Post Covid lockdown, it is estimated that 18 per cent single unit restaurants are likely to shut down between May and July and another 12-15 per cent of restaurants will be part of a second round of closure between September and December.
A research report called 'Future of Food: Covid-19 Survival Plan' by Indian Federation of Culinary Associations and Tagtaste says that based on the analysis and extrapolation of last available profit and loss statements and balance sheet, and subsequent interactions, anestimated 18% single-unit restaurants won't be able to re-start their units. Chain-brands too run the risk of shutting down 12-15% of their restaurants by December 2020, it said.
It estimates 18% of the outlets are likely to shut down between May and July. There will be a second round of closures in September-December, about 12-15% of the restaurants will be shutting down but the remainder will hold out and invent new ways of conducting their businesses.
As per the report, in financial year 2019-20, the year that ended in March 2020, only 19% outlets delivered an EBITDA of 10% or more, "half of our universe was negative".
The decline can be attributed to multiple factors —over-expansion, irrational occupancy cost, below average culinary standards, erratic new product development process, lack of training and sometimes hubris.
It noted that too many restaurants opened and then closed too fast, after months, not years. And closures have been an equal-opportunity phenomenon, worldwide.
"People who pitch to investors had to present concepts where the graph runs bottom left to top right. Everything happened on a PowerPoint before you've put one thing in a skillet", it said.