Covid-19 Expected To Eat Up Half of Dine-In Restaurant's Revenue FY 21

With the country under the lockdown since March-end and all the outlets instructed to be shut down, it is no surprise that the revenue of the food outlets will take a big hit in FY 21. Even after the relaxation of the norms, the restaurants are expected to operate at 25-30% of their monthly levels for at least a month and a half. As per the Crisil Research, June is expected to lift up businesses by another 15% since the restrictions have now been lifted off and though sceptical, people will eventually step out to these organised dine-in restaurants.

With restrictions on mass public movement and gatherings expected to be extended again in Delhi-NCR and Mumbai, dine-in restaurants will have curbs and will have to operate at low service levels. Crisil Research Director, Rahul Prithiani said “The organised sector has seen a 90% reduction in sales since the lockdown. Dine-in is not operational and online orders have declined 50-70%”.

Prithani also added “And when the lockdown is lifted, the rebound is expected to be gradual. This holds for especially for Mumbai and Delhi-NCR, which makeup nearly half of the organised restaurant industry in India, but are red zones accounting for over 30 per cent of the COVID-19 cases in India”.

Estimated at INR 4.2 lakh crore in FY 19, the organised restaurants account for 35 per cent of the Indian restaurant industry, where the dine-ins are 75% of the organised restaurants, with takeaways and online deliveries taking up the rest of the share. This will also hamper the financial health of many restaurant operators. Due to high operating leverage, a 40-50% decline in revenues might lead to negative operating margins this FY.  Restaurants are now seeking concessions or deferment of rentals.

Crisil Research Associate Director Anjali Nathwani said "Once the restrictions are lifted, restaurants will have to rework their business models and overcome operational challenges. With consumers turning more health-conscious, hygiene protocols at restaurants and supply chains will need to improve materially, which will increase cost". This will also hurt the horticulture farmers, food processors, dairy producers, suppliers, logistics and delivery partners.