Restaurant players have started a dialogue with mall owners to explore new ways of engagement like revenue share model in the post-COVID-19 period, the National Restaurant Association of India (NRAI) said on Wednesday.
According to a PTI report: The NRAI explained that restaurants do not expect the business volume in the post-pandemic period to be more than 30 percent to 40 percent of the pre-lockdown numbers.
“Considering that the proportion of fixed operating expenses in our business is very high, this may lead to massive operating losses to many businesses unless the expenses are brought down significantly and a critical expense like rentals is converted into a variable cost,” it added.
The NRAI said it has written to all malls owners that the mandated lockdown has forced restaurants to shut shop and prevented the malls to allow entry to guests, staff or suppliers of restaurants.
This is a clear case of force majeure and therefore all charges of rentals or common area maintenance (CAM) for the duration of the lockdown needs to be waived entirely.
The industry body has also pointed out that the engagement contours in the post-COVID era needs to move towards a totally variable model.
Such revenue-share model will ensure that the fortunes of both parties, i.e., restaurants and malls are firmly inter-linked, the statement said.
“While we continue with our advocacy efforts with the Government for strong stimulus packages, NRAI is steadfast in its belief that no business will be able to sustain itself post resumption on older terms of engagement,” Anurag Katriar, President, NRAI was quoted by PTI as saying.
The industry cannot operate on old costs with less than half of older revenue, he added.
“Therefore, I reckon that revenue share is a very fair model that will ensure that malls don’t lose out if we see an unexpected early surge in business volumes,” Katriar further told PTI.
NRAI totally understands that the malls too have huge costs to take care of, which is not easy with reduced cash flows. Unfortunately, this is the stark reality for every business, including restaurants, he added.
“Most of our members have expressed their unwillingness and inability to restart the business unless these issues get firmly and proactively resolved… I am fairly certain that as long-standing business partners of ours, the landlords will extend their support in these times of unprecedented crisis,” Katriar was quoted by PTI as saying.
NRAI will soon initiate similar proactive dialogues with other stakeholders such as food service aggregators and individual landlords as well, the statement said.