The struggle of F&B business during the pandemic

Do you remember the time when opening a restaurant or any F&B related activity was the safest business investment for any small entrepreneur? Well, that seems to have become a memory of the past for many countries. Just browse your favourite online marketplace under the “Business for Sale” category and you will find countless eateries for sale. It is hard to find specific data in the GCC, but taking the UK and the US numbers as a reference, could bring us closer to appreciate how restaurants were really impacted by the pandemic. In the UK, about 6,000 outlets have shut down operations in 2020. The number might look small, but it represents a 195 per cent increment in businesses misfortune compared to 2019. When we include other F&B operators to the casualties — such as bars, pubs etc. — all in all more than 10,000 of them have closed ship in 2020. According to Kate Nicholls, CEO of UK Hospitality: “The loss of 6,000 premises is a dreadful blow to this country’s hospitality sector, but it is going to be the tip of the iceberg if we continue on our current course. The sector’s outlet numbers have contracted 5 per cent and one in five businesses say they do not have enough cash to last beyond February (2021).” When it comes to the USA, in an article published by Bloomberg, we find out that more than 110 thousand restaurants have closed in 2020. This number represents a sixth of the entire market. In many cases it meant a family business gone burst. However, the US is a unique case since the decision on how food and beverage businesses are allowed to operate is often decided at State level with some guidelines from Federal Government. But let us look at numbers on average in order to grasp the big picture. Restaurants that were not allowed to operate indoor dining might have managed to survive when they had outdoor options, or take away service. In that case such outlets have experience an average loss of business of 36 per cent. This represent more than a third in revenue decline, which often was more than enough to transform the business profit into a loss. Of those unable to offer alternative services to mere dine in, their revenues went from 100 per cent to 25 per cent. A spectacular drop that represented end of the road for many eateries. Overall, 90 per cent of F&B businesses have reported a decline in 2020. This resulted — in the US — in half a million restaurants experiencing less revenues in 2020 than in 2019. But 2021 seems to be a more encouraging year for food related business. For those looking for a bargain, this could be the best time to take over a restaurant at the lowest price of the decade. However, it is a risky bet. If lockdown restrictions will remain in place, then F&B might take another year to recover. As always, every economic crisis or downturn offers investment opportunities. Some of them have a high ceiling for stellar profits, while others contain risks that the investor need to consider before jumping into a new venture. Especially when the crisis is still ongoing. [The writer is a member of the International Press Association]   STEFANO VIRGILLI stefano@virgilli.com