15% of Chennai eateries shut down permanently during second wave, say industry stakeholders

The hospitality sector urgently needs a shot in the arm from the government, in terms of loan restructuring, GST relief and other relaxations.
15% of Chennai eateries shut down permanently during second wave, say industry stakeholders
15% of Chennai eateries shut down permanently during second wave, say industry stakeholders

At least 15% of Chennai’s eateries have shut down permanently with the second wave, say industry stakeholders as businesses screech to a halt after 1.5 years of losses. On July 5, Tamil Nadu’s restaurants were allowed to reopen with 50% capacity. However, many enterprises chose to stay closed as operating in half capacity would further drain their reserves. 

“In and around Chennai, there are 10,000 registered coffee shops, tea stalls, big chain outlets such as Namma Veedu Vasanta Bhavan, Adyar Ananda Bhavan, Saravana Bhavan, small stand alone restaurants, sweet shops etc. At least 1500 of them have closed down permanently,” says M Ravi, secretary of the Chennai Hotel Owners Association. He explains that mounting loans and mortgages to pay GST penalties, rent, property tax, and high operational costs of enterprises have created a debt trap for several restaurant owners. 

“For 18 months we have been closed down with zero revenue from our establishments. In this time, we have had to pay rent to building owners, interest on loans, ESI (employee state insurance) contributions, GST on businesses etc,” says R Sreenivasan, owner of Madurai based Vasan Tiffin Home and state secretary of Tamil Nadu Hotel Owners’ Association. 

Srinivasan explains that to stay afloat, some restaurant owners negotiated with building owners to get the rent reduced, while others took huge loans to keep their establishments running. 

“Ideally the state government should pass an order asking building owners not to charge rent from closed businesses during an imposed lockdown. For that, the state government has to stop charging building or property tax which goes to their exchequer. For a 25,000 square feet commercial space, property tax can come up to 8 lakh per year. This is a huge amount for the building owner and they further torture restaurant owners to pay rent,” he adds. The Union government has so far not issued any relaxations on GST penalties for the hospitality sector, which has further distressed the industry. 

The hospitality industry is desperate for a shot in the arm from the state and Union governments by way of relief from GST penalties, loan restructuring and other relaxations. 

Take away only brings in a portion of earnings

Speaking to TNM, M Ravi says that ever since the pandemic, restaurants have only been making 15-20% of their usual earnings, through take-aways, including online orders from Swiggy, Zomato, and other platforms. This is not enough to tide over the losses incurred, he adds. 

“At the most, earnings from take-aways can go upto 20% of the entire revenue of the enterprise. But again, this is only for branded restaurants. For small standalone shops and small bakeries and tea shops, the pandemic spelled doomsday as Swiggy and Zomato did not generate any orders for them. They have no online visibility,” explains Ravi. 

KT Srinvasa Raja, who runs popular Chennai-based south Indian eatery chain Adyar Ananda Bhavan (A2B) with brother KT Venkatesan says that they are expecting more losses after opening their outlets. 

“We do maximum business during dinnertime, that is 7-11 pm. But the government has only allowed restaurants to remain open only until 8 pm, forcing us to sacrifice three hours of peak business in the evenings. The 50% capacity clause will further reduce our profits. So we are only expecting to make 10% more than what we were making during lockdown,” Srinivasa Raja explains. 

To tackle the situation, A2B has opened a select few outlets established in the busiest neighbourhoods of Chennai. “All our branches on highways, residential areas, and not so busy roads will remain shut,” he says. 

Ravi, who is the executive chairperson of Namma Veedu Vasanta Bhavan, says that they will shut down bigger branches which are 5000 square feet and above and move to smaller spaces. 

“We have 25 branches in Trichy and Chennai, and we are identifying bigger branches to shut them down and move to less than 2000 square feet spaces to reduce running costs,” Ravi explained. 

Things will only look good for the restaurant space once tourism picks up and footfall increases. 

“Right now, despite lockdown relaxations, movement is very low. Footfall in restaurants has drastically reduced. People are spending their money on medical and sanitary expenses and are also wary of a possible third wave which prevents them from stepping out to eateries,” R Srinivasan says. Work from home culture has also contributed to losses as they have lost out on business from the ‘office crowd’ which during lunch and dinner time.

In Chennai, 60% of the labour force employed in the hospitality sector are out of work, says Ravi. “We bring in workers from the north and north-eastern states and train them to become skilled labour. These are the people employed in restaurants, including in star hotels in Chennai and other districts. But with the pandemic, most of them have gone back to their hometowns. They either do not want to return to Chennai, or have already found jobs in other industries in their home states. This has led to a huge demand in labour with the restaurants slowly opening up,” says Srinivasa Raja. 

Appeals to Union govt and state 

On June 19 the Chennai Hotels Association wrote to Chief Minister MK Stalin requesting the government to “waive off shop rents, GST penalties, EMI on bank loans and private finance, water charges, EB charges, sewerage charges, municipal Tax, property tax and late payment charges for hotels and restaurants for the entire lockdown period.” The letter also asked the state government to allow hoteliers and restaurant owners to pay the EB bills in instalments “instead of collecting penalties for delayed payments free from disconnection.”

In another letter to the Union Finance Minister Nirmala Sitharaman, the association asked for waivers on GST penalties, GST on shop rent, EMI on bank loans. The letter also asked for the easing of the GST revocation process and restructuring loans so that hotels and restaurants can take a breather before repaying them. 

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