KFC. Photo: VCG

The novel coronavirus (COVID-19) outbreak dealt a surprising blow to the country's food and beverage industry. Foreign businesses such as KFC and Starbucks will also likely report significant losses. Industry insiders said COVID-19 created a 50 percent or more drop in profits among foreign vendors in China from January to mid-February.

Zhao Jinsheng, a senior research fellow on the service economy and catering industry at the Chinese Academy of Social Sciences, told the Global Times on Monday that due to the epidemic, combined with restrictions on businesses opening during the outbreak, catering business will see a sharp decline in revenue.

Although standardization and production processes among global catering businesses are advanced and have less human factors involved, and it may be easier for them to prevent and control the effects of the epidemic than it is for other catering enterprises, they will still experience a significant impact, Zhao said.

"They might not cut jobs at the larger scale during the short term, which means they will bear the costs themselves," Zhao also said.

One employee who works at a KFC in Beijing surnamed Liu, said most of their business is either to-go or delivery orders, with very few customers eating onsite.  

"We are now encouraging customers to use self-service ordering machines at stores to complete their orders and payments to reduce the possibility of close contact," Liu said.

All KFC restaurants have started measuring the body temperatures of every customer who enters their locations.

Starbucks released its Q1 2020 fiscal year report at the end of January, revealing $7.1 billion in revenue, up 7 percent year-on-year, which was in line with expectations. However, with after-hours trading, Starbucks reported a 1.75 percent drop. 

Starbucks CEO Kevin Johnson said the company has temporarily closed more than half of its locations in China due to the outbreak and lack of customers.

A Starbucks manager in Beijing told the Global Times that their store is only offering delivery and takeaway services.

"Since people are staying home, fewer are coming to our store to purchase things," said the manager, adding that all industries have been affected by the epidemic.

"The number of employees at our store has remained the same as we are all local residents," the manager explained.  

The epidemic has impacted not only KFC and Starbucks but other foreign businesses like McDonald's and Costa.

"Many restaurants are closed because of local government regulations aimed at preventing and controlling the epidemic, and not because of corporate decisions," Zhao said, adding, "it remains to be seen how the outbreak will develop."

Zhao said in the future, precision measures by the government could allow stores in less affected areas to open. 

"But I don't think the restaurants will all resume operations before March," Zhao said.