Recently, Li Biao, the owner of Kangnian Seafood Restaurant, the last sizeable Chinese restaurant in Chinatown in San Francisco, announced that the restaurant was closed. “Kangnian Seafood Restaurant” is one of the few restaurants in Chinatown that can hold large-scale banquets. It is also a fixed venue for overseas Chinese groups and community event banquets.
Lin Biao said that although he was reluctant to give up, the monthly rent, insurance, and other rigid expenses made Kangnian, hit by the epidemic, overwhelmed and had to close the school. At present, catering practitioners in many countries are faced with problems such as difficulty in dine-in, shortened business hours, shrinking passenger flow, declining revenue, and racial discrimination. Under the superposition of many issues, some restaurants are closed, and the remaining people can help themselves?
Here’s the real story about them:
01 Catering industry, suffering from rent difficulties
The traditional catering industry has always said: “three highs and one low”: high rent, high labor costs, high food prices, and low-profit margins. The three expenses of rent, workforce, and ingredients account for 70-75% of the total cost. After deducting taxes, depreciation of fixed assets, and other losses, the profit margin is usually only 5-10%. Under the epidemic, affected by inflation, rents in many countries increased instead of falling, which became the last straw that broke the camel’s back.
According to the latest data from the U.S. Department of Labor, U.S. rents rose 0.5% last month, the most significant increase since May 2001. Under the new crown pneumonia epidemic, the trend of closure of Hong Kong’s catering industry is accelerating.
In early February, Daoxiang Group, a leading local catering company and a listed company in Hong Kong, announced that five branches would be closed. Some of them would no longer be serving dinner time. While about 20 restaurants under Felicity Group were temporarily closed, 2,000 front-line employees were given no pay for three days. Fake. In March, “Xu Liushan,” known as “the dessert memory of a generation of Hong Kong people,” was brought to the court by the landlord due to arrears in rent, demanding more than HK$190,000 in rent and requiring the repossession of the shop. At the same time, some creditors also filed a lawsuit with the Hong Kong High Court. Apply for the liquidation of “Xu Liu Shan.”
“Xu Liushan” publicly pointed out in January this year that the turmoil of the amendment bill significantly impacted the company’s business, and the number of tourists to Hong Kong decreased sharply. Resulting in a decrease of 60-70% of its store business in traditional tourist areas, and it fell into operational difficulties. To relieve people’s hardship and ensure employment. The Hong Kong SAR government announced the establishment of an “anti-epidemic and anti-epidemic” fund of more than 30 billion Hong Kong dollars in February after the Hong Kong SAR government announced measures of 19.1 billion Hong Kong dollars last year.
Among them, support for the catering industry is included. Large restaurants, large restaurants, and factory canteens can receive HK$200,000 in support, while snack shops, small restaurants, and food manufacturers can also receive a subsidy of HK$80,000. However, industry insiders pointed out that the donation is only “a drop in the bucket,” and the monthly rent is the most significant financial pressure. It is hoped that the government can promote the MTR, the Housing Authority, the Housing Society, and other shops to take the lead in reducing rent and exempting rent so that private owners can follow suit.
The domestic catering industry has ushered in good news recently. According to the executive meeting of the State Council, the government will increase support for industries with particular difficulties such as catering, retail, tourism, transportation, and passenger transportation, in terms of phased tax reductions and exemptions, and delayed payment of some social security premiums. In particular, for small and microservice enterprises and individual industrial and commercial households in the service industry that lease state-owned houses. The rent is reduced for six months in high-risk areas in the epidemic and three months in other locations. All localities can assist small and micro enterprises in the service industry and individual industrial and commercial households that rent non-state-owned houses. For the owners of dwellings whose rent is reduced or exempted, this year’s property tax and urban land use tax are reduced or exempted according to regulations.
In addition to the country’s practical actions to help the industry recover after the outbreak of pneumonia caused by the new coronavirus infection in China in early 2020. many commercial real estate operators immediately followed up and launched preferential activities such as donations and rent-free to help small and medium-sized businesses fight the epidemic. According to incomplete statistics, a total of 79 commercial real estate operators have implemented preferential policies for a rent reduction and exemption, involving nearly 600 department stores and shopping centers. In terms of the rent reduction, it can be as short as one week or as long as two months. Over 70% of operators have adopted half of the rent, and some have waived rent altogether. Among them, Wanda and China Resources have both issued rent waiver notices, and it is estimated that the total profit of this act of charity is close to 10 billion.
02 Turning to takeaway, traditional catering starts a self-help battle
In the face of enormous survival pressure, overseas catering companies are actively adapting to find a way out. Those restaurants that originally only operated dine-in have developed an online business, and now they are trying to order food online and take out food delivery. At the same time, a series of new service models such as ordering through code scanning, online payment, robot food delivery, and setting up isolated seats are used. Make the indoor dining environment safer and more secure.
Wei Zhao, chairman of the China-Britain Federation of Industry and Commerce in London, introduced the United Kingdom’s recently passed third “city closure” order. Chinese food practitioners generally report that although there are many takeout orders. due to the high commissions of overseas takeout platforms and insufficient capacity, “some restaurants can only stop taking orders during dinner hours, and many bosses even have to go out to deliver takeout in person.”
Online takeout has become a common choice for Chinese and foreign catering industries under the epidemic.
According to the “2021 Annual Report on China’s Catering Industry” jointly released by the China Hotel Association and Xinhuanet, under the epidemic, due to the stagnation or reduction of offline business, some catering companies that did not sell online before started takeaways. Some catering companies tried Retailing semi-finished products, finished products, and ingredients. Some catering companies have opened online ordering and telephone reservation platforms, developed dishes suitable for Internet sales, and launched online booking, online order, store pickup, and home delivery services.
Pure dine-in or takeout, these two types are rare among catering companies, and more companies adopt the “dual home” model. From the perspective of the input-output ratio, this is already a challenge for the catering industry to confront uncertainty—the most pragmatic path to sex. The development of the takeaway business does not increase rigid costs such as additional rent and workforce but only adds two flexible expenses such as packaging materials and takeaway commissions.
Stores that focus on the takeaway from the beginning can reduce the area of the store under the same sales volume and can significantly reduce the rent, and 10-15% of the rent cost can be converted into profit space, that is, the Profit margins increased to 20-25%.
Of course, the development of takeaway business also has an additional cost for restaurant owners, that is, the technical service fee paid to third-party platforms, commonly known as “takeaway commissions.” For the overseas catering industry, the new difficulties in the takeaway business model are the first and foremost commissions that are not cheap on foreign takeaway platforms. Last year, a restaurant owner in Illinois, the United States, posted a screenshot of Grubhub charges online, which went viral on social media overseas, causing the public to pay close attention to the commission policy of the takeaway platform.
The screenshot shows that Grubhub took nearly 70% of the 46 takeaway orders totaling more than $1,000 in the month, including commissions, delivery commissions (delivery fees), platform processing fees, and marketing fees. That is to say, in the third-party delivery scenario, the cost of delivery fee + packaging fee accounts for half of the total cost of a single meal. At this time, the average profit of the merchant is more than half of the average yield of dine-in.
Although some catering companies and public opinion believe that domestic and foreign sales also have the problem of high commissions, in comparison, the commissions of domestic and foreign sales platforms are far lower than international ones and far quieter than other domestic Internet formats. Judging from various data of domestic and foreign sales platforms, the actual rate of domestic and foreign sales commissions is only single digits, which is not only the lowest in the world but also the lowest in the Internet industry.
Compared with other Internet models, taking live streaming as an example, if a merchant wants to invite an anchor to sell goods for their products, they have to pay a 20-30% commission and pay a pet fee according to different levels of star anchors. The combined cost of the two will be higher. Taking travel as an example, data released by Didi shows that the actual commission ratio of the online car-hailing business in 2020 is 15%-25%. In the more mature e-commerce industry, the general technical service fee is around 5%, but this is only one of several charges. In addition, there are other significant expenses such as annual technical fees, deposits, and online marketing (traffic costs).
Such a cost structure of food delivery has led to the realization rate of transaction volume, gross profit margin, and profit margin of domestic and foreign food delivery platforms are significantly lower than those of overseas counterparts. It is also a takeaway. Overseas catering businesses are complaining, and the high cost is passed on to the user’s end. This is why overseas Chinese send out the emotion that “you only know when you go abroad, domestic and foreign sales are too delicious.” In addition, the operation of food delivery in overseas areas is not as popular as in China. The current situation facing overseas practitioners was 20 years ago when clothing stores entered the online store model from physical stores. They also need to spend time and energy researching and adapting to the food delivery period—interaction and service model.
According to media reports, the Sino-British Federation of Industry and Commerce is in London, England. Has carried out many trains on the production and packaging improvement of takeaway dishes to help them improve their takeaway business to solve the problem of Chinese restaurant operators’ lack of experience in takeaway operations. The fast-changing catering industry has never lacked latecomers. In the new ecology built under the epidemic, the coexistence of shuffling and opportunities has also become a new test that the Chinese and foreign catering industries must face.