Since the pandemic, the F&B industry has been the hardest hit along with the travel industry. Pre-Covid, a typical restaurant would generate 60 per cent of its revenue from dine-in and the remaining 40 per cent from delivery. Delivery has never been the primary focus as the profitability is usually very low thanks to the high commissions charged by the delivery aggregators. A restaurant would depend on its dine-in sales to generate the much needed profitability as a business. Unfortunately since the pandemic, due to safety concerns, consumers have stopped going out and also reduced ordering takeaways. Restaurants today consider themselves fortunate if they are able to generate 50 per cent of the sales they had pre-Covid.
So is it all doom and gloom? How does one set up an F&B business during these turbulent times? And should one even consider opening one? Well, every crisis presents us with a set of opportunities, and the same is true in today’s scenario. Truth be told we were over saturated with F&B concepts when compared to our population. In the next three to six months we fear 30-40 per cent of the restaurants will close doors. Only the more established restaurants and brands will survive this downturn. So if you are planning on setting up a F&B business today, here are six critical pointers to follow:
Takeover/buy an existing business
As a buyer you will be spoilt for choice. Buying an existing setup will reduce your cost of setup by 30 per cent, if not more.
Go low on rent
Pre-Covid the mantra for a successful F&B business was location location location! Thanks to the decline in dine-in sales, the F&B business has shifted predominantly to a delivery focused model. To increase profitability in the delivery model, it is important to have very low fixed costs — especially rent. So your primary deciding factor should be low rent.
Multiple locations and shadow kitchens
For a delivery business to be successful, it is important to cover a wider geographic area by setting up additional smaller shadow kitchens. Multiple locations also allow for multiple listings across delivery aggregators resulting in wider brand presence.
Direct online orders
Unfortunately, the delivery platforms charge anything between 30-35 per cent of the total invoice value as commission. This results in lower gross margin for the restaurant. So it is imperative that a start-up restaurant should focus on increasing direct online orders. This can be easily accomplished by offering exclusive deals and cash back offers on repeat orders to encourage direct online ordering.
Pre-Covid, a typical restaurant would generate 60 per cent of its revenue from dine-in and the remaining 40 per cent from delivery. Delivery has never been the primary focus as the profitability is usually very low thanks to the high commissions charged by the delivery aggregators.
Safety measures to inspire confidence
Restaurants need to communicate and showcase the safety measures you are taking as a business. This can include live feed to the heat sensing camera, to detecting the temperature of the people walking into your premises. Or if you do not have such high-end hardware, perhaps post pictures of staff with their temperature reading while holding today’s newspaper. This can be posted on social media stories.
Creative advertising and influencer engagement
Due to the pandemic and overall global economic slowdown, advertisong costs are at its lowest. Brands should take advantage of this and be more aggressive with their advertising spend. Food influencers still play a vital role in influencing the decision making of today’s consumers.
While the industry continues to go through challenges a paradigm shift in modus operandi is inevitable. The new players who enter the F&B segment now will define the new normal.
— The author is a UAE-based restaurateur, concept developer and hospitality technology expert. His product My Menu is being used by 1,600+ restaurants across more than 18 countries