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Life may go back to “normal,” but your neighbourhood might not

January 18, 2021 3 Minute Read

Life may go back to “normal”, but your neighbourhood might not

 

The pandemic has meant unprecedented hardship for the restaurant industry. For the better part of 2020, restaurants across the country have been forced to close their dining areas, or to operate at a reduced capacity. Profit margins, typically less than 5% during the best of times, have all but disappeared.

 

To try to stay afloat, restaurants raced to partner with food delivery companies. These third-party apps bite even further into profits by charging commissions that ranged from DoorDash’s 10% all the way up to Uber Eats’ 30% commission rate. This provoked a major backlash against Uber Eats.

 

When Take Out Wednesdays was launched last April, some restaurants disabled their Uber Eats app in protest of the exorbitant commissions the delivery service charged.

 

As a panacea to the hurting industry, Ontario temporarily capped fees on third-party delivery apps at 15% on Dec. 19. A few days later, British Columbia followed suit. Calgary and Montreal are pushing for similar limits.

However, this measure and the shift to take out may be too little, too late to save many customer-starved restaurants.

 

In December, Restaurants Canada reported that the number of restaurants that have closed since March reached a staggering 10,000.

 

Before COVID-19, foodservice was the fastest-growing industry in Canada, generating $93 billion in sales in 2019, according to Restaurants Canada. Now the non-profit organization is estimating that half of all local restaurants are at risk of closing within the next six months.

The pandemic has claimed everything from fine dining establishments to mom and pop shops, leaving swaths of vacancies in neighbourhoods across Canada.

Even large chains have not been immune to the impact of COVID-19. Global chicken conglomerate Nando’s closed 21 of its Canadian locations in 2020. Starbucks just announced that it will be closing 300 stores in Canada by March. According to the company, most of these outlets are located in downtown core areas of the country.

Ghost kitchens

The pandemic has forced many industries to evolve rapidly. For the restaurant industry, this has resulted in the rise of the ghost kitchen.

The concept first cropped up a few years ago as a way to introduce a restaurant or a brand to a market without needing the capital to establish a physical, dine-in location.

Now the concept is being adopted by full-service restaurants in response to the rise in demand for takeout amid the pandemic.

Recipe Unlimited Corp., which includes brands like Swiss Chalet, East Side Mario’s, Montana’s, New York Fries, Harvey’s, opened its first ghost kitchen in Toronto last March under the name Ultimate Kitchen. It opened a second Toronto location in November and has more in the works.

Google-backed ghost kitchen company, Kitchen United, raised USD $40M in a Series B round in 2019 and has plans to expand across the U.S. Since the beginning of the pandemic, the company has been barraged by requests from brokers and developers to place a Kitchen United outlet in their retail space, Bisnow reports.

Growing takeout and delivery capacity will be the key to restaurant survival until diners return, which for the beleaguered restaurant industry, can’t happen soon enough. Our neighbourhood might look very different in a post-vaccine world.

 

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