The Restaurant Industry of Pakistan

The restaurant industry, carrying global significance, has also played a vital role in Pakistan’s economy. In the years 2017-18, the GDP growth for Pakistan was 5.8%, which was a 13-year high. One of the two sectors responsible for this growth is the services sector, which includes the hospitality industry. This article explores one element of this industry, i.e., restaurants. Therefore, this article begins by highlighting the varying trends in Pakistan, specifically Sindh, that propel people towards restaurants. It advances into a discussion on the challenges faced by restaurants and measures taken by the government to tackle them. This is followed by an analysis of the impact of COVID-19 on restaurants and the Sindh government’s response to the unprecedented situation.

Since the introduction of multinational food franchises in the 1990s, Pakistan’s food industry has seen an incredible upsurge in dining-out trends. Sharif, Jamil, and Nasir (2017) identified two main reasons behind people preferring to dine out recently. First, the general perception regarding dining out has changed and it is now seen as a leisure trip or a social gathering, instead of limiting it to occasions. The same study highlighted socializing as the core factor for dining out, attested by 44% of respondents from Karachi. The research brought to notice how our society lacks all forms of essential entertainment, and that cities are riddled with multiple restraints to fill that void.

Secondly, the trend is multi-faceted as it is not restricted to a particular class or age only. In the beginning, the concept was only welcomed by the higher-income class as the high prices made the food unaffordable for other income segments. However, the industry has progressed since then as now restaurants offer various promotions, which result in expanding their customer base. Hence, despite the global economic conditions and poor job opportunities in Pakistan, the food industry is perhaps one of the only sectors which have remained the least affected by the external environment.

Restaurants and hotels are a major part of the hospitality sector which contribute significantly towards employment generation. The leading ten trades in the sector counted for almost 200,000 jobs in the hospitality industry. In Sindh only, the rate of vulnerable employment, measured as the proportion of own-account workers and contributing family workers in total employment in hotels and restaurants, has increased from 37.7% in 2014-2015 to 40.9% in 2017-2018.

Although the food industry in Sindh has shown significant growth, the challenges faced by it cannot be undermined. Various restaurants face difficulties in registration due to long procedures – which involve various technicalities and consume time and money. For instance, the license fee amounts to PKR 10,000-20,000 depending on the scale of the restaurant. Due to these factors, some restaurants do not register and rather accept the constant threat of shutting down.

Rising inflation and burdensome taxation policies increase the cost for the restaurants, which makes their survival difficult. “The SRB issued working tariff on November 01, 2020. They said that the sales tax rate shall be 13 per cent on services provided or rendered by restaurants” (Pkrevenue, 2020). This sales tax has compelled restaurants to increase their prices, thereby pushing potential customers away.

The food services market is extremely competitive; thus, a lack of customers for these emerging restaurants forces them out of business. However, this severe competition exists only in Karachi – the commercial hub of the country. These restaurants can open in interior Sindh, but the potential of the food market in other cities has not been tapped yet. People there usually do not have a taste developed for trying a different cuisine or they prefer to avail necessities rather than spending on food. Hence, restaurants in Karachi go through immense competition while the market in interior Sindh remains limited.

The challenges, however critical, have been taken into account by the Government of Sindh. In their attempt to ensure food quality and security, the Sindh Food Authority Act of 2016 was devised. The act explains the variety of food categories, and safe packaging procedures, and introduces the concepts of food laboratories as well as food safety officers. It transcends into a detailed overview of the Food Authority itself, which comprises nineteen members including the chairperson, vice-chairperson, and conveners. The functions of this branch are to

  • Formulate standards, procedures, processes and guidelines in relation to any aspect of food including food business, food labelling, and food additive, and specify appropriate enforcement systems;
  • Identify procedures and guidelines for the setting up and accreditation of food laboratories;
  • Formulate methods of sampling, analysis of samples and reporting of results.

Thus, this governing body produces frameworks for the Food Operating Officers who conduct frequent visits to restaurants to ensure that the protocol is being followed. The Sindh Food Authority has also outlined a list of offences and penalties, which include substandard food, unhygienic conditions, false labelling, forfeiture of food, etc. To enforce these penalties, the authority establishes or outsources a food laboratory that can conduct tests to ensure food quality.

This act was revised in the form of the Sindh Food Authority Legislations of 2018; these legislations comprehensively outline health risks associated with any offences and the set punishments. While the literature on legislation is extensive, there is a lack of evidence, such as published annual reports by the Sindh Food Authority, to ensure that these legislations are being implemented with the utmost integrity. Thus, it is challenging to formulate an opinion on whether the government is efficiently dealing with problems.

The discussion here would remain fundamentally incomplete without assessing the impact of the COVID-19 pandemic on the industry. As the virus broke out in Sindh in early 2020, restaurants were closed for multiple months to curb the virus’ spread – although home delivery and take-away were allowed in the Karachi division. It was only in August, nearly half a year later, that restaurants were allowed to entertain dine-in facilities, only to be disallowed again soon after due to violations of governmental health guidelines and the subsequent surge in COVID-19 cases; over 100 non-compliant restaurants in Karachi were sealed and multiple were fined. Following these vicissitudes, outdoor dining was finally permitted – first till 10:00 PM, and, recently, without time restrictions. However, the Federation of Pakistan Chambers of Commerce Industry, All Pakistan Restaurant Association (APRA), and restauranteurs still await the resumption of indoor dining, as was the norm in the pre-COVID world.

Naturally, the limiting of restaurants’ authorized operations over the last year has translated into revenue and, thus, employment contractions across the industry. According to APRA, over 100,000 restaurants countrywide shutdown, rendering jobless many of the five million people associated with the industry, and their revenue decreased by 90%; this happened despite food delivery services increasing by 20-25% after the virus’ first wave. Furthermore, most employees were paid their salaries either partially or not at all, affecting the daily-wage workers most adversely. Nonetheless, additional employment opportunities for riders and homemakers-turned-chefs have been the silver lining amid otherwise unfortunate circumstances that have deteriorated the industry’s standing.

To conclude, the restaurant industry’s growing accessibility to various societal factions has contributed to its expansion. However, the statistics underscore the legal, administrative, and political challenges being faced by the industry, which include extensive procedures, heavy taxation, and excessive competition for emerging restaurants. To cater to these challenges, the Sindh government devised the Sindh Food Authority Act 2016, which introduces a governing body that formulates procedures and legislations to ensure efficiency in the restaurant industry. Nonetheless, the Act proved to be inadequate to safeguard the industry in the face of the COVID-19 pandemic by giving rise to a new set of problems – from which the government and the industry are still trying to recover.

Authors: Batool Tasneem, Dhuha Alvi, Isbah Premjee, Rimla Qamar.


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Featured Image credits: Muhammad Ashar Photography; Usama Qureshi’s Tweet: https://twitter.com/UsamaQureshy/status