On 26 May 2020, we brought together leaders from the restaurant and food to go sector to discuss how - with the market largely closed and with operating restrictions expected to last into the medium term - their sector has been impacted by COVID-19 and their expectations for recovery.
At that session they shared with us, how they think the sector will cope in the short- and medium-term, as well as what they believe the industry might look like after the crisis.
Most large operators closed their businesses entirely in the initial phase of lockdown, with 43% of our surveyed attendees still fully closed. While they are now able to offer delivery, many have taken time to establish new kitchen procedures (to adhere to required social distancing and keep staff safe) before now offering takeaway and delivery from selected sites. Once the procedures and economics of this have been assessed, they will consider rolling this out further across their estates.
Food to go operators are more likely to have some sites open for takeaway, which makes sense given they are more operationally geared towards take-out options.
Businesses must use this crisis period to reassess and restructure their operations. All of our respondents indicated that they are planning to change their operating model or business because of the crisis. Operators should look at right-sizing head office teams, reducing on-site staff levels, and rationalising supply chains. Others might consider simplifying menus or more limited opening hours, something we have seen examples of in international markets. These are things which are likely driven by short-term needs but also could benefit businesses longer-term.
Some operators are also planning to consolidate estates. 57% of respondents did not expect to reopen all of their sites post-crisis, with the majority expecting to close 10-20% sites. The question is whether the tails of sites being cut are being based on historical or future demand profiles. If working from home becomes an established trend, previously high performing city centre sites may deliver lower sales levels; conversely, historically lower revenue sites in commuter towns may do better.
In addition to offering more takeaway and delivery, the closure of sites has accelerated innovation around offerings. Businesses need to look at what they have and what they can do to generate revenue, whether that’s an expansion into selling meal kits or grocery items or putting products into supermarkets. For some, these options may have been on the agenda for some time but not prioritised because of a focus on day-to-day trading. It will be interesting to see how the economics of new business streams stack up and whether they represent long-term incremental business for operators.
Operators need to be responsive to any lasting changes to consumer behaviour. Many expect less eating out, some trading down to cheaper options and more use of promotions, all of which we normally see in an economic downturn. We’re also likely to see greater use of takeaway and delivery, in line with the already established growth trend in these areas, as well as the increased use of well-known brands, which are trusted by consumers or perceived to have better hygiene controls.
This is an incredibly difficult time for the sector and it is likely to remain difficult for some time. As well as focusing on surviving in the short-term, operators should use this as an opportunity to transform into the business they want in the future. While the industry faces serious challenges over the coming weeks and months, we remain positive over its long-term prospects. Those which emerge from the crisis will be leaner and more focused on target customers and core competencies, which will position them well to benefit over the long-term.
Director, Strategy& Travel & Leisure, PwC United Kingdom
Tel: +44 (0)7748 965165
Director, Transaction Services, PwC United Kingdom
Tel: +44 (0) 207 2131030