Restaurants to shut down dine-in services; kitchens to remain open for online orders

As social distancing catches on in the wake of the Covid-19 pandemic, dining out will have to be on hold for a while. The National Restaurant Association of India (NRAI) has issued an advisory to its 5 lakh-odd member restaurants to down shutters from March 18 to March 31 with respect to dine-in services.

The restaurants, though, will continue to run their kitchens to enable online orders and delivery services run by aggregators such as Swiggy and Zomato, NRAI clarified.

The advisory will impact restaurants across Delhi-NCR, Mumbai and Bengaluru and follows a March 16 order by the Delhi government through its health and family welfare department. The order directed the closure of night-clubs and restaurants with over 50-member capacity till March 31, 2020 in view of Covid-19.

“This is an extraordinary situation and beyond our control and we expect support such as converting fixed rentals to variable revenue share, allowing input tax credit on GST, moratorium on loan repayment, waiver of interest, reduction on energy costs, deferred payment of license fee and taxes will go a long way in curtailing our astronomical losses,” said a statement issued by NRAI.

Meanwhile, in a separate advisory, the Federation of Hotel & Restaurant Association of India (FHRAI) has asked its member restaurants to not shut down business unless a specific directive is issued by local authorities. The body claims to represent over 10,000 restaurants across India, apart from hotel chains.

“The federation has members across the country and we are not asking anyone to shut down their establishments. But yes, we are insisting that everyone who is open to business be extremely aware and vigilant and that they take all the precautionary measures, and follow the directives by local authorities,” said Gurbaxish Singh Kohli, vice president of FHRAI in a statement. 

While Pune hotel and restaurants association have shut operations across 850 businesses for three days starting March 18, Mumbai hotels and restaurants have been advised to follow the same by Maharashtra chief minister Uddhav Thackery to avoid the spread of the virus.

Private cloud kitchen labels run by Swiggy including The Bowl Company and Homely will continue to operate as will other cloud kitchens. Swiggy also operates delivery only brands with 100 popular brands across 13 cities as part of Swiggy Brandworks. According to a February 2020 report by KPMG in association with the Retail Association of India, the share of private labels in online food delivery was pegged at 8-10%.

In Zomato’s case, the restaurant shutdown will impact its exclusive dine-in membership program, Zomato Gold, which offers 1+1 on food or beverages to members at select restaurants. Less than 5% of Zomato’s Monthly Active User base have Zomato Gold memberships, with an estimated $25 million revenue contribution from the membership by end of 2019. Zomato’s Gold programme was also in the eye of a storm last year as restaurant associations alleged that the membership program led to deep discounting. As per numbers released by Zomato in its Annual Report in April 2019, food delivery contributed to three-fourth of its revenues.

Both Swiggy and Zomato did not respond to specific queries on the foreseeable impact on their businesses till the story was published.