Food delivery and takeaway services amid pandemic not sustainable according to restaurant operators

To help contain the spread of COVID-19 pandemic, Prime Minister Lee introduced a set of “circuit breaker” measures last Friday (3 April). The measures allow only deliveries and takeaways and forbid dine-ins at the country’s 4,800 restaurants from Tuesday (7 April) until Monday (4 May).
The government stated that it will absorb five percentage points of three food delivery platforms’ commission costs of around 20 to 40 per cent per order, throughout the period of the circuit breaker measures. This move is done to assist the F&B industry, which had a turnover of S$11.3 billion in 2019.
However, there are some restaurants which opted to stop operations, like Swee Kee Eating House at Amoy Street. Cedric Tang, the shop-owner said that it was “untenable” to keep the shop running through its self-service options from their CBD branch because the area is now empty of people.
Because there are too few residents in the CBD to support business, it would be meaningless to keep the shop open, as remarked by Mr Tang, who is the Director of Ka-Soh Restaurants, the group that operates the Cantonese family restaurant.
According to Mr Tang who has operated on the platforms, deliveries and takeaways revenue will be outstripped buy the expenses for food supplies, staff and rental costs.
“Taking 30 per cent out of each ticket leaves for very slim profit margins, if we have to rely solely on takeaways,” he commented due to the fact that between 28 per cent and 30 per cent is charged by delivery platforms on his orders. He added that deliveries and takeaways form only 20 per cent to 30 per cent of sales at Ka-Soh’s two other branches in Outram and Bukit Timah.
It would be unfair to ask the employees to learn how to use delivery apps overnight because most of them are seniors, Mr Tang also pointed out, being that he is the founder’s grandson.
Six workers have been transferred to the other two outlets whereas there workers at the Amoy Street branch are now on unpaid leave.
Another restaurant, Grain Traders has also shut down earlier this week as businesses cannot be sustained only with deliveries and takeaways, according to its General Manager, Joel Ong.
Mr Ong noted that delivery platforms only deliver within a 5km radius from the restaurant’s location and the lack of residential properties in the area mean that in-person and online orders would be few and far between.
Using islandwide delivery platforms such as Carpal and Lalamove will cost between S$10 and S$25 per trip, making it not a feasible option, Mr Ong added. Absorbing the delivery charge or passing it on to customers would be pointless because each customer pays an average of S$19 for each transaction, according to the last six months of sales.
The restaurant’s 15 workers are still paid their wages, although with pay cuts, Mr Ong pointed out.
Worries about the current situation also struck Deliveroo Editions, which is a restaurant with two delivery-focused outfits.
According to Pho Stop’s Co-Founder, Tomy Chen, deliveries only form 30 per cent of sales, whereas the Downtown Gallery’s dine-in spot provides 70 per cent of the remaining sales. The shop will be kept running for one week before Mr Chen decides whether to shut it down. Two of the 15 workers have been told to take annual leave, while the rest will be kept at Shenton Way branch or transferred.
Mr Chen has also forfeited his own wage “for the foreseeable future” so that payroll does not dry out. Capital has been injected by Mr Chen and the shareholders, which will hopefully allow the business to operate for at least five more months.
Anxious but grateful
The Parliament has announced several measures to ensure that jobs are protected and economy functioning. Measures such as the soon-to-be mandatory property tax rebate and the higher wage subsidy from 50 per cent to 75 per cent in April, will boost the F&B industry.
Restaurant operators have expressed their gratitude to the government for the help that they have provided through these measures thus far.
For example, Alexandre Lozachmeur will be able to pay his six workers their full wages with the help from the Jobs Support Scheme, even though his restaurant, Fleur De Sel will be closed for one month. Mr Lozachmeur will not be doing any takeaways or deliveries because he wants to ensure that his workers are “completely safe”.
“They are my family…I’m responsible for them. They have kids, they have families of their own,” he added. Mr Lozachmeur also expressed his thanks to his patrons, many of whom are regulars, for having their “last supper” at this restaurant to support it while they still could. He will forgo his wage for this month, as he already did for March, so that the business can last through April.
Mr Lozachmeur, and other restaurant operators are worried about the future. He opined that dine-in restrictions may still be in place even if the pandemic situation improves.
Rentals and remuneration make up more than half of restaurants’ business costs, based on the estimates of Singapore Department of Statistics in 2019.
Mr Chen stated that if the measures are not lifted, laying off some workers or putting them on unpaid leave may be the only solutions. Due to the weak economy since 2019, sales have consistently dropped, he pointed out. The figures dropped to 90 per cent from 85 per cent by the end of last month.
Delivery platforms will also experience tough competition as many establishments compete for orders, he further remarked.
According to Unlisted Collection CEO Loh Lik Peng, although measures by the government may be a lifeline for F&B businesses, the cashflow of many establishments remain affected because many landlords have yet to say that they will pass down the property tax rebates.
Mr Loh said that his company, which operates 18 restaurants, has not received confirmation from its landlords regarding when they will obtain their property tax rebates. F&B operators run on “single to low double-digit” profit margins, he added.
Rent reliefs are important as the industry urgently needs to pay their employees, Mr Loh stressed. The #savefnbsg movement on social media was also initiated by him.
The same sentiment is echoed by the Restaurant Association of Singapore (RAS), which has more than 450 members. RAS urged landlords to offer “timely and prompt support” by supplementing the tax rebates pass-down with two months of rental waivers.
For the coming six months, landlords should let the rentals to be in accordance with the grass turnover (GTO). RAS stated that the GTO for outlets in shopping malls is 15 per cent and non-malls to be 10 per cent.
“Our objectives are clear – to ensure business sustainability, prevent closure of businesses and loss of jobs in the F&B industry,” RAS assured.
As of now, there is not much that can be done by food operators but to wait for the restrictions to be removed eventually as well as the grants and subsidies to be dispensed. Many of them do not know what to do beyond May.
Mr Tang said that he would focus on “just taking it one step at a time.”
Mr Lozachmeur remarked that shutting down for one month is difficult to deal with, but he remains optimistic about the country-wide closure: “Hopefully everything gets better, then our business can slowly get back on track.”