By Gene Lin
With social distancing policies in place, COVID-19 has posed unprecedented challenges to the global restaurant industry. Larry Tang, the founder of the Hong Kong-based restaurant group FAMA, is not surprised by the setbacks brought by the current pandemic.
When the coronavirus disease first emerged back in December last year, Tang was already expecting an industry-wide crisis to happen. For him, it was not a question of if, but when.
“Honestly it’s not something that is so surprising because before that, there was the swine flu and bird flu,” said Tang, “I just think history always repeats itself if you don’t learn a lesson. I thought the SARS lesson was simple but I don’t think people learnt it”.
With COVID-19 wreaking havoc on the global economy at an unprecedented scale, the restaurant industry has been among the most sensitive to the disruption. Since restaurants operate at extremely low margins and require constant orders to stay afloat, many of them are finding it difficult to withstand widespread social distancing.
Speaking at one of his own restaurants SOHOFAMA, a health and sustainability-themed restaurant under FAMA Group, Tang said that the business has been able to cope with impacts from the pandemic despite significant uncertainties ahead. At a glance, each table at the restaurant has been equipped with hand sanitisers, while all tableware has been switched to disposable materials due to customer requests.
“The [number of customers for the] first two weeks [of the outbreak] was like dead. It was terrible, it was really bad,” said Jaki Faulkner, community director at FAMA Group. She added that the restaurant’s business model is changing almost every day due to the disruption, “I guess the main goal is to not close the restaurants really”.
Amidst widespread social distancing, restaurants had to make tough decisions to stay alive with workers feeling the impact most acutely. While some businesses unilaterally asked employees to take unpaid leave, Tang took a more democratic approach of letting his employees vote on whether they prefer to cut one-third of the staff or reduce one-third of everyone’s wage, and most employees chose to take a pay cut. Tang’s employees now work three days a week as opposed to two days, with waiters and bartenders all wearing face masks.
As customers tend to stay home due to the pandemic, restaurants are shifting to takeouts or third-party delivery services to keep businesses running. Delivery services such as Foodpanda, Deliveroo and Uber Eats have become many restaurants’ main channels to sell their products over the past few months. Some businesses even resort to robotic delivery services to minimise the spread of the virus.
“We’ve seen an uptick in demand for delivery as many locals are using Nuro as a safe way to get their groceries and other essential needs without having to drive to the store,” said the spokesperson at Nuro, the autonomous delivery vehicle company.
According to Tang, a lot of restaurants under his FAMA Group are now operating as virtual kitchens, where foods are prepared in a central kitchen and shipped out to customers through the delivery service Foodpanda. Food delivery orders now make up almost half of the company’s revenue every month, which stands at around HK$750,000. But the restaurant group still suffers a significant revenue loss as their pre-pandemic income is roughly HK$1.5 million per month.
The adoption of food delivery has been a work in progress for FAMA Group before COVID-19, and the pandemic merely served as a catalyst that was needed to jump-start that operation. One of their projects, named Food Hero Academy, helps entrepreneurs set up independent virtual restaurants which become part of FAMA Group’s food delivery network. Another project focuses on Community Supported Agriculture (CAS), which sources fresh produce from local farmers and redistributes them through the same network.
However, Tang said that leaning into food delivery does not make his business more resilient against the pandemic, as the operation is still very experimental. He said there are a lot of innovations to be done in the delivery space, specifically, customisation and personalisation for the food customers receive at the doorstep which is similar to services provided by Blue Apron.
Despite their recent surge in demand, most food delivery services remain heavily subsidised by venture capitals and are losing money on a regular basis, according to Tang. While he sees the potential for this industry to expand, it will have to find a sustainable business model eventually. “This existing type of growth cannot continue forever,” Tang said.
The answer to how restaurants could stay afloat in an extended period of the global pandemic remains unclear. While some food services might get by easier than others, the general landscape is bleak and relentless, especially when a recession is almost inevitable.
When asked what he has done right for the business to still be around, Tang said that FAMA Group is not competing in the luxury market, nor are they trying to offer a specific dining experience. Their edge lies in their brand as a premium product that focuses on health and sustainability, and that is what keeps people coming during a crisis. “It’s just luck,” Tang added, highlighting an even more uncertain outlook for the global restaurant industry.
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