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25 Dec 2020


Restaurants 2021: High risks and challenges remain amid fragile growth; investors advised to maintain caution (Current Issue No.3175)


KResearch views that the business environment for restaurants in 2021 is still fraught with risks as in the preceding year, as a new wave of local COVID-19 transmission, fierce competition among businesses and the yet-to-recover purchasing power will affect any recovery of restaurants in 2021 to varying degrees. Full-service restaurants may recover only slightly, with growth of 0.7 percent, while limited-service restaurants and street food stalls, particularly those with low- to mid-range prices, may see support from the government's stimulus packages to boost spending during 1Q21. Moreover, expansion of market segment and adjustment of business models for mid-sized to large business operators are expected to generate growth of 2.4 percent and 2.0 percent, respectively.

For their businesses to survive amid such risk-laden economic conditions, restaurant operators will need to shift their business model to compact-size enterprises – which possess 1. mobility in accessing target customers speedily and extensively, with examples of such eateries including pop-up restaurants, food trucks and cloud kitchens; and 2.management flexibility which encompasses flexibility in marketing channels or the ability to make changes to steps and formats of business operation; for instance, small restaurants with limited space (like kiosks) are distinguished by their use of smaller advance investment and working capital compared to mid-sized to large restaurants.

Furthermore, the success of these restaurants still depends on other important factors such as the diversity of marketing channels, cost and inventory management, and COVID-19 preventive measures at every service point.

While small to large operators continue to make investments in their operations, the risks posed by the pandemic and fierce competition will likely force a considerable portion of restaurants out of business, leaving a high rate of turnover within the industry. At the same time, KResearch perceives that, if the spread of COVID-19 remains below levels which would necessitate another nationwide lockdown, the total value for restaurants in 2021 will amount to THB 410-415 billion, representing  slight growth of 1.4 to 2.6 percent amidst a fragile business environment that signals the need for all restaurants to maintain caution in their investments and undertakings.​