Prior to Covid-19 and the Movement Control Order (MCO), food and beverage (F&B) outlets were seen as a key driver of footfall into shopping malls and the retail market.
Now, with malls operating under the safety guidelines of the Recovery MCO, the key concerns for restaurants and food courts are social distancing and lower dine-in numbers. How can F&B operators adapt to the new normal?
Secret Recipe Group business development director Patrick Sim Chee Hong told Property Advisor that the demand for deliveries is increasing.
“When the moratorium on the repayment of loans ends this month, we will likely see an increase in demand for value-driven offerings as people tighten their belts.
“Overall, dine-in trends continue to increase, but are still below pre-pandemic levels.”
Looking at how Grabfood or Foodpanda rates are affecting the bottom line, Sim said it is tough as margins are taken up by delivery partners.
“Restaurants lose out on service charges and have a higher operating cost. But as customer preferences change, the industry needs to adapt. Convenience at a value is still attractive, despite forgoing a nice dine-in experience.”
He said deliveries allow F&B outlets to reach out to customer segments and geographical areas that they probably would not have reached previously.
“This means incremental sales increases when the reach is expanded. But with delivery the main source of revenue, there could be a problem as the outlets operating a bricks-and-mortar outlet have overheads that are not optimised for a full delivery model.”
He said it is important for delivery aggregators/providers to improve their cost models for F&B players as they continue to scale and grow, for a win-win, profitable situation for all.
However, a tricky area of the cost structure post Covid-19 will be rent, especially at shopping malls.
“When deliveries form a higher proportion of overall revenue, the relevance of being in a mall comes into question … To pay a higher base rent on top of delivery sales will add to costs, as opposed to setting up a delivery-focused location at a much lower rent with easier access for riders.”
F&B digital marketing and consultation services provider, Set the Tables (STT), founder and editor Theri Burhan said restaurant owners are constantly adapting cost structures to suit the situation.
“A major one would probably be human resource and food cost, as restaurants are paying the same rent and serving fewer people.
“Owners are looking for ways to cut costs and maximise resources through cross-utilisation,” she said, adding that consumers are becoming more careful about how they spend their time and money.
With deliveries now an integral service for most restaurant models, except for fine dining, Theri said business owners need to factor delivery commissions into their cost.
Can cloud/dark kitchens work here?
The rise of food delivery has created a new concept – the dark kitchens. Secret Recipe’s Sim said the demand is strong and provides an opportunity for the growth of deliveries.
“The dark kitchen concept has begun to take off here. Kitchen facilities are set up and rented out to F&B operators. Operationally, it has its challenges and it is still early in the game to tell how sustainable it will be.
“Most of these operations are not profitable now. But it is hard to comment because Secret Recipe is not operating one.”
Dark kitchens are also referred to as cloud kitchens or virtual kitchens.
SST’s Theri said cloud kitchens are built for the production and delivery of prepared meals to customers on order.
“It works because owners save on dining space fit-out and front-of-house resources. Starting capital is at least 50% lower than opening a bricks-and-mortar restaurant.
“While saving a significant amount on real estate, owners can concentrate on meeting the delivery needs of their target markets. As good as it sounds, with lower costs, more efficiency and reduced risks, is this too good to be true? The key question to ask is, “Is the cloud kitchen the way of the future?”
This article was written by Sharina Ahmad of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.
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