One of the hardest-hit segments of the economy impacted by COVID-19 is the restaurant industry, most of which was forced to close in the early stages of the pandemic due to public health concerns. While the novel coronavirus crisis is still raging across the globe, businesses are trying their best to adapt to the new way of doing things as best as possible, chief among them the patronage-starved restaurants.
To help these institutions pivot to the new way of business, digital apps and new Internet-based services are creeping up with each promising to point to the future as well as offering a solution for the problems faced by the industry in the here and now. What does this explosion in tech companies catering towards restaurants mean for the industry post-COVID and how is it helping it recover now?
Aside from a future more galvanized by online devices than ever before, restaurants could also face a reality in which much of their business depends on apps and third-party delivery services.
To begin, though restaurants are recovering along with other sectors in the economy, the recovery is uneven and disproportionately centered in the big chain and fast-food segment. Using an analysis of debit and credit activity among its customers from July 1 of this year, Bank of America discovered that larger chains and fast-food restaurants had largely recovered their business with their numbers down only 4% compared year over year. Smaller restaurants, meanwhile, are down some 25% year over year.
Highly dependent upon the dining room experience, these restaurants are not able to make full use of their current capacity on top of a general malaise among the public and negative consumer sentiment about public places like eateries.
The situation for small restaurants is so dire, in fact, that, bar a change in the situation or the arrival of assistance from the government, some 85% of them could close by the end of 2020 according to the Independent Restaurant Coalition.
Possibly Massive Bailout Needed from the Government
The group is pushing the government to approve a $180 billion bailout package for the restaurant industry though it is unclear whether this is actually viable from a legislative perspective. At this point, Democrats and Republicans are struggling to come up with larger macro proposals, let alone more targeted packages like that being requested by the IRC.
The report from Bank of America reads in part, “While big chain includes limited service and full service concepts, we note that smaller chains and independent restaurants are more often casual dining (full-service) and quick-casual concepts. Casual dining and quick-casual have been hit harder by a shift to social distancing, which explains some of the gap between big chains and other restaurants in the data. It also supports our expectation of greater store rationalization in those two segments vs. limited service.”
There are larger concerns among the dine-in restaurant industry about COVID-19 leading to a permanent culture shift in the way people dine out. Many owners and operators are scared that the move away from crowded public spaces could be permanent which means that restaurants need to pivot now to survive. The only problem with that is that many of their options are limited given the inability to utilize interior space.
For some, turning to delivery and expanded out-of-restaurant options has helped but it cannot replicate the dining room experience. Not only do many smaller restaurants depend on healthy alcohol and beverage sales, but also most of them are prevented from extending this aspect of the business to the takeout realm. The shift to lower margin delivery items means that restaurants are increasingly reliant upon third-party apps like Uber Eats to help them make ends meet. Yet one major issue with these apps is that their fees often eat away at the already scant margins enjoyed by smaller dining establishments.
This was a complaint about them prior to the advent of the pandemic but the issue has become even more acute now that restaurants are accounting for each and every penny going out of the door out of business necessity. Some restaurants have pioneered their own apps and services – each beset with their own sunk costs and operator issues – while others are lobbying and working with existing companies to find a better middle ground.
One major criticism that restaurants have of these so-called delivery apps is that they command high prices while offering the most minimal of services. On top of that, many of them are free from brick-and-mortar expenses and none of their delivery drivers are considered actual employees of said company. With all of these advantages, many restaurants wonder how apps aren’t able to make plenty of money taking a much smaller cut of the final total but this disregards the often substantial capital backing these services and its need for a healthy return on investment.
MenuDrive Offers Restaurants a Solution
A novel solution that makes sense for restaurants that want to take charge of their delivery process is MenuDrive. MenuDrive helps restaurants deploy their own online services and build out a delivery network of their own. Owned by point-of-sale tech company Lavu, MenuDrive has allowed thousands of restaurants to pivot during the COVID-19 pandemic. For restaurants in the UK Table Service is offering 100% free service.
As Bob Szuter told a recent panel of restaurant chefs discussing the process of reopening their establishments, “Fortunately, we began preparing slightly ahead of the bar and restaurant closure in mid-March. We quickly moved to beer delivery which has been really helpful. Shortly thereafter, we worked with our point-of-sale provider, Lavu, and set up their online order and delivery platform, MenuDrive, to allow for beer/food carry out without having to rely solely on third party order and delivery services. As we look to reopen our on-premise business, we’re taking our time so we both do it safely and also not lose focus on what’s been working well for us.”