Worldwide, this is an exceptionally testing time for the hospitality industry. With the Coronavirus pandemic still looming large; people remain apprehensive of dining out; notwithstanding the enthusiasm to socialize with social distancing protocols.
In the present pandemic no articulate political-economic stratagem exists on how businesses may potentially survive a prolonged period without any revenue. Many hospitality and retail businesses are getting sacrificed at the altar of community health. For restaurant owners it is now a battle to retain the very existence of their business. They will have to adopt stringent Best Practices and Protocols if they want to thrive after the lockdown.
Some encouraging news is that many technology start-ups in India have ventured into providing platforms and e-commerce solutions that enable restaurants to restart adhering to the new protocols. Restaurants and Diners must engage technologically to exchange information, provide feedbacks, and handle transactions. Simple actions like booking a table, pre-ordering meals, takeaway, digital ordering, digital payment, etc. can be modified keeping the present scenario in mind. Every touch point must reflect, reinforce, and reiterate the modified priorities of Diners.
Gurugram based DotPe’s QR platform is geared up to enable digital ordering for Indian restaurants familiarised with minimum human touch. Guests can scan the QR code placed on the tables from their own mobile phones and view the entire menu of the restaurant on the phone just like an e-commerce catalogue while remaining seated and also make the payment through their phone. Simultaneously strategic business decisions will be made by the restaurants themselves.
Industry body National Restaurant Association of India (NRAI) entered into a strategic partnership in mid May with DotPe to increase sales and provide B2B QR-based digital ordering solutions fully integrated with a payment gateway for its member restaurants and cloud kitchens. Over 5 lakh restaurants represented by NRAI will be able to harmonise their operations by connecting with their customers directly through WhatsApp. NRAI members can avail these services at a low flat fee rather than a percentage based commission. Restaurants can use the Dotpe’s QR based catalogue and e-commerce platform for digital ordering which ensures minimal human touch.
Around 18.05.2020 Bengaluru saw Food-tech company HungerBox create a solution based on FSSAI (Food Safety & Standards Authority of India) and WHO guidelines, and the Government of India’s AarogyaSetu App, to make cafeteria operations COVID-19 safe.
“The HungerBox ‘Covid-19 Safe’ solution” follows a five-pronged strategy which envisages features such as technology, user connect and communication, WHO-prescribed supervisor training and superior protocols for kitchen and cafeteria operations. It includes, according to Sandipan Mitra, CEO and co-founder of HungerBox “Rigorous checks on operations personnel and a tech-led monitoring system that encompasses a 360 degree view of cafeteria operations.”
Using Artificial Intelligence/Machine Learning, the platform regulates footfall into cafeterias and enables decongestion and enables enhanced crowd management. Users visit the café only when it is safe and social distancing can be maintained. Improved safety protocols inside the kitchen and regular temperature screening of staff, monitoring of compliance to food safety standards at the kitchen and food counters, usage of UV sterilisers to sanitise crockery and cutlery and contactless payment options are provided to eliminate the risk of virus transmission.
Restaurants in countries like USA, Sweden and Thailand have already begun functioning as “Covid-19 resistance properties” since May 2020. For example, in Ransäter, Sweden a pop-up restaurant, named “Bord for En” (Table for One), doesn’t have waiters. The food, kept in a basket, is served from the kitchen through a pulley. An eatery in Thailand has plastic barriers to maintain social distancing. In USA some pubs have a pre-booked “one hour” slot for guests.
On May 05, 2020, Ministry of Tourism released Dineout’s white paper on guidelines for restaurants post-Covid covering Staff Management and Staff Health and Safety, In-Restaurant Operation, Kitchen Operations, Contactless Delivery and Pick-up and Contactless Dining. Ankit Mehrotra, CEO, Dineout says “Our new InResto Contactless Dining Suite will help the F&B industry adjust to the new normal, as everything from informing diners about the restaurant’s new safety measures, booking a table and pre-ordering dishes to minimising waiting time, seamless takeaway, contactless payments and ensuring superior hygiene standards are the need of the hour for the entire hospitality industry.” “Over 15,000 restaurants across the country are already using some of our tech solutions, and many of them may sign up for our entire product suite to ensure complete peace of mind for diners”. “As a leading restaurant tech platform, we aspire to empower restaurateurs with our tech innovations to help fight this crisis, and reassure them that the human desire for good food and good time with loved ones will never go out of vogue.”
The biggest hardship being faced by restaurateurs is payment of rent for their commercial properties even when their services have been suspended prompting them to invoke the force majeure clause in their lease agreements. But ironically on 21st May, 2020 the Delhi High Court in Ramanand & Ors. Vs. Dr Girish Soni & Anr. refused to allow the lessee of a commercial property to suspend payment of rent on grounds of the current lockdown situation tantamounting to force majeure and frustration of contract under the Indian Contract Act, 1872 (ICA). The High Court reiterated that, Section 56 of ICA is inapplicable to leases as a lease is a “completed conveyance or an executed contract”. It further held that, lessees cannot seek refuge under Section 108 of Transfer of Property Act, 1882 (TPA) for seeking suspension of rent on grounds of “temporary inability to use the premises”; because that would apply only in the absence of contractual stipulation on force majeure, that too when there is complete destruction of the premises, or when premises are rendered substantially and permanently unfit for the purpose for which it was let.
The High Court however ruled that “in the absence of a contractual provisions allowing suspension, if a tenant invokes equitable jurisdiction of the Court on account of temporary inability to use the premises, facts and circumstance in each case will have to be looked at in determining whether a tenant is entitled to any relief by way of suspension of rent”. It held that “if the payment of rent is linked to profits under rental agreements, the tenant may be entitled to seek a waiver of payment of rent if the tenant has not made any profits due to the lock down.”
Germany and Singapore have had the vision to address the present situation. Singapore has adopted the COVID-19 (Temporary Measures) Act, 2020 to grant temporary and targeted protection to businesses and individuals from their contractual obligations. Germany passed the “Act on Mitigation of the Consequences of the COVID-19 Pandemic in Civil, Insolvency and Criminal Procedure Law” which suspends the rights of landlords of business and residential premises to terminate the lease on grounds of non-payment of rent due to temporary loss of income caused by the COVID-19 pandemic. Similarly San Francisco has put a cap on delivery commissions. In India, aggregator commissions are around 25 % and these are hurting the restaurant businesses.
Religious places, hotels and restaurants are not allowed to open in Maharashtra (which had the highest number of COVID-19 cases in India) till June 30. According to Sanjay Shetty (owner of the popular restaurant chain, “London Taxi”), “Even with the relaxation of some lockdown conditions like opening of offices (with a cap), markets are closing much earlier and there remains a 9 p.m. curfew, which, in a city like Mumbai greatly affects dinner service for restaurants. In Mumbai people usually step out for dinner only after 8.30 or 9 p.m.; so unless this changes once dining-in reopens, these time restrictions will totally deplete business. Also, restricted public transport, which is the primary form of travel for Mumbaikars will hit footfalls greatly. A lot of restaurants whose business model is centred around mid to upscale in-house dining and alcohol sale, will either perish altogether or have to reinvent the wheel with more economical food and pricing.
In Tamil Nadu (the state with second-highest number of coronavirus cases in India), restaurants reopened after two months on June 8th. The state government issued strict SOPs including no air conditioners, 50 per cent occupancy, disinfection of chairs and tables after every use, sanitisers on every table and thermal scanning. There are around 50,000 restaurants across the state, with around 20,000 in Chennai alone. Karnataka has been one of the few success stories, with restaurants open for dining-in, and people gradually venturing to eat out; but business is still a far cry from normal.
One category of food service industry that appears better positioned than the others to deal with the crisis is QSR (Quick Service Restaurants). McDonald’s, Dominos, Subway had modelled deliveries, drive through and OTC pick up’s into their business long before the present crisis. So, while dining-in has been affected even for these businesses, the altered version to a delivery based structure is not new for them.
The National Restaurant Association of India has called the current crisis “a battle to retain [our] mere existence.” The restaurant industry in India has an annual turnover of approximately Rs 4 lakh crore and employs over seven million people, but all of this is at risk because, “as an industry, our business model is such that the proportion of fixed operating expenses is very high, which is a very high-risk model.” According to its President, Anurag Katriar, the sector lost about INR 80,000 crore during the lockdown period, and continues to lose INR 1,100 crore per day.
Hence, the one big cost hit which the restaurant industry is looking to at least save; is GST on rentals for the period of lockdown with no dine-in business. While relief from rent itself is still a distant hope; restaurateurs are hoping the government will hear their plea for a waiver of GST on rentals for this period.
In the face of this catastrophe; the traditional concept of contractual bargains and their enforcement by the Courts will need to be re-examined. Individual landlords and tenants need to arrive at amicable solutions through dialogue or mediation under the aegis of the Court.
The Author is a Practicing Advocate in the Supreme Court of India