Covid impact: big restaurant walk out of mall to high street

The COVID-19 has forced the malls and shopping complexes to remain shut for the last 3 months. The big restaurants and food chain outlets that were seen to have shifted to malls during the last two decades are largely affected. Since the restaurants in the local areas have been functional and home deliveries have been allowed, the coronavirus has forced the restaurant owners for thinking about moving out of malls.

Needless to say, the modern retail is going to see the food hubs taking a reverse route and witness some of the leading food brands, such as McDonald’s, Speciality Restaurants, deGustibus, and Lite Bite Foods moving back to the streets from malls.

All the venues for public gatherings have remained shut to contain the virus and control its spread and the shopping malls were no exception. Considered high-risk areas for infection spread, even when malls open, the business timings are most likely to remain restrictive. Most importantly, the stores in the streets are typically available at a rental lower than in malls. Hence, calculating from a business point of view, the food chains find moving out of malls beneficial.

The standalone stores in some locations also offer drive-through facilities, an alternative to both sit-down and home-delivered meals. This is why Mr. Sanjeev Agarwal, chairman of Connaught Plaza Restaurants Ltd (CPRL) believes that moving out to stores in the streets would be a smart decision. He runs 155 McDonald’s restaurants across north and east India. According to him, McDonald’s has begun drive-through lanes in the north and east in 17 of its restaurants, with more in the process.

The pioneers of the industry claim that the business volume is expected to be only 30 to 40% of pre-lockdown at the beginning of the post-lockdown period. The managing director of Speciality Restaurants, Mr. Anjan Chattarjee believes that the high-street stores are not dependent on external factors. For example, the number of customers in a restaurant inside a big mall depends on the mall footfall. Speciality Restaurants operates Mainland China and Oh! Calcutta. Mr. Chattarjee further added that the restaurants in the streets are offered at lower rents and don’t attract common area maintenance charges that one has to pay in a mall.

The National Restaurant Association of India (NRAI) recently expressed concern on the matter and wrote to mall owners to “urgently resolve” commercial concerns. The waiver of rentals and variable revenue share models were suggested. Since the restaurant owners are facing a steep slowdown, they are of the opinion that they will have to shut down stores in any mall, where the rentals are too high to afford. Collectively, the industry executives believe that the high-streets are easier and less expensive to operate in.

The president of NRAI, Mr. Anurag Katiar mentioned, “We will walk out of any operationally high-risk location.”

However, Mr. Deepak Zutshi, the head of Select Citywalk Mall, said that there can’t be collective bargaining with one industry association. He mentioned that the negotiations will be on a one-on-one basis since relationships “are different with different brands”.

In this backdrop it can be clearly inferred that in months to come we will see many big restaurants move out from Malls and find a place in high streets.

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