Search

COVID-19’s Impact on the Restaurant Industry and Innovations to Bring in New Revenue



The restaurant industry was one of the first to be hit by the Covid-19 pandemic; not just in Canada but all over the world. With profit margins already tight, many restaurants could not survive the long shutdowns and had to close their doors quickly with more on the verge of being faced with the same fate.


The option of curbside pick-ups started trending when the lockdowns began. For many restaurants, this was an easy pivot, but for others, major operational changes and added costs were required to offer this service. Delivery services like Uber Eats and Skip the Dishes dominated and the impact of their large percentage of the bill has been written about often during the lockdown. For many, these fees resulted in break-even sales, but restaurateurs carried on, believing the shut downs would be short term. Since March 2020, 800,000 foodservice workers across the nation were laid off or had their hours cut down to zero when the pandemic hit its peak. Very few have been called back with still numerous out of work (1).


One outcome of the prolonged closures and restrictions has been restaurants rethinking their models altogether. New personal protective equipment, safety training for staff, extra sanitization procedures, extended patios and other safety measures have brought with them more unexpected costs for the restaurants so that they can ensure a safe and enjoyable experience for their customers.


One new and significant model to emerge is the pivot to ghost or cloud kitchens. These are commercial kitchens that are developed solely for the preparation of take-out only meals. They are also often referred to as delivery-only restaurants, only-only restaurants, delivery kitchens, virtual kitchens, shadow kitchens, or dark kitchens. Many of these have emerged within the Greater Toronto Area within 2020.



The Government of Canada has developed relief programs that can help businesses stay afloat. The restaurant industry can also take advantage of these programs for relief. One of these programs is, “Canada’s COVID-19 Economic Response Plan – Support to Businesses”: this program assists in preventing layoffs by providing 75% wage subsidy for businesses so that they can keep workers on the payroll, getting a business credit and extended timelines for paying income tax. Another program is the “Business Credit Availability Program (BCAP)”: This program was designed to allow Export Development Canada and the Business Development Bank of Canada to provide more than $65 billion in direct lending to Canadian businesses. There is also the “Work-Sharing Temporary Special Measures” program as part of Canada’s plan to keep businesses functioning and avoiding mass layoffs. This program provides eligible employees with EI benefits who agree to shorten their work hours by sharing them with other workers so that employers are able to keep maximum employees on the payroll. The government as recently provided an additional $600 million funding to support small and medium sized businesses.

Provincial governments are playing a role in trying to assist local restaurants to survive. Many provincial governments are providing financial assistance programs, respite in payment of fixed costs such as rent payment, utilities and property tax. Restaurants have also been given temporary liquor sale licenses to allow them to sell alcohol as part of take-out and delivery. The Ontario government has a “Main Street Recovery Plan” in place which further assists in allowing permanent 24/7 delivery to restaurants, supporting the availability and distribution of local food and food products along with urging people to support their local restaurants as much as possible.


It is not however all bad news for the food service industry. Meal kit home delivery services have seen an increase in growth. (2) Take out windows have also started showing up as restaurants have shifted from walk-in service. Many eateries have also opened up pop up grocery shops to sell fresh ingredients and restaurant-branded condiments, sauces etc.

Local governments and economic development offices have found ways to support restaurants to find new revenue streams. These have fallen under banners of food tourism, promoting local, restaurants pivoting to CPG (consumer packaged goods), and in support of a different type of economy after Covid, sustainability and circularity in food. For many years, entrepreneur incubation programs run by municipal governments across Canada have helped new business owners turn their ideas into realities and just this past year we also saw the advent of a new niche incubation program specifically for restaurant-owners. This program, offered by an online business called Food Venture Program, pivoted their efforts in March to start helping restaurants find a new stream of income by helping them turn their recipes into retail-ready food products. This program will be running again February 2021 and will also be offered through various municipalities in Ontario starting January 2021. More info here: https://www.foodventureprogram.com/restaurants-pivot-to-cpg


Now that a vaccine for Covid 19 is being disseminated an end is in sight, however restaurants will continue to need support and innovation to continue to run profitably. Municipal and provincial governments as well as the food service industry as a whole continue to encourage the public to support restaurants by ordering take out directly from the restaurants and perhaps soon enough, we may see our favorite restaurants recipes and products on local grocery-store shelves!




References:

1. https://www.restaurantscanada.org/industry-news/covid-19-has-cost-the-foodservice-sector-800000-jobs-since-march-1/

2. https://www.prnewswire.com/news-releases/meal-kit-delivery-services-market-size-worth-19-92-billion-by-2027-grand-view-research-inc-301070638.html

33 views0 comments

Recent Posts

See All