As restaurants begin to open up again – if they open up at all – they will be facing a new set of challenges, new rules and expectations, and more than likely a permanent shift in how they do business. Restaurateurs have their work cut out for them. Traditionally a thin-margin business to begin with, local restaurants especially may be hard pressed to survive an extended shutdown, even with the availability of the Paycheck Protection Program loans – which often are still not enough to keep all employees on the payroll, and can only be used for a narrow list of expenses outside of payroll.
Yes, people will still go to restaurants once the pandemic finally goes into decline and a vaccine has been discovered, approved and distributed. But the question remains, what will be left? And more importantly, will consumers feel differently about restaurants from here on in? Since the pandemic, restaurant patrons have become accustomed to a new normal, where frequent dining out has been replaced with cooking at home, or at best, no-contact delivery or takeout options. Whether those consumers will ever go back to their pre-pandemic restaurant habits is still up in the air.
Restaurants are facing an uncertain future, with the restaurant industry having lost $120 billion in sales over the last three months, according to the National Restaurant Association. The trade group also discovered in a recent survey that many operators do not expect to turn a profit in the foreseeable future, and further noted that the restaurant industry faced the biggest losses of sales and jobs of any industry in the country during the first quarter of 2020. As much as 85 percent of independent restaurants could go out of business as a result, according to the Independent Restaurant Coalition. That report notes that those independent restaurants are much more at risk than chains. Independents also depend more on dine-in revenue, which is likely to continue being weak for some time to come in favor of chains and fast-casual restaurants which have more carryout and delivery options.
Salsa Fresca Mexican Grill, a regional concept chain with ten fast-casual restaurants in Connecticut and New York, has begun the gradual process of re-opening its restaurants on a limited basis, while still emphasizing takeout and delivery with socially distanced dining rooms. “Being quick-serve is to our benefit,” said Marc Miles, co-owner of Salsa Fresca Mexican Grill. “It takes longer for full-serve to get back to full capacity, particularly in terms of indoor seating. A lot of our customers are already accustomed to pickup and delivery, and during the phased re-opening plans we are seeing in our states and in the rest of the country, we will still see customers skewing towards pickup and delivery from quick-serve restaurants as opposed to looking for the dine-in experience they may have enjoyed before the pandemic.”
Salsa Fresca is certainly not alone in looking out towards a “new normal,” or a full re-imagining of what restaurants will look like for the foreseeable future. Outdoor dining – at least for those restaurants that have outdoor space available – has already been included in reopening strategies nationwide, especially in warmer climates.
Some of the financial pressures have been relieved, at least for restaurants which qualified, by the availability of the PPP loans. Miles said “We applied for the PPP loan and ultimately got funded through Chase, and now we are navigating that process, and how to make best use of those funds. There’s a big incentive to get more labor back on, but until sales returns to normal numbers, we may not need 100 percent staffing. We are hoping that the SBA revises rules on how to use those funds. While applying a significant part of it towards labor makes sense, it is not practical to require businesses to use all of it for payroll.” Still, the PPP has been a tremendous benefit to keeping their ten restaurants going, and Miles said, “We are projecting that by September, we will be back to 100 percent of where we were a year ago. Normally we would look for year-over-year growth of eight to ten percent, but if we get even with last September, we will be happy. For now, the numbers bottomed out in April, but are gradually trending up from that low water mark, and the PPP helped us to offset some of those losses.”
A worry for smaller, independent restaurants and regional chains like Salsa Fresca is that, according to Miles, the pandemic has proven to be too great a stressor for many operators. “But big or small, restaurateurs to are just looking to return to normal will be disappointed. Survival going forward will be helped by programs like the PPP, but it will also depend on restaurants being willing to adapt and get creative.”
How then, will restaurants be able to recover, rebound and create a new strategy going forward? The short answer is, not all of them will. But those who do will do well to follow a few key strategies:
- Be part of the community. Those restaurants which maintained their connection to the community during shutdown are better prepared to re-open quickly. Consumers will remember which businesses stayed in touch. “We saw that the community appreciated some of the things we did during the pandemic,” said Miles. “While we were only open for curbside pickup and delivery, we ramped up our ’Feed Our Heroes’ program, which allowed people to add an extra meal for a first responder when they ordered online. Also, we recognized that as more people stayed at home, they were looking for healthier options, and so we put several more 500 calories or less options on our takeout menu.”
- Optimize no-contact pickup and delivery. Even after restaurants are able to resume normal dining room operations, capacity may be limited in many municipalities, and consumers may still not feel ready to go back to their normal dine-in habits. Older pickup/delivery methods may need to be revisited to reinforce contactless strategies. Several delivery services, including Postmates and Uber Eats, have rolled out “no-contact” delivery options, which gives customers the ability to specify how they wish to receive delivery, including “leave at door” drop-offs.
- Optimize safety protocols. Most restaurants did ramp up their standards of cleanliness and safety protocols, but even after the immediate danger has passed, restaurants will need to continue meeting this higher standard, which include protocols governing both the kitchen and employee areas, as well as public areas.
The future of the restaurant industry is destined for change, and not all will survive. Many have already announced permanent closures. Yet, the industry as a whole is one of the most creative and remains very much in touch with what consumers want and need. As the industry moves forward, we are certain to see creative new ideas and business models that serve the public while acknowledging the need for long-term change.
Dan Blacharski is editor-in-chief of TheVivant.com.