High-End Restaurants During COVID-19: The Beginning of a New Fine-Dining Era?

Abstract

High-end restaurants are commonly known for presenting unique culinary experiences based on the utilisation of different ingredients, innovative dishes, level of service and above average prices. Some of these restaurants have greatly contributed to the promotion of certain regions or even countries. Their business model is generally associated with high value for money based on the particularities of their offering. When the COVID-19 emergency interventions were imposed across the globe in early 2020, the sector was catapulted into an unprecedented crisis. High-end restaurants suffered immediate repercussions which forced them to resort to drastic measures to stay afloat. High-end restaurants across the globe adopted some of the most notable pivots, changing their core value proposition, which initiated changes in most other aspects of their business model. This observational case study explores the innovative practices developed and delivered by these restaurants during COVID-19 and poses questions for the future of high-end restaurant experiences. The case study aims to apply knowledge of business models and the Business Model Canvas as a conceptual tool to encourage visioning and strategising around the high-end dining concept.

Appendices

Teaching Note

Case Summary

In recent decades, the importance of gastronomy has extended to include its connections to the food supply chain particularly localstakeholders involved in the production, preparation and delivery of gastronomic experiences (UNWTO and Basque Culinary Centre 2019). Generally created and run by local chefs, high-end restaurants are perceived as playing a substantive role in the promotion of a country’s gastronomy because their unique offering is based on dishes prepared with distinctive local ingredients or traditions. These restaurants attract a diverse clientele, both residents and foreigners that seek to enjoy a different culinary experience that cannot be easily replicated in other settings. This year, however, high-end restaurants have been practically forced to pivot their business model due to COVID-19. The aim of this case study is for students to analyse the effects of COVID-19 on the business model of high-end restaurants, examine current innovative initiatives around the world, and with the assistance of the Business Model Canvas, propose potential long-term solutions that will allow high-end restaurants to maintain their value proposition. The teaching objectives will require students to work in groups to critically analyse and discuss the present and future options for high-end restaurants.

Teaching and Learning Objectives

• 1. Identify the importance of high-end restaurants for destinations and communities

  • (a) Tourism promotion (unique point of differentiation, international recognition)

  • (b) Linkages to local food supply chain (resources, stakeholders)

  High-end restaurants have provided destinations with a distinctive way of differentiation. By offering dishes that are refined transformations of local culinary or based on local resources, chefs around the world have created restaurants that hold unique offers. This in turn has served for tourism promotion as many of these restaurants and their chefs are internationally renowned. While contributing to the destination attractiveness, high-end restaurants have become an important promoter of local produce as the source of those unique culinary experiences.

• 2. Assess the effects of COVID-19 on high-end restaurants around the world

  • (a) Solution-oriented adaptation

  • (b) Distribution mode

  • (c) Support networks (local and international)

  Due to the worldwide pandemic, high-end restaurants across the world have been forced to rapidly adjust their offer in order to remain operative. Those restaurants that were quick to respond to the challenge had adapted by moving from sophisticated dining experiences to comfort food, include delivery services or use virtual tools. Streaming cooking classes, for instance, have resulted in broadening the customer base for audiences that perhaps could not have been able to visit those restaurants before.

  High-end restaurants have continued to use locally sourced produce and their role in supporting local farmers has gained greater importance. In effect, renowned chefs around the world have created support networks both locally and internationally. Many of these chefs currently use their social media platforms to promote smaller businesses while others have collaborated to generate resources to support the industry.

• 3. Apply the Business Model Canvas as a tool to develop solutions to complex business challenges

  • (a) Business Model Canvas as theoretical framework and its strategic role for businesses

  • (b) Importance of BMC to generate innovative solutions

  Each business enterprise, either explicitly or implicitly, employs a particular business model that defines how the organisation creates, delivers, and captures value. The Business Model Canvas is an entrepreneurial tool that enables the visualisation, design and reinvention of a business model. The tool allows business to develop a clear view of their value proposition, operations, customers and financial aspects, as well as how all business components relate to each other. It can also serve as an overarching framework for developing a business strategy or a prioritised action plan by addressing the nine building blocks the tool is comprised of. The challenges imposed on businesses by the COVID-19 pandemic have prompted many businesses, including high-end restaurants to re-evaluate the value propositions they present to customers and innovate. However, innovation by itself does not automatically guarantee business or economic success – the effort should be coupled with the development of a business model which defines its ‘capturing value’ strategies. Given the simplicity, flexibility and intuitiveness of the BMC, it may be an ideal tool to systematically think through and generate, develop and iterate innovative solutions for high-end restaurants post COVID-19.

Target Audience

Suitable for students of Hospitality and Tourism Management; third-year subjects. The case study may be suitable for programs with a focus on innovation, as well as final-year capstone research projects, given that it intends to synthesise interdisciplinary knowledge that students may have acquired throughout the course of their degree.

As recommended prerequisites, students should have at least basic knowledge of value proposition development, customer segmentation, types of distribution and promotion channels, types of resources, and should be able to identify different types of business costs.

Teaching Approach and Strategy

It is recommended that at least two class sessions are dedicated to the case study.

The first session can start with an introduction of recent trends in the food and beverage / restaurant industry. This can incorporate a group discussion of outdated trends in the industry, trends the sector is surviving on, and trends the industry may need to be aware of and might need to adapt to in the coming future. This can be followed by a discussion of the role of innovation in the food and beverage industry, by emphasising that restaurants need to continually look for new ways to serve customers more effectively and efficiently to ‘survive’. Students may be asked, individually or in groups, to research and share with the class examples of recent innovations in the restaurant (or food and beverage) industry. The session can also highlight the impact of COVID-19 and related restrictions on the restaurant sector around the world.

The second session can introduce the role and importance of business models, with a specific focus on the Business Model Canvas and development of the restaurant concept. The session should also remind students of the importance of innovation as a mechanism for business survival in today’s dynamic environment and emphasise the need for businesses to become agile. The case study can be assigned as a pre-reading and used to encourage some initial brainstorming and future-driven thinking around the fine dining concept and development of viable business models.

The case study activity itself may be completed in groups of three to four students. The groups may be allocated a specific restaurant from the Pellegrini list of 50 Best Restaurants in the World by teaching staff, or they could be given the responsibility to select their ‘client’ from the list to provide recommendations to.

Example Responses

The value proposition of high-end restaurants experienced a significant change during the pandemic. With the gastronomical extravaganza unable to be recreated in a takeout box, many restaurants had to change their core offering and develop new ‘delivery-appropriate’ menu options in an attempt to appeal to a different customer base than normal. With national borders remaining closed and the uncertainty surrounding international travel, the approach to capture domestic demand is likely to remain a primary focus for upscale restaurants, at least in the foreseeable future. These restaurants should also aim to retain consumers who became firsttime customers during the pivot through carefully developed CRM strategies.

Industry profit margins are expected to be squeezed due to COVID-19. Fixed costs have remained the same, however some variable costs, like engaging waiters, may have decreased, whereas costs related to delivery (either in-house or through a third-party) and adaption of the restaurant operations would have likely increased. Restaurants’ bottom lines are also expected to be affected by strict hygiene protocols and restrictions on the maximum number of patrons per space. The ‘old’ business model may make it difficult to cover restaurants’ expenses, which will result in higher costs that restaurants may transfer to consumers in the form of higher prices. Should upscale restaurants decide to stick with the business model developed during COVID-19, in an attempt to lower costs, they may opt for in-house delivery that makes higher margins compared to third-party apps that take a substantial cut from restaurants for each delivery order placed. We may see upscale restaurants outfitting their websites with online order components to cut out third-party delivery service apps.

Appendix 6.1 Suggested Business Model Canvas Template