F&B operators navigate through MCO to sustain business


  • Corporate News
  • Saturday, 04 Apr 2020

Bank Islam's Mohd Afzanizam(pic) said as most of the F&B operators are SMEs, the government may need to scrutinise in detail about the state of their finances.

KUALA LUMPUR: As the Movement Control Order (MCO) entered its 18th day on Saturday, food and beverage (F&B) businesses across the country, from cafe and restaurant owners to big-name fast-food outlets, manufacturers and retailers continue to feel the impact of the measures to minimise the spread of Covid-19.

Under the second phase of the MCO which started on April 1, supermarkets, restaurants, and food delivery services were allowed to operate from 8am to 8pm.

Unlike most entrepreneurs who struggled to sustain their business and ensure their workers are taken care of, F&B operators and food delivery services were quick to adapt to the situation.

Food delivery services besides takeaways are experiencing a surge in demand. For instance, Grab told Bernama that its delivery services have grown by more than 30 per cent.

"We have activated over 10,000 of our drivers as delivery-partners in order to ensure that Malaysians can still access their essential daily needs conveniently and safely, while ensuring all our partners can continue earning an income on the platform,” a Grab spokeperson said.

On another hand, how do the F&B businesses tide over the trying times?

Challenges faced by F&B operators

For Nasi Ayam Baba Restaurant in Melaka, it has been receiving high volume of orders for delivery services even before the MCO.

The owner, Ahmad Shukri Abdul Shukor said he has been relying on delivery services as another source of revenue besides takeaways during the MCO.

"We had been ranked the number one client by Grab for food delivery services in Melaka because we had made good sales from my second branch in Jalan Hang Tuah. So, during the MCO, there is an increase of about 15 per cent on our food delivery,” he said.

However, Ahmad Shukri said on the whole (delivery and takeaways), he could achieve only around RM1,500 sales daily, 60 per cent down during the MCO period compared to RM5,000 during normal operation hours from the two branches in Jalan Hang Tuah and Batu Berendam.

"I have 20 staff in total at the two branches and I am afraid that I cannot afford to pay my employees because the raw material cost is very high,” he added.

Meanwhile, myBurgerLab managing director Chin Ren Yi said the company received most of the orders from delivery rather than takeaways during the MCO.

After enduring the first phase of the MCO from March 18-31, Chin realised that the delivery service did not give enough profit even though the company hit high sales from its six store nationwide.

"About 25 per cent to 35 per cent of our sales are gone to the delivery services as profit-sharing and there is an imbalance because we are still paying high rental to our landlords.

"Unfortunately, not all landlords give a discount or rebate, hence, it did not help when everything have shifted to only delivery. Our margin has shrunk and we had just enough to pay back ourselves a little more,” he said.

Chin said the situation is not favourable for myBurgerLab.

"The team is really stretched and they might get tired and sick because they need to complete a large volume of orders. If we are working so hard just to earn a little bit, it doesn’t seems worth it,” he added.

Business sustainability

Ahmad Shukri said he will be taking the Special Relief Facility (SRF) announced in the Prihatin Rakyat Economic Stimulus Package (PRIHATIN), unveiled by Prime Minister Tan Sri Muhyiddin Yasin, to sustain his business which was established in 2016.

The government is increasing funds to the SRF for SMEs by RM3 billion, bringing the total to RM5 billion. The SRF is in the form of a working capital for SMEs at a lower interest rate of 3.5 per cent compared with 3.75 per cent previously.

"I will take the SRF because it is not easy to lay off workers, as they are our asset and had help us expand the business.

"Hence, the SRF will be used to sustain the company for six months to one year, and we will also set aside a sum of money for recovery budget to spike our sales through marketing,” he said.

Chin said he would also be taking the SRF to weather the storm for another two months, adding his company would discuss with the employees if they are willing to take a pay cut.

"Most of the conversations will be held with senior managers first. Under the present scenario, we have no choice other than to make a tough decision that could affect the ground level team. My priority is to take care of them,” he said.

Furthermore, myBurgerLab has started conducting research and development to differentiate the menu offerings of diverse products to gain more customers in the future.

Measures to lessen COVID-19 impact

Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said business are definitely operating below their normal capacity by force and not a choice during the MCO.

Therefore, he said there will be some forms of negative side effects as the government's priority is to suppress and break the chain of COVID-19 spread.

"Measures are directed to address businesses cash flow requirement such as paying utilities and salaries,” he said, adding players very prudent in their cash flow would have a better chance to weather such adversities and vice-versa.

Afzanizam said as most of the F&B operators are SMEs, the government may need to scrutinise the state of their finances.

"Just looking at the fall in revenue may not be the sole indicator to describe the state of SME finances. So, we have to deep dive into the problems and go into every detail.

"That would mean the government has to ascertain the level of cash flow position, their balance sheet, especially on their level of indebtedness, working capital, overhead, rental, and others,” he added.

He said the government needs to understand their ecosystem such as supplier, landlords, lenders and investors to be able to know how much to give in terms of financial assistance.

Afzanizam urged F&B operators to improve their product offerings and service to attract and retain customers at their eateries - Bernama
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