The Impact of Coronavirus on Restaurants in Shanghai

How will the coronavirus impact restaurants in Shanghai?

Results from an independent survey done by Nomfluence show a snapshot of how diners and restaurant operators feel about the situation.

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The coronavirus outbreak has China and the world on high alert with more than 24,000 confirmed cases reported. The primary concern now is the health of those infected with the virus.

A secondary concern is its effect on businesses.

Restaurants, which usually take a hit every Spring Festival holiday, are now weighed down by the nationally sanctioned holiday extension. How will restaurants affected by the coronavirus outbreak?

A survey conducted by Nomfluence was done on February 3 and 4 via WeChat and targeted expats living in Shanghai.

I’m sure you know, Nomfluence is run by me, Rachel Gouk. I am only one person and I’m not a sociologist. I just wanted to take the temperature of the city and understand its attitude towards food and restaurants in light of the viral flu outbreak.

Consider these results a snapshot of what people are feeling at the moment and not statistical proof of anything. But maybe, hopefully, it will be instructive for people working in the F&B industry in Shanghai and help them plan for the coming months.

  Survey Data: 

  Impact of Coronavirus  

   on Restaurants in Shanghai   

Total Respondents: 475

Diners and restaurant operators

First, I wanted to know about the respondents' dining habits—how often did they eat at a restaurant during a regular month versus ordering delivery every week.

Most people answered these two questions—both diners and restaurant operators.

The chart above show that the survey demographic eat out often: 37% eat at a restaurant at least twice a week and 30% least three times a week.

Next was: How are people surviving through the coronavirus outbreak? Many restaurants are closed due to new government regulations. These were both multiple-choice questions.

More than 90% of people in Shanghai are opting to cook at home during the coronavirus outbreak. Some have combined cooking at home with delivery (39%) and dining out (20%).

Many restaurant operators (and other industries) are weary about how the coronavirus will affect their business. I wanted to know how people felt about returning to a restaurant post-outbreak.

Surprisingly, more than 40% think its safe now/during the outbreak. 

What could hurt restaurants is the 20% that would only go to restaurants after the government announces Shanghai is cleared of the virus.

At least 45% of people think it will be a month or more before they would go to a restaurant.

Valentine's Day (February 14) is one of the major dining events of the year. Apart from reunion dinners during Chinese New Year (of which most restaurants experienced cancellations as well), Valentine's Day is a reliable barometer of consumer confidence.

Only 15% said they would go to a restaurant for Valentine's Day.

It is obvious that February will be a difficult month.

Insights: Food & Beverage Industry Operators

Most restaurants are closed until February 9, many announced they will be reopening on the 10th, barring any new updates from the government.

30% said they would open after February 10, but 42% were not sure when they could reopen.

Despite their eagerness to open as soon as possible, many are short-staffed. Staff who have returned to their hometowns for Spring Festival are finding it difficult to return to Shanghai. Additionally, as an annual occurrence, restaurants lose quite a few staff members just around Chinese New Year—most will leave for better opportunities, or leave after receiving bonuses.

So when will business return to normal? The following results were answered by F&B operators.

Again, these numbers are just a snapshot. The size of this survey is small and targets mostly expats and western/non-Chinese restaurants. 

A majority of restaurant operators (37%) anticipate that business will return to normal by May 2020. However, many are uncertain (28%). 

Only 22% said business will return to normal by March, while 13% said it will be until after July.

March is usually a very good business month for restaurants in Shanghai. Post-Chinese New Year, March is when people get back into their routine.

76% of restaurant operators believe revenue for March 2020 will be down 50% or more compared to March 2019.

11% estimates no change in March 2020.

13% estimates a revenue decrease of 25%.

35% estimates a revenue decrease of 50%.

24% estimates a revenue decrease of 75%.

17% estimates more than 75%.

How Will Restaurants Cope?

My last question was to F&B operators:

What measures will you take to survive until things return to normal?

(Asking landlord for rental concessions, reducing staff, shortening menu, adjusting opening hours, etc.)

A summary of 140+ write-in responses: 

Rental concessions - 85 mentions

Reducing staff/work hours - 50 mentions

Shortening/limited menu - 35 mentions

Adjusting/limiting operating hours - 34 mentions

Delivery/Takeout - 15 mentions

Promotions - 15 mentions

Salary decrease - 3 mentions

Delayed payment to suppliers - 3 mentions

Transparency of hygiene measures - 5 mentions

Additionally, here are some other comments:

“We planned to hire more staff for this spring but we have to hold it, and we plan to sign a new location but we have to hold it.”

"Doing only delivery."

"Cost saving. Contingency mode. Menu strategies. Praying that landlords show a bit of humanity understanding that the crisis is for everyone therefore waive rental."

"Aggressive promotions."

"Push on existing niche clients."

"Open only by reservation."

"Offer take-home special meal packages & multiple points rewards for members."

"Need government to have tax reductions."

"New sales channels, push volume from existing customers, micro events, sell aging inventory and private collection at discount."

"Installation of UV sanitizing lamps for disinfection between services, alcohol hand wash on top of regular soap, face mask service."
 
"Rental concessions for sure. Discussing based on percentage of revenue or 1-2 months free. Will also need 1-2 months of free management. Staff are permanently on hold now....Administrative staff will be hit especially hard with no work or less hours. Anyone on payroll not working we still plan to pay 80% of the legal base salary....I estimate many shops will go out of business and hope the government may also be able to provide some assistance or rules for landlords to try to help. I think a lot of people will lose jobs. Hopefully they can pivot to other things. I saw online Hema is making deals with restaurants to temporarily use their staff. We will try to focus on how to tap into delivery more and how to market and execute in a way that puts concerned guests at ease and encourages them to come back out."

Conclusions

Again, the primary concern is health. It is pertinent we all take the necessary safety measures to ensure our safety and the safety of others.

It is and will continue to be a difficult time for the food and beverage industry. The last couple of years have not been kind and the slowdown of business is apparent.

I fear that the impact of the coronavirus on restaurants in Shanghai will be severe.

But, Shanghai is strong, and people are resilient.

I hope that operators will triumph over these hard times and survive this.

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Comments?

Unfortunately my WeChat account does not allow comments. However, this same article is also on nomfluence.com.

Click read more at the bottom of this article for the web version—if you'd like to make a comment, please do so there.

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