NRAI initiates dialogue with all Mall Owners to resolve COVID-related issues of the F&B Industry
The Restaurant Industry with an annual turnover of approximately INR 4.25 Lakh Crore and providing direct employment to over 7 million Indians is in a very precarious situation currently due to the ongoing lockdown, fighting a grim battle for its existence.
While NRAI continues its efforts to engage with both Central as well as various State Governments seeking policy and liquidity support for the beleaguered Industry, we also feel that it is crucial to initiate a separate dialogue with the other significant stakeholder in the ecosystem, the mall owners, to resolve the various bilateral concerns.
As an Industry, we don't expect the volume of business in the post-pandemic period to be more than 30% to 40% of the pre-lockdown numbers. Considering that the proportion of fixed operating expenses in our business is very high, this may lead to massive operating losses to many businesses unless the expenses are brought down significantly and a critical expense like rentals is converted into a variable cost. Therefore, it is absolutely unavoidable to protect the F&B Industry, which is one of the largest job generators in the country.
NRAI received several representations from our members requesting our intervention in resolving this critical issue. We also feel it is our responsibility as an Industry body to speak on behalf of the fraternity and facilitate such a dialogue for the benefit of everyone in the ecosystem.
While we understand that every outlet may have its own individual commercial terms, we have communicated the following two principal concerns to all malls that need immediate attention.
• This is the biggest crisis faced by the mankind. The mandated lockdown has forced us to shut shop and prevent the malls to allow entry to our guests, staff or suppliers. This is a clear case of force majeure and therefore all charges of rentals or CAM for the duration of the lockdown needs to be waived off entirely.
• The engagement contours in the post-COVID era needs to move towards a totally variable model. Such revenue-share model will ensure that the fortunes of both parties, i.e., the restaurants and the malls are firmly inter-linked. This will ensure that neither parties stand to profiteer at the cost of the other.
Speaking on the subject, Anurag Katriar, President of NRAI says, "While we continue with our advocacy efforts with the Government for strong stimulus packages, NRAI is steadfast in its belief that no business will be able to sustain itself post resumption on older terms of engagement. These are extraordinary times and we need to think anew and think differently with a singular purpose of saving each other, the Industry at large and all the jobs that we have created. You cannot operate on old costs with less than half of older revenue. Therefore, I reckon that revenue share is a very fair model that will ensure that malls don't lose out if we see an unexpected early surge in business volumes.
He further adds, "We totally understand that the malls too have huge costs to take care of, which is not easy with reduced cash flows. Unfortunately, this is the stark reality for every business, including ours. In absence of any/less revenue, every business has been compelled to use its reserves or raise capital via debt or equity to fund the losses during this lockdown period. It is no different for malls too, though the announced moratorium on loan repayment surely gives them some respite from cash flow concerns. Our appeal is aimed at playing a constructive role in resolving these issues at the earliest. Most of our members have expressed their unwillingness and inability to restart the business unless these issues get firmly and proactively resolved. There is an overwhelming feeling that it makes better sense to close down now and cut our losses rather than risking massive operating losses in future. This will be most unfortunate for everyone; the business, malls and employees. I am fairly certain that as long-standing business partners of ours, the landlords will extend their support in these times of unprecedented crisis.
NRAI will soon initiate similar proactive dialogues with other stakeholders such as food service aggregators & individual landlords as well. NRAI aims to ensure that precious time doesn't get wasted in resolving these burning issues post-lockdown. We rather have all stakeholders devoting their collective energies in rebuilding this fragile sector that is perhaps one of the most impacted one today.
