“Without a stimulus package, generating cash flow to cover the expenses is impossible in a time like this”

Indiaretailing reached out to Rahul Akerkar, Founder & Managing Partner, Qualia Hospitality LLP, and a doyen of the restaurant industry in India, to elicit his views on how the sector can come out of the other side of the Covid-19 crisis fighting fit and be able to collectively redraw the industry’s business fortunes.
With restaurants shut down for almost a month now, what steps and measures can be prayed in aid of the industry’s survival and for it to be nursed back to health?
Restaurants, as opposed to other businesses, are majorly dependent on a cash flow management system. With the total shut down and no revenues coming in, our very existence comes into question going forward. We need the government to offer a stimulus package that addresses the issues of payment of rents and salaries, make accommodations towards statutory payments like GST, VAT, taxes, etc. A moratorium on the repayment of loans is the need of the hour; there should be a deferment of statutory payments as well provision of payment plans for the same.
What makes the current situation particularly bad for the restaurant industry?
Operations in restaurants across the country have been suspended and will not commence until the situation blows over. As such, there is no income being generated. As business owners in this space, we have fixed expenses regardless of the incoming cash flow. About 50 per cent of these expenses are made towards rents and salaries, which is a huge chunk. Without any stimulus package and relief, generating cash flow to cover these expenses is impossible in a time like this. Stimulus packages will go a long way in helping businesses stay afloat.
How much a relief has it been for the industry as far as the deferment of bank loan for a three month period is concerned?
Yes, that’s a positive but apart from the temporary stoppage on EMI payments, businesses also need to have access to more working capital and attractive or 0% interest rates.
How do you think the issue of unemployment will play out for the industry?
As the situation stands, a majority of the workforce in the F&B segment all over India has either been laid off or asked to take a leave of absence without pay. Very few restaurants are able to offer pay or even partial pay to their staff. The short-term impact of this temporary closure without any cash flow coming in directly affects the survival of the people and their families, as well as their ability to provide for their families. There are some businesses trying their best to raise funds to pay salaries, some are choosing to stay partially open with skeleton staff or opt for a delivery-only model; however it is not the best step in this situation. These measures do little to even remotely cover the total cash flow required to pay salaries to staff. Sadly, unlike many countries in the world, we do not have a true state funded, unemployment or social security benefit in India. Now is the time for the government to act immediately. It needs to step in and offer support to business owners in hospitality/restaurant and other industries towards paying employees and/or offer a means for people to generate some salary income in this period of shutdown. If this continues unchecked much longer, millions of people in India will go broke. We are looking at an existential and survival crisis that can get very ugly if contingencies are not put in place.
The NRAI has already issued an appeal to the landlords to waive off rent. How far will that go to mitigate this aggravation?
Just like stimulus packages from the government are absolutely needed to help businesses tide through this lean period, landlords also need to step in and bail out the business owners. As I mentioned earlier, for businesses in this sector, rents are a major expense. Without any income being generated, how do businesses pay rent and continue leasing a place? We need landlords to work with business owners and offer some kind of relief towards temporary stoppage of rental dues and other accommodations, so restaurants can reopen at some point.
While the restaurant sector is certainly stressed out, what is it doing to help the government and the authorities fight back this widening gyre of a crisis?
While the government has certainly united its people to fight this deadly virus from spreading and the country is under a strict lockdown, it’s heartening to see organizations including the restaurant sector come out in full support to extend whole-hearted help to the local authorities to ease the situation.
Operators have tied up with social and charity organizations to extend support to daily wage workers by providing them with food supplies. Apart from making donations to the PM Cares Fund and to the local authorities in their locations, operators are also offering their properties for quarantine facility, wherever needed. We are ready to offer any support the government may need from us.