The restaurant industry in Sri Lanka: Potential strategy and focus areas post COVID-19

Across the globe, the restaurant industry, cafes, eateries, pubs and recreational clubs are some of the most impacted businesses due to Covid-19. Considering that the horrific Easter Sunday terror attacks happened just a year ago, the current pandemic situation has come as a double blow to the restaurant, food and beverage industry in Sri Lanka 

– Pic by Shehan Gunasekara

At the time of writing this article, we have completed 5 weeks of curfew and lockdown in Sri Lanka due to the COVID-19 pandemic. The overall economy has been impacted due to this pandemic with small businesses being hit the most. Initial forecasts indicate that the global economy would contract by at least 3% this year. Analysts also predict that the economic recovery may take around 24 months for certain countries. Interestingly, most countries seem to be allocating between 5-10% of their GDP in order to fight off the pandemic and provide a much-needed stimulus to their economies. Sri Lanka unfortunately is not in a position to allocate such amounts due to the limited fiscal space available at the moment. Kantar Sri Lanka, in their recent Consumer Sentiment Report (COVID-19: Barometer Sri Lanka) outlines that consumers are ready to downsize their lifestyles and the focus is apparently more on saving rather than splurging. Around 54% of the respondents have claimed that they are now saving more in comparison to the pre-lockdown time period. Similarly based on the research data, Kantar is further of the opinion that ‘indulgences’ may be under threat and preferences seem to be shifting towards local, traditional and healthy food and beverages. 

Across the globe, the restaurant industry, cafes, eateries, pubs and recreational clubs are some of the most impacted businesses due to Covid-19. Considering that the horrific Easter Sunday terror attacks happened just a year ago, the current pandemic situation has come as a double blow to the restaurant, food and beverage industry in Sri Lanka. Irrespective of whether you are a ‘casual dining’, ‘fine dining’, ‘home baker’ or a ‘take away food service provider’, no one has been spared by COVID-19. Most urban and affluent Sri Lankans regularly patronise the various recreational clubs in the city to relax, unwind, network and entertain their guests. These subscriptions based ‘Members Only’ recreational clubs are impacted not only at the moment but due to social distancing norms it seems they will continue to suffer for a reasonable time post-lockdown as well. It can be predicted that the same scenario will apply to ‘pubs’ too.  

When you look back and reflect at the last 5 week time frame, arguably some restaurants, cafes and eateries have been more nimble, agile and adaptable than others. They have resumed operations (even though limited in offerings) rather quickly through various online delivery models either by themselves or in partnership with ride hailing services like UberEats, PickMe Food and YouCab. Other restaurants have struggled initially but by now have got some operations going. The staffing, supply chain and immobility issues due to the curfew regulations and other challenges have hampered these entities thereby disrupting their usual operations. Unfortunately some players have still not been able to get their operations going at all. Surprisingly some of them are well established entities who have been in the business for a long period of time. 

As per the Colombo City Restaurant Collective (CCRC) the restaurant sector is a highly labour-intensive industry that directly employs over 30,000 people while indirectly providing employment to many others. Due to the decrease in tourism arrivals and the overall negative economic situation the CCRC predicts that the adverse impact on the restaurant industry may last for at least a period of 12 months. It is reasonable to assume that due to the lack of business, the industry will be faced with cash flow issues and hence most players will be struggling to pay rents, salaries and other overheads. A few will unfortunately have to close down and that is the brutal reality. In addition to the recently announced Rs. 50 billion economic stimulus package, the Government will also have to see how best they can provide additional support to this Sector. We will understand the developments and policies with this regard in the future and until such time the players in the Industry will need to re-evaluate their business models and come up with various strategies to survive.  

The new regulations and best practices announced by the authorities for the restaurant industry for the commencement of operations post-lockdown has been exemplified below (only the most relevant to the scope of this article has been outlined here). Whilst it is unclear if these are the final regulations, it can be argued that most of these will be applicable in order to ensure health and safety alongside meeting the necessary social distancing requirements. 

Currently prescribed guidelines

• Disinfect all the surfaces of chairs and tables in the premises after each use  
• All workers and customers should maintain at least 1 meter distance inside the restaurants and eateries. Furniture should be arranged accordingly.
• All workers should wear face masks. 
• Display the menu either by TV screen, display board or under the glass pad of the table.
• Places where buffets are available, there should be dedicated staff member(s) to serve the food to avoid many customers handling spoons and other utensils in the buffet.
• Customers shall not share crockery and culinary equipment.
• All cleaning staff should wear gloves and masks.
• Waiters shall wash their hands frequently to prevent any cross contamination.
• Culinary equipment and crockery should be thoroughly washed with soap and water.
• Payment counters shall ensure minimum handling of cash (preference should be given for credit/debit cards). When using the credit/debit card ask the customer to insert it and also to remove it from the machine.
• The officer in the counter should not share the pen used to sign the documents (The customer should use his/her own pen). In case the customer does not carry a pen he may use the pen of the cashier but it should be disinfected immediately afterwards 
• Keep an alcohol rub/hand sanitiser by the side (one per each person in the counter) and use it as frequently as possible or alternatively wear gloves (gloves should never be re- used)

Other countries have also implemented similar policies to the above and it seems to be the norm more than the exception. 

Since we now understand the various challenges that the restaurants, cafes, eateries, pubs and recreational clubs are facing both during and post COVID-19, let's try to explore three areas that the industry needs to focus on in order to minimise the impact to their businesses. There is a need to re-examine, re-strategise and re-calibrate their businesses. Decision makers in the industry needs to apply a rational and pragmatic approach. Planning and strategising is important alongside a strong execution focus. It’s basically now or never. Tough times call for tough measures. Survival is not a choice, sadly; it’s the only option.  

Re-look at your business model

Considering that customers may not be comfortable to ‘dine in’ at restaurants and cafes or patronise recreational clubs and pubs in the short term (at least) one needs to examine the validity and relevance of the current business model. As a business owner you need to make a decision on whether it is prudent to have a 'dine in' option. An accelerated strategy to move from ‘on premise’ to ‘off premise’ may be the way forward. If the customer foot fall is lower than expected, the business may not be able to cover the basic costs such as rent, utilities and the staff required to serve (as in the case when operating at high capacity). Rather can you now explore a 'take away' and 'online delivery' only model? Will it make sense to have fewer menu options so that the food costs and the supply chain can be managed better? Are there any new menus that you can introduce to meet the common demand patterns (even though it is different to the desired concept)? Can you introduce a lower base salary plus profit share scheme instead of fixed salaries for key staff like chefs and restaurant managers until business picks up to the usual level? Do you deliver the products to customers by yourself or through a reputed ride hailing service? Do you continue to operate the usual hours or will you now focus mainly on the peak hours only? These are some of the areas that the industry players need to think hard with an open mind-set and accordingly come up with the most appropriate strategies to implement. 

If you decide to continue with an 'on premise dine in' model, then you will have to redesign the space in a manner that minimises space efficiency issues whilst meeting social distancing guidelines. This may be tougher than one can expect. Innovative and creative thinking is absolutely crucial here. Similarly recreational clubs can also look at delivering its most famous 'bites' so that members can enjoy the next best alternative to patronising the club. It is reasonable to assume that a hot butter cuttlefish, cheese toast or a devilled meat dish delivered from your favourite recreational club will be an experience that you wouldn’t want to miss. Traditionally most of these recreational clubs did not have a food delivery option. Now is the time to think out of the box and explore every possible way to improve the revenue scoreboard. Recreational clubs can also look at giving special offers to the members that have paid their subscriptions. For the members who have not yet paid the subscriptions they need to explore implementing a flexible payment plan to encourage payments. Every rupee matters today. The key is to adapt quickly by changing your business model to deal with the new realities, the changing dynamics of the market and customer lifestyles. Of course heavy emphasis will have to be placed than previously on the safety aspect when implementing your revised business model.   

Partnerships and collaboration

By partnering and collaborating with other players in the industry, you can derive a number of benefits such reduction in costs and maximising underutilised (or excess) capacity. Instead of running their own kitchen, a business can outsource it from another player in the Industry thereby creating a win-win scenario for both parties. The hotel industry in Sri Lanka is severely impacted by the COVID-19 pandemic. All these hotels have kitchen facilities that will have underutilised capacity now. Can the restaurant industry strike a partnership with the hotel industry to use their staff and facilities at a pre-agreed payment and operational model? The answer is definitely yes because we see this happening already in other countries. The author of this article is of the view that there is a significant opportunity for a kitchen as a service (KaaS) model or a 'Cloud Kitchen' type of concept. Industry players can obtain the services on an ‘on demand’ basis with such a model without having to worry about overheads and fixed costs. The mind-set should be that ‘we are all in this together’ right now. There is no room for ego or myopic thinking. Actively seek out and identify opportunities for partnership with other local players. Sharing kitchen space, resources, staff and supplies are all possibilities with the right partnership and collaboration. We see this happening already in other countries too. The writer is of the opinion that the industry should move away from looking at each other as competitors, but rather look at each other as partners who are navigating stormy seas together. 

The power of marketing

The industry will have to focus heavily on the marketing aspect once the lockdown is relaxed. Digital marketing and social media marketing will play an integral role more than ever before. It’s all about having the mindshare of your customers. Make sure that your loyal customers are aware that you are open, understand any changes in your business model, and are familiar with the various promotions that have been introduced. It is important to exemplify to your customers the various health and safety (including sanitation) measures that have been implemented.  If you have a database of your customers, now is a good time to keep them posted about your initiatives, menus and other plans. Continuous engagement is the key. Instead of bombarding them with irrelevant content, focus more on personalisation. Reaching out to your loyal customers with personal letters, emails, calls, texts or WhatsApp messages is crucial and an absolute necessity. The social media pages such as Facebook and Instagram need to have the right content. It should be relevant and appealing. If you do not have expertise on this area, seek the help of a professional. Recreational clubs in Sri Lanka has historically been rather weak in their social media marketing. Now the time has come for them to place more emphasis on this aspect. Designing the right promotions will also help one differentiate itself from the competition. Whether it is meal vouchers, loyalty and referral programs, family packs (and bundle offers) or off-peak discounts the various promotional options available are limitless. 

Customers will now be looking at value, and the demand for indulgences will reduce at least in the short run. Businesses need to therefore exemplify the ‘value proposition’ in everything they do. Update your website and give it a new look and feel. Use search engine optimisation (SEO) tools to drive traffic to the website. The power of storytelling should not be underestimated as well and this is where public relations (PR) can be immensely beneficial to a business.  It should be understood that what worked before may not work or be relevant now. There is no room for complacency or ignorance. It is a survival battle. Every activity and minute spent on the business matters, so make sure you make it count. Therefore, it is evident that the restaurants, cafes, pubs and eateries in particular need to understand this and come up with the necessary strategies. Once the strategies are in place, the marketing mix and the relevant tools need to be used effectively. 

As we already know, the world that we are going to embrace post COVID-19 is a new one. As exemplified above there a number of decisions that restaurants, cafes, eateries, pubs and recreational clubs will have to make in order to mitigate the challenges associated with the COVID-19 pandemic. However, the author of this article is of the view that the above ideas and strategies will definitely be useful for the Industry if implemented with diligence and careful analysis of its strengths, weaknesses and strategic options. Sri Lanka is a resilient nation and together we can weather this storm. The COVID-19 pandemic does not differentiate based on race, religion, age, nationality, gender, political affiliation or lifestyle. The entire world is united in the fight against the pandemic. From a Sri Lankan perspective as well, we need to be united to mitigate the impact of this deadly virus. There is no room to be myopic, selfish or narrow minded. Diversity is our strength and unity will be our recipe for success. There is nothing which is impossible for us as Sri Lankans. Let’s work together as one nation to fight this pandemic. Let’s also collaborate and support each other so that we can collectively get our companies and industries to overcome this crisis situation and move forward with a renewed purpose, proactive methodology and positive mind-set. We need to support the local restaurants, cafes, eateries, pubs and recreational clubs. They need our support more than ever. Let’s ensure that we play our part and do the needful. Sri Lanka together, we can!

The writer is an entrepreneur, consultant and Associate Professor in Business Administration.