Can food delivery save restaurants from the second wave

It seems like having a Déjà vu! Partial lockdowns, night curfews, limited seating capacity and the second wave of the pandemic has once again halted the meaningful recovery that the restaurant industry was witnessing. Just in a span of one month since the Covid spike, food businesses in metros are already down by as much as 50 to 70 percent. The beleaguering industry has lost all hopes. 

In fresh curbs announced in the various states, it is being anticipated that another round of closures is to hit the industry by the end of the month.  This will turn the majority of restaurant business unviable, at least for smaller players. However, with the delivery and takeaways being allowed, should restaurants learn from past experience? Can the delivery model be a saviour in the second wave?

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Today because of the pandemic, online ordering has become a way of life and backbone for many physical restaurants. Food deliveries by platforms such as Swiggy and Zomato are growing at a 50 percent compound annual growth rate (CAGR), while deliveries by marketplaces such as Flipkart and Amazon are growing at 63 percent CAGR, the highest among all e-commerce segments.

Offline players taking online route

“Last year, during unlock, we saw the delivery of F&B coming under essential services. Since then, the F&B industry has evolved with a heavier focus on hygiene towards no-contact deliveries. If the alarming second wave does result in lockdowns, the delivery model will be the saviour to everyone,” shared Ashwin Mocherla, Co-Founder of TTSF.

Expanding via cloud kitchens has become a great way for offline players. The industry veterans of dine-in concepts like Zorawar Kalra, Riyaaz Amlani, Anjan Chatterjee, all announced their cloud kitchen platforms last year, tapping into the growing demand. Not just the restaurateurs, but hospitality giants like ITC Hotels and Taj Hotels too ventured into the cloud kitchen segment, even investors couldn’t keep themselves away by putting their money into the segment.

Amid the Covid-19 pandemic, food delivery platform Swiggy has witnessed a 30 percent growth in orders for food delivery. According to the platform, the top three cities that saw maximum orders during match days were Bengaluru, Mumbai and Chennai. The top five tier 2 cities that performed well when it comes to food ordering were Lucknow, Guwahati, Indore, Surat and Ahmedabad.

The rise in digital payments and the country moving towards digitisation has also been a catalyst for fueling this growth. According to a report released by ACI Worldwide, more than 70.3 billion real-time payments transactions were processed globally in 2020, a surge of 41 per cent compared to the previous year.

Cannot rely completely

However, restaurateurs fear that one cannot rely completely on online delivery. Rahul Seth, Co-Founder at Burger Singh commented, “It's definitely not the only recovery model. Unfortunately, the past year has forced a lot of individual restaurants to shut shop. The food market aggregators tell us there has been as much as a 30 to 40 percent reduction in supply. While this is really unfortunate for the restaurants that have shut down, it has left a huge open market for chains like us that thrived because of our lean business model.”

While tweaking of business models is imperative, one cannot run away from the fixed operating expenses like rentals, utility expenses and salaries, which usually is huge and cannot be fulfilled only through online orders. 

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With online food ordering demand growing at a high CAGR and the cloud kitchen model enabling faster expansion with cheaper resources, it is definitely going to be one of the biggest trends we shall witness but we cannot put the responsibility of complete revival onto its fragile shoulders.