60% of F&B businesses are not prepared for COVID-19

Restaurants are expecting revenue to be halved in the next three months.

Close to 60% of restaurants in Singapore stated that they are not prepared and equipped enough to deal with the impact of the novel coronavirus (COVID-19) on their operations, a snap poll by the Restaurant Association of Singapore (RAS) revealed.

More than half, or 57%, of restaurants indicated that they are expecting a revenue loss of over 50% in the next three months, RAS stated in a press conference. Over half or 53.3% of the survey's respondents report an annual revenue of about $2m, whilst 30.8% of them collects in between $2m-$10m.

RAS president Vincent Tan said that in a span of 22 days, they have witnessed revenues and visitor arrivals of retailers and restaurants dive. RAS also stated that about 200,000 of F&B employees have been affected by COVID-19.

To help manage the impact of the outbreak, almost nine in 10 (89.9%) or respondents want wage support from the government. Rental subsidies for spaces in the private sector came second at 88.7%, whilst 85.1% of the respondents wanted the foreign worker levy to be suspended.

The association is urging landlords to ease rents for their food & beverages (F&B) tenants as the COVID-19 continues to weigh on their manpower and rental costs, according to Tan.

“When we analyse our cost of operations, what stares at us is the fact that apart from manpower cost, rental cost accounts for more than a quarter of our operating cost. The association has written and reached out to landlords across Singapore to review this cost at a time when our industry is in dire straits battling a challenge that we did not see coming and certainly, could not have planned for,” he said.

"The results are worrying. However, we believe that the full impact of the 2019 Novel Coronavirus has yet to be felt."

Jewel Changi was the first to respond, as they have agreed to give a 50% rebate on fixed rent for two months. The airport houses international quick serviced restaurants such as Shake Shack and Burger & Lobster.

"Amidst concerns around the evolving COVID-19 situation, we have observed a decrease in footfall over the past weeks. This has inevitably impacted the business of our tenants and we want to lend them our support during this difficult period," Jewel Changi Airport Development's CEO Hung Jean told Singapore Business Review.

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Changi's support measures also include a host of marketing and promotional initiatives such as redemption for free parking. The rent rebate applies to both Jewel’s F&B and retail tenants from 11 February to 10 April, whilst the free parking promotion will commence on 14 February. This promotion is said to be the first of various initiatives against the impact of COVID-19 on their tenants.

"The support measures we have introduced seek to provide temporary cost relief against a challenging operating backdrop for our tenants. This will be boosted by the marketing and promotional initiatives we will introduce to help them grow their businesses," Jean stated.

Meanwhile, Euromonitor research analyst Deepika Chandrasekar noted that it wasn't just the lack of tourists that are hurting F&B players' pockets--even locals are suspending non-essential dining out due to the outbreak.

"With the panic buying at supermarkets following Singapore’s upgrade of the DORSCON level to orange, it is likely that restaurants are seeing lower footfall while eating at home starts to increase. Online orders of food have been rising both from retail and food delivery. But majority of Singapore’s foodservice revenue still comes from dine-in, so even despite food delivery apps like GrabFood and Foodpanda, restaurant revenues are still expected to decline overall," she noted.

Chandrasekar echoed the results of RAS' polls, highlighting the calls for rental refunds and wage supports. "If landlords agree to provide significant rental rebate, foodservice tenants would find some relief and may not have to take extreme measures of closing shop," she said.

"Once some of this burden is lifted at the back end, players may be able to start offering promotions at the customer-facing front end."

But even if the rebates were granted, the F&B sector is headed towards an inevitable decline. "Overall, the footfall is not expected to reach pre-COVID-19 numbers for the foreseeable two to three months,"she concluded.