Hospitality has been hit hard by the pandemic. Restaurateur Roger Narula shares his advice for navigating the industry in 2021
As the pandemic stretches on, it’s clear that once COVID-19 has waned, the “normal” that we’ll all be living in will be very different from the “normal” we were used to pre-pandemic. Where did we first catch a glimpse of what the future might hold? The restaurant industry! Countless full-service establishments, including my restaurant Yum Sa, have bent over backward to adapt to pandemic conditions and find a way to serve customers who are, and should be, looking for ways to avoid contact at every step of the customer journey. How can restaurants recover? COVID-19 has paved the way for restaurateurs to reflect and assess pre-pandemic operational procedures, moving financial-led decisions to the back seat. We have been forced to explore solutions, analyse procedures and respond to a global crisis.
Although the pandemic hit full service the hardest, changing social norms and business landscapes will alter the various restaurant segments for good. As the effects of COVID-19 spread across the entire world, the primary focus for governments and businesses is the safety of their people. Whilst this focus will continue, the implications for economic growth and corporate profits have to lead to a sharp sell-off in equity markets across the globe.
We must understand the impact on cash, working capital and profitability. Here are my tips for navigating this difficult time in the restaurant industry.
Operational impact and mitigation
• Have an extended cash flow forecast for the next six months. Be realistic and have Base and Downside scenarios to understand critical cash points and any breaches of lending covenants.
• Manage payments to suppliers.
• Minimize all discretionary operational and capital expenditure. Reconsider or postpone maintenance and other capital expenditure where possible in order to conserve cash.
• Put an advanced revenue management system and pricing models in place to respond to market developments quickly.
• Assess the equity or debt funding sources available.
• Be transparent towards existing lenders and involve them in the mitigating procedures and continuity plans.
• Identify alternative lenders that can move quickly to provide short term funding. However, these may have a higher interest charge and fee structure.
• Ensure you apply for the tax refunds and other financial relief measures.
• Assess the impact on Occupancy and RevPAR and create a plan to mitigate
• For investors: know how your operators are affected and identify the type of contracts that are applicable (lease or management).
• Talk to your operators to discuss their expectations about the impact on performance.
• For operators: assess the impact on Occupancy and RevPAR and create a plan to mitigate risk.
• Understand if the loss will be permanent or just delayed. For investors, understand the impact on the operating fees.
Keep plans under active review. This is a dynamic and fast-moving environment. Be prepared to quickly respond to the changes outside of your normal perating and business processes. Why not use this downtime to re-evaluate your business, train your employees and try to develop new products? Become more flexible and look for new opportunities.
Despite the uncertainty, London’s restaurateurs have leapt into action to protect their livelihoods and those of their staff, proving that necessity can be the mother of invention. Their first recourse has been to turn to takeaway and delivery. Planning permission for change-of-use to takeaway has been waived for the next 12 months, allowing for a swift transition.
Suddenly, in the government’s style-guide, delivery drivers have been promoted from ‘unskilled’ to ‘key-workers’. As many as 3,000 restaurants have signed up to Deliveroo in the past month. But due to the high costs when operating with Deliveroo, Uber Eats and other competitors — a sign-up fee of up to £600 and 35% commission on orders — lots of restaurants (including Yum Sa) have come up with their own delivery methods. This is hardly sustainable nor the key to survival (the weekly takings from delivery equates to one busy Thursday evening in pre-Covid times) but it has been a welcome revenue stream for many. For those who make it through, delivery is likely to boost the continued growth of the restaurant industry.
Recent studies indicate that restaurants have a job to do in building trust before consumers return to the dining rooms. Research firm Ipsos Mori found that 61% of Britons would feel uncomfortable going to bars and restaurants. 29% said they were happy to go out to eat but just 21% said they would use public transport to get there.
For some, the COVID-19 crisis presents the world of food with a precious opportunity to make changes for the better. This has shown us how broken the food system is and how challenging it is for restaurants. When this is over, I really hope we don’t forget about important issues such as sustainability.
Creating worry-free, safer places for all to enjoy is a priority for us at Yum Sa. We have been working in partnership with Shield Safety Group to ensure the Yum Sa premises is Safe to Trade. Our mission is to bring back some normality to create a safe, relaxed experience for everyone. In conjunction with the Shield Safety Group, we have conducted a rigorous risk assessment, self-assessment, remote food safety audit and eLearning courses to ensure we were confident to reopen and start trading again. We want all of our guests and colleagues to feel confident that our business has gone above and beyond Government guidelines to ensure protection and prevention of COVID-19 transmission, and this has been integral to our reopening.
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