How Covid took a big bite out of the restaurant business

Among the hundreds that shut shop were popular brands that decided to consolidate, explore other models

Known for its fine food and informal ambience, Indigo Delicatessen, or Indigo Deli, thrived in the Mumbai metropolis with close to 10 outlets sprinkled across the city. Then came the pandemic, ravaging industry after industry. And the restaurant business took a direct hit. Indigo Deli shrank to three outlets.

“I didn’t want to die under the weight of my losses and decided to accept the pandemic-induced reality instead of being brave for the heck of it,” says Anurag Katriar, founder and director, Indigo Hospitality, which owns the restaurant brand. “I was ruthless in culling the outlets. I can re-build the business, if my business stays alive.” So he shut down the outlets in Colaba, Bandra, Thane, Andheri, Nerul East (Navi Mumbai), Parel, and in Delhinational Capital Region and Pune.

Like Katriar, Riyaaz Amlani, CEO and MD of Impresario Handmade Restaurants, took a considered call against renewing the lease of his popular nine-year-old outlet, Smoke House Deli, in New Delhi’s upscale Khan Market as the pandemic struck. “We had reached the end of our tenure at Khan Market, so we decided not to renew because we were not sure how long the pandemic would last,” says Amlani, whose firm also owns other trendy dining joints like Social and Mocha.

Similarly, Speciality Restaurants, which operates brands like Oh! Calcutta, Mainland China and Hoppipola, shut down outlets that, Chairman and MD Anjan Chatterjee says, “were fence-sitters in terms of profitability”. Among them were some Hoppipola outlets in Bengaluru, Chennai and Hyderabad. “We closed them down because costs in these cities are huge. In Cyberhub, Gurugram, we shut down an Oh! Calcutta,” he adds.

Among the ones that fell to the pandemic were also old-timers such as Downtown pub on Residency Road, Bengaluru. The pub temporarily shut down during the first wave of the pandemic and the owners planned to reopen it this year. “We were renovating the place, but then the second wave struck and it shook us,” says Santosh Ravindranath, the proprietor who has decided to shut the place down. Ravindranath’s father and uncle had founded the outlet in 1991.

Pradeep Shetty, joint honorary secretary, Federation of Hotels and Restaurant Associations of India (FHRAI), says, “While many restaurants managed to survive the first lockdown (and restrictions), the second one led to a permanent closure of 2530 per cent of them (see box).” He adds, “The 50 per cent that may have reopened are continuing to run in losses." FHRAI represents 55,000 hotels and 500,000 restaurants.

Uncertainty, labour shortage with migratory workforce too scared to return to the cities, poor business sentiment, absence of international tourists and corporate staff working from home led to the undoing, says Shetty. While some brands consolidated by shutting outlets to pare the losses, others tweaked their business model.

Side Wok, which is known for its pan-asian cuisine, its clay pots and pad thai, closed its doors to patrons in Khan Market and now has a takeaway outlet at the nearby Meherchand Market and a dine-in outlet in Gurugram.

Pebble Street Café in N-block of Delhi’s Connaught Place was a collegegoers’ hub, with a yellow scooter on the landing of its entrance serving as a cheerful spot for Instagram photos. It, too, closed during the first lockdown. “At Connaught Place, we were struggling even before the pandemic because of the competition around us. It was a franchise outlet. The pandemic proved to be the last straw and it became very difficult to sustain the rentals,” says Ashish Ahuja, the café’s director. His outlet in New Friends Colony, Delhi, which he owns, remains operational.

Several other student hubs in Hudson Lane, near Delhi University’s North Campus, were also forced to shut shop in the past two years. Among them is QD’S, popular for its signature tandoori momos, and Mad Monkey.

Amit Roy, partner at Shilton Hospitality, says around 35 per cent — that’s 4,000-odd — registered restaurants and pubs in Bengaluru have closed down in the past year-and-ahalf. “We made multiple representations to the state government, but did not get any concession,” says Roy, whose restaurant, Watson’s in JP Nagar, which served alcohol and seafood, was among those that permanently closed its doors. As did the Thalassery Restaurant in Whitefield. Meanwhile, The Hole in the Wall, a café chain that used to see long queues on weekends for breakfast, has stopped dine-ins at its Indiranagar branch and now has only takeaway.

In Bengaluru, outlets serving alcohol were the hardest hit due to steep licence fees. Of 500 pub owners, some 300 did not renew their licences this year, according to a report quoting a Karnataka wine merchants’ association.

Chatterjee of Speciality Restaurants says of the outlets he shut down, “These places might have become profitable in 3-4 years, but they were sucking up profits. We decided to consolidate. So, by shutting a few of them, we gained a lot.” He adds, “Wherever we shut down, we quickly moved to a cloud kitchen model. We have assets all over India and the kitchens are large. So, within one kitchen, we started more than one brand — where we had Mainland China, we put Mainland China Asia Kitchen, Haka and Oh! Calcutta.” He now runs 78 kitchenwithin-kitchen, besides cloud kitchens. This has meant saving on overhead costs while adding only the aggregators’ margins.

Pre-pandemic, delivery accounted for about 10 per cent of the total turnover, says Chatterjee. “Today, it’s about 38-41 per cent.”

"While we shut down some restaurants in India, we opened a few in international destinations: like Chourangi in London, Mainland China Asia Kitchen in Dubai, and opening one in Houston," adds Chatterjee.

Having consolidated operations, Indigo Hospitality’s Katriar launched a new brand a month ago: Platform 7 by Indigo — a kitchen and home delivery brand that offers multi-cuisine meals under five brands specialising in Indian, Italian, Asian, homemade food (Ghar ka khana) and single bowl meals.

The pandemic has changed consumption habits in a big way, so the hospitality firm decided to get into this segment. With encouraging response from the first one in Lower Parel in South Mumbai, Katriar is opening one in Andheri, the Mumbai suburb, on Monday.

High rentals also made survival difficult. “In this business, people who own the premises can still survive; for others it’s tough,” says Katriar. The restaurant business, he rues, is highly overregulated, with most operating conditions governed by the state — the municipal authorities and civic bodies. “Unfortunately, everywhere people are erring on the side of caution. As a result, the mortality rate has been very high.”

Shetty of FHRAI says the current phase is a critical one, and will determine whether the industry survives or not. “If all goes well and the authorities don’t issue advisories, things will bounce back to the pre-pandemic level in six months.” For now, he adds, everyone is “in a wait and watch mode”.