bookings and reservations in restaurants even though businesses are open in most countries including the UK and US.
Unfortunately, the fear of the virus has spread and people do not trust public places.
By the end of February, restaurants all over the world saw a sharp decline in dine-in reservations, as reported by the reservation app, Open-table:
At this point, the coronavirus outbreak hadn’t threatened the economy and health of citizens to a point where they completely stayed at home, so those that cancelled reservations switched to takeaways and home deliveries.
This was a major reason why fast food restaurants’ sales increased in the last week of February as customers switched to the safer options of drive-thru and takeaway.
March 2020: Customers switch from takeout to grocery
Currently, the coronavirus has spread in 189 countries. That’s 6 countries short of the entire world.
The magnitude of this is so huge that governments are forced to impose lockdowns, curfews and strict measures to ensure people remain in their homes with no outside contact whatsoever.
For this reason, there are little to no takeouts.
Restaurants are surviving majorly on home deliveries as people remain quarantined int heir homes.
However, there is so much paranoia around the virus and the many ways in which it can be transmitted so instead of having to disinfect food packaging and relying on restaurants to ensure proper disinfection and health of employees, most consumers are switching to grocery items instead of takeout.
So why are consumers not trusting restaurants now as compared to last month?
The healthcare systems of even the most powerful countries in the world including the US and UK are overwhelmed with the number of corona-virus patients.
With a severe shortage of equipment, hospital staff and isolation centres for the treatment of coronavirus patients, the risk of contracting the disease is much higher.
Without proper care and treatment available, the risk of death also increases which is why consumers need to eliminate any possible way of contracting the virus; thus, completely steering clear of food from restaurants:
In fact, by the end of March, many states including New York, Chicago and Los Angles ordered all restaurants to completely close down.
This uncertainty and harsh conditions will make it extremely difficult for small businesses to survive in the coming months as temporary workers have already been laid off.
The New York Times reported that more than 3 million American workers were unemployed in just the past week, citing an ‘economic hurricane’ instead of a typical recession.
This number is 4 times bigger than the unemployment rate faced in the last recession:
The effects of this can only be reduced if we all do our part in social distancing and helping out the community in these trying times.
What restaurants are doing to fight the coronavirus
If you’re a restaurant owner or manager who is adamant on fighting the virus and the challenges that it brings about, here’s a few examples that you can incorporate into your business:
- Foodpanda, the online delivery service which conducts operations in multiple countries in Asia, encouraged customers to make online payments and training delivery workers to leave food packages on doorsteps; thus, effectively eliminating human-to-human contact
- Many restaurants and food delivery apps like Foodpanda are sharing their COVID-19 disinfection process and safety measures on social media in order to create trust which is a great way to boost takeouts and sales. If your customers believe you are taking complete measures to protect your employees and premises against the virus, they will rely on you instead of making home-made food!
So that sums up the restaurant COVID battle talking in terms of how COVID-19 is affecting the restaurant industry.
The best thing that restaurant owners can do right now is to be prepared for a massive downfall of profits. There are many people still in denial who believe their businesses will be up and running again.
However, the first step is always to identify the problem at hand. This will allow you to take the required measures e.g. saving overheads like electricity, using less machinery, filing a petition for free rent until the outbreak passes and getting access to government subsidies to help your business remain afloat.