Dining industry still in ICU

While restaurants have been allowed to provide delivery services and more recently takeaway food and alcohol under lockdown alert Level 3, the new normal has not been enough to cover a number of restaurants in the industry.

“It’s definitely a tiny breath but it has not taken us off a ventilator – we are still in ICU,” says Gwen Harding of the Restaurant Collective, an association representing sit-down restaurants in the industry.

Restaurant doors closed for over a month when the country went under a hard lockdown from March 27. Some reprieve was provided in May when the government’s Level 4 restrictions allowed for the sale and delivery of hot food.

From the beginning of June this was extended to pick-up takeaways as well as the delivery of alcohol between 09:00 and 16:00 from Mondays to Thursdays.

Relief welcomed, but it’s not enough

The lifeline has not provided equal relief across the board.

“It’s good but it’s not going to feed everyone,” says Harding, who is also co-founder and chief executive of Ocean Basket.

She explains that since restaurants are now only permitted to sell takeaways, a restaurant normally requiring an average of 25 employees will now only require six. In some cases, this drops to almost no staff at all.

Ryan Pellatt, operations executive at News Cafe, tells Moneyweb that the entertainment restaurant chain’s 20 stores have largely remained closed, even as the restrictions on the industry are being gradually lifted through the different levels.

“We have two stores that are attempting to trade but it has not been successful and I think the reason for that is we are not known as a takeaway venue,” says Pellatt.

Experience can’t be ‘boxed’

“Our product is designed to be enjoyed inside a store and is very much ‘experience’ focused, it’s very difficult to put it inside a box and send it out.”

News Cafe also has seven stores in other African countries such as Kenya and Tanzania where operations have also stopped due to Covid-19-induced restrictions, while in Namibia and Botswana the restaurants have started takeaway operations.

“The outlook for the year was obviously tough trading conditions, but certainly at no stage did we consider that we would not be trading at all,” says Pellatt.

Wendy Alberts, CEO of the Restaurant Association of South Africa (Rasa), says the industry across the globe has been “completely decimated” by Covid-19.

“There’s been no relief for us. We have had to completely transform our business models from the onset with delivery, and then with takeaways. It’s not the standard business model [of what] we do.

It’s about more than just food

“Our business is about bums on seats, foot traffic, the experience and the combination of liquor and food,” says Alberts.

She expresses frustration around not getting clear explanations from the government on the process it used to allow certain industries and activities to resume – such as church gatherings, schools opening and flights – while nothing has been says about the restaurant industry.

Alberts says calls from restaurant owners who have decided to permanently close their doors have been “coming in fast and furiously”.

“We are losing a very important part of the GDP and a very important part of employment,” says Alberts.

According to Rasa there are about 23 000 restaurants in South Africa employing around 800 000 people.

“Remember with the current business model 50% to 60% of our staff are front-of-house staff [bar tenders, waiters, sommeliers] and all those people are unemployed,” says Alberts. There is a ripple effect on suppliers, including businesses involved in production, logistics and entertainment.

The longer the restrictions remain, says Harding, the more staff will have to be retrenched when restaurants do open because the businesses will be under pressure to manage costs.

Debt pile

Pellatt says even if restaurants are only allowed to be fully operational in the latter part of the year News Cafe is intent on ensuring that it reopens as many stores as possible, although it’s difficult to put a number on exactly how many are likely to stay open.

He says the group is assisting its franchisees with various cost-cutting measures such as renegotiating leases with landlords. But with landlords facing their own uncertainties Pellatt says the kind of relief they have received has been more temporary, month-to-month solutions.

In addition to rent, restaurant owners have also had to contend with costs such as full-year subscription fees for performing rights and music rights for music played inside the establishments, as well as municipal rates, says Alberts.

Insurers disappoint

An added issue not only for the restaurant industry but all businesses that have had to close during the lockdown is insurance companies that do not recognise infectious or contagious diseases in their business interruption cover.

Following engagements with the industry, the Financial Sector Conduct Authority (FSCA) and Prudential Authority (PA) said in a statement in May they found that only a small percentage of policies cover infectious diseases.

The authorities also determined that insurers would only cover instances where business operations were interrupted due to Covid-19 infections in the company and not related actions such as the loss of customers due to lockdown regulations.

To make matters worse, a number of insurers have made applications to the FSCA to withdraw cover related to infectious and contagious diseases from policies that are already in effect.

“If insurance companies had actually come to the forefront, there would not be so much pressure and desperation from the restaurant industry to reopen their businesses,” says Alberts.

Brought to you by Moneyweb

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