Deliveroo is calling on the Hong Kong Government to build on recent measures and further aid the restaurant sector, in the face of continuing and unprecedented challenges posed by the third wave of COVID-19. Brian Lo, General Manager of Deliveroo Hong Kong and Board Director of the HK Federation of Restaurants and Related Trades, has written to Chief Executive Mrs. Carrie Lam on the matter, asking for urgent action.
Brian Lo said, “The Government has taken a number of steps to support Hong Kong’s restaurant industry this year, including the Employment Support Scheme, the Food Licence Holders Subsidy Scheme and the Catering Business (Social Distancing) Subsidy Scheme. These one-off subsidies have prevented thousands of restaurants from going out of business and protected many people from losing their jobs – but the crisis is far from over. Restaurants continue to see significant revenue losses under the current dine-in ban and 50% reduced capacity; and while these measures are critical for public safety, urgent action is needed to protect the sector.”
Deliveroo partners with close to 8,000 restaurants in Hong Kong, representing around 40% of the city’s licensed food providers. A recent survey of Deliveroo’s small and independent restaurant partners revealed that more than 50% are facing the prospect of immediate business suspension. Many predict that if the current situation continues, within the next three months they will be forced to permanently close or even pushed to bankruptcy.
Lo added, “Restaurants have seen significant revenue losses during the lockdown even if they are able to remain open for delivery business. The growing contribution of delivery sales to their total revenue is not sufficient to cover cumulative fixed costs such as rent obligations. The precipitous drop in dine-in sales means restaurants are finding it close to impossible to operate and cover their day to day costs. Since last week, we saw close to 1,000 restaurants on our platform alone temporarily shut their doors. Many of these are small and medium sized businesses with no foreseeable date to reopen.
As the leader in the food delivery sector and as an important stakeholder in the F&B industry, we have invested over HK$30 million in a number of measures in the past 6 months including commission reduction, payment delay, funding promotions and rider COVID-19 testing kits, to support our restaurant partners and the industry, as well as our rider community. However, without further Government support to help restaurants to generate revenue and cover costs, more than 5,000 restaurants may be forced to permanently close their doors in the coming months, putting at risk over 80,000 jobs in the industry itself, as well as the loss of income and jobs in businesses providing goods and services to the F&B industry.”
In its detailed submission to the Government, Deliveroo, based on extensive consultation with a large proportion of its 8,000 restaurant partners in Hong Kong, has formulated a series of key policy proposals which would help the industry to recover through this challenging period, adapt to the new economic environment and thrive in the future. These include:
- Subsidy Scheme Extensions: Following on from the success of the first Licensed Hawkers Subsidy Scheme and Food Licence Holder Subsidy Scheme back in March 2020, Deliveroo proposes the provision of incremental HK$200,000, HK$80,000 or HK$5,000 payments per licensed outlet for every three months of continued enforcement of social distancing measures. This will be vital in allowing restaurants to pay rent, supplier bills and staffing costs; and to stave off immediate liquidity concerns.
- Action on Rents: Rent costs in Hong Kong are equivalent to around 20-25% of a restaurant’s usual revenue, compared to the 10-15% range in major European markets, the UAE, Australia and Singapore. The recent drop in sales of 50% or more due to COVID-19 means that rent as a percentage of sale has increased even further, squeezing Hong Kong operators’ margins to the breaking point. Deliveroo proposes a series of measures including waiving rental fees for four months, introducing an evictions moratorium, and encouraging landlords to use turnover leases.
- Action on Staffing Costs: The unemployment rate for the F&B industry rose from 8.6% in Q1 to 14.7% in Q2, according to Government Census data. Deliveroo’s data shows further signs of deterioration, indicating a 300% increase in restaurant closures in July alone compared to the same period last year. Deliveroo therefore urges the Government to extend the Employment Support Scheme for at least six more months or as long as social distancing measures prevent restaurants operating at full capacity. This will potentially safeguard tens of thousands of jobs.
Other areas for proposed action include helping restaurants meet the cost of becoming COVID-secure, launching a government-led campaign making clear that restaurant food is safe, and providing a subsidy for restaurants to conduct deep-cleaning
Restaurants such as Mini Bangkok, Man Kee Cart Noodle, Chilli Fagara, Golden Monkey, Holy Eats, nood food, La Rotisserie, Limewood, Sip Song, Mott 32 and Pololi are in support of the suggestions Deliveroo has put forward.
Mark Lam, Owner of Mini Bangkok, a popular Thai restaurant in Kowloon City, said, “Like many others in our industry, we’ve had to make major readjustments to cope with this extremely difficult time. It’s tough not knowing from day to day if we will be able to maintain our operations – and the situation continues to become increasingly urgent. While delivery and takeaway is an important part of our business, the revenue lost through minimizing dine-in truly challenges us, preventing us from being able to support fixed costs that we can’t escape. We need further support from the government to safely sernoodve customers, maintain our workforce, ensure a steady supply chain, and so on. We hope that further action will be taken to help us and others in the industry to weather the ongoing storm.”
Tracy Wong, Owner of Chilli Fagara, a modern Sichuan restaurant in Lan Kwai Fong, said, “While we completely understand the need for social distancing measures, the unfortunate truth is that our business has suffered heavy losses as a result of the downfall in foot traffic, especially as a restaurant located in Lan Kwai Fong when alcohol selling and dine-in are prohibited. If we were to cut losses and close the business today, we would still continue to lose money, as a result of forgoing the rent deposit. It has truly become a desperate situation for our restaurant and from what I understand, for many other operators in our same position. We strongly urge the Government to further bolster support for the industry at this difficult time.”
Lo concluded, “We are proud to be a part of Hong Kong’s restaurant sector, renowned as one of the most vibrant and dynamic food scenes in Asia and indeed around the world. We are glad to support our restaurant partners via increased delivery sales during this time, but we recognise that more and urgent action is necessary to counter the financial effects of yet another wave of COVID-19. We believe the measures that Deliveroo is today proposing to the Government can help to ensure that Hong Kong’s restaurant industry survives this pandemic and rebounds after it; and we look forward to further opportunities to discuss and aid the sector during these difficult times.”
