How can indie restaurants survive the coronavirus?

Discussion
Photo: RetailWire
Mar 20, 2020
Tom Ryan

Many restaurants are struggling to pivot to pickup and delivery as major cities have temporarily outright banned dining-in.

While delivery and pickup are expected to surge as Americans social-distance at home, given the loss of dining-in, takeout isn’t expected to cover the fixed costs of labor and rent for many. Shifting to to-go often requires reinvented menus, lower prices and turning servers into couriers.

“There is no way delivery and takeout can work to sustain a business, unless your business was already designed for that,” Jon Shook, chef and co-owner of Jon & Vinny’s and other high-profile restaurants in L.A., told the Los Angeles Times.

Some relief was promised as Grubhub and other third-party delivery aggregators temporarily waived commission fees. But many food establishments are scoffing at eventually having to pay from 15 percent to as high as 30 percent per order to cover deliveries. Some restaurants are urging customers to call directly to avoid those fees.

For many restaurants allowed to stay open, new laws restricting hours and/or the number of dine-in patrons are crippling revenues. Traffic was already dropping due to creeping fears over public places.

Most restaurants are taking extra safety precautions in part to give consumers’ confidence, including requiring masks and gloves for staff and taking their temperature before shifts. Those able to offer dining-in have added vigilant cleaning practices and other measures.

Despite all the efforts to remain in business, numerous reports describe workers being laid off because restaurant owners can no longer pay them.

 

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Olmsted & Maison Yaki have been the projects of a life time for us. The support we have received over these near four years from our community, industry, and media have been life altering. And then over the last few days we were forced to layoff our entire staff, almost 70 employees. These are the people that make Olmsted & Maison Yaki what they are. Unemployment benefits are sub-minimum wage. Please help us to support them with disaster relief that is no where to be found from our government, as of now. All contributions over $100 will receive a free ticket to our Re-opening Celebration, date TBD of course. 100% of the proceeds will go to our staff. Link in Bio. With Love, Max, Greg, & Mike

A post shared by Maison Yaki (@maisonyaki) on

With little communication from officials on bailouts for small businesses, scores of restaurants are launching drives on crowdfunding sites, with many foremost supporting employees. Many are setting up virtual tip jars through pay apps like Venmo and PayPal.

In Chicago, where a two-week moratorium on in-person dining is in place, The Beacon Tap caught wide coverage for offering a free roll of toilet paper with a delivery or takeout order.

“It’s scary for a lot of people,” general manager Tommy Riemer told NBC Chicago. “They say two weeks. We all know it’s not going to be two weeks.”

DISCUSSION QUESTIONS: What suggestions would you have for local restaurants attempting to weather the fallout from the coronavirus outbreak? Is shifting to a to-go and/or delivery model a necessity, at least in the short term?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"It's very sad, but I fear we're looking at a decade's worth of damage to the economy. I hope I'm wrong."
"An interesting side note: Weed stores are considered “essential” and not subject to same closure restrictions under California’s stay-at-home rules as restaurants."
"Some interesting creative things are happening already. In the U.K. fast food restaurant Leon is converting to a mini-supermarket."

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17 Comments on "How can indie restaurants survive the coronavirus?"


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Bob Phibbs
BrainTrust

There are no easy answers here in the absence of government action. Quite simply restaurants are rarely money makers in the best of times. If they can’t cover costs now, many will wonder why they would get a loan until there is hope when things can return to some semblance of normal.

Neil Saunders
BrainTrust

It is a very sad fact that not all independent restaurants will survive this. However, many are going down fighting and deserve huge respect for doing so. One potential solution is to try and switch to delivery and focus on marketing to local people with meals designed to be eaten at home. Perhaps offer a subscription or service where people can pay in advance and then get so many meals delivered over a period of time; that will help with cash flow. Of course, that may not be enough: the problem with this crisis is that everyone and everything is affected so aggregate demand and spending power are way down. Good luck to all the independent restaurants and retailers.

Art Suriano
Guest
I feel horrible for the restaurant industry. Guestimates are saying about 30 percent of the restaurants will never reopen, and that is very unfortunate. There is no simple answer. I have seen many local restaurants advertising for take-out on Facebook, and if a restaurant has an extensive mailing list, they can continually send e-blasts with special offers, but it will not be enough for them to survive. Takeout or having dinner delivered is an entirely different experience than dining out, and right now too many consumers are more focused on not getting the virus, their own survival, and less interested in saving their local restaurants. I would suggest that all the local restaurants work together through the local chamber of commerce. The can offer promotions and set up their own delivery services to keep costs down. Create incentives to achieve points to be rewarded and used when the restaurants reopen. Rather than try to compete with one another, work together. Their survival is more important right now rather than who makes the most profit.
Richard Hernandez
BrainTrust

Here in Texas they are considering adding alcohol delivery with the take out or delivery of food. While it’s not a solution, it could be an incentive to order. Unfortunately, it still won’t be enough to support the entire staff for the long haul.

Rick Moss
Staff

Yes, Richard, here in Brooklyn the bars are packaging cocktails in plastic cups for delivery. It’s at least enough of a novelty that they may get some takers, for now.

Cathy Hotka
BrainTrust

Celebrity chef Tom Colicchio expects that 75 percent of restaurants will close as a result of COVID-19. It’s unlikely that the government will choose to rustle up the money to save independents. It’s very sad, but I fear we’re looking at a decade’s worth of damage to the economy. I hope I’m wrong.

Meaghan Brophy
BrainTrust

Cathy, I agree. It’s really sad to see – some indie restaurants in my area are already shuttering for good. Restaurants operate on such thin margins as it is – a pandemic coupled with a recession means we will see many indie restaurants close their doors. Curbside pickup and delivery are helping a few restaurants stay open, but that doesn’t help the servers and bartenders who are out of jobs. And as consumers continue to tighten their wallets and cut back on spending, many people simply won’t be able to order takeout and support their local businesses even if they want to.

Suresh Chaganti
BrainTrust
Suresh Chaganti
Co-Founder and Executive Partner, VectorScient
6 months 4 days ago

Restaurants that are not designed for carry out will not be able to respond quickly enough. Delivery option may not cross the mind of their regular customers. Restaurants rarely do mailing lists. So they won’t be able to market is a hurry. Some dishes and cuisines are just not made for carry out.

The reality is, even restaurants that have been doing deliveries before coronavirus have seen demand just tanking.

Overall the situation is pretty bleak. A wave of bankruptcies is a reality.

For restaurants that have been looking to get into delivery before coronavirus, and have the ability to invest, this may be a good opportunity. For the rest, unfortunately it is not going to be a viable or practical option.

Dick Seesel
BrainTrust

A tale of two restaurants in our suburb north of Milwaukee: First, our “regular” Chinese restaurant, which already does about two-thirds of its business in carryout and is relatively well-positioned to survive. Second, the local outpost of a small chain of casual “microbrewery” restaurants. They decided yesterday at 4pm to pull the plug on their conversion from dine-in to carryout or Doordash delivery.

From what I can tell, the second restaurant wasn’t equipped logistically to deal with the “new normal,” in part because their entire (broad) menu was available online. They will need to figure out how to execute a much narrower menu in a strictly online environment before they can reopen their doors.

The second restaurant is a big, healthy business under normal circumstances — so they are likely to survive. But there will be plenty of mom-and-pop restaurants that don’t have the financing or expertise (or even websites) to handle this.

Ralph Jacobson
BrainTrust

As mentioned in a couple of my recent posts, my wife and I have purchased gift cards from our local restaurants to help the cash flow. I like these other creative ideas in the article, including Chicago’s Beacon Tap, my old high school stomping grounds.

This is hitting restaurants, large, small and chain operators. These are survivalist times for these and other companies. So yes, the ideas mentioned are necessary now, and the government is crystal clear that financial support is on its way to these companies specifically in the coming weeks.

However, these companies’ very existence is still threatened if the virus restrictions continue much past three months. They and other threatened industries need to think beyond their own industry — e.g., maybe restaurants could order basic grocery staples from suppliers and be additional locations for consumers to buy bottled water, bath tissue, etc.? Or maybe there are other product categories to provide? Ideas, please?

Oliver Guy
BrainTrust

Great questions here. Being able to pivot quickly is key to survival. Some interesting creative things are happening already. In the U.K. fast food restaurant Leon is converting to a mini-supermarket.

Also we are seeing big changes in the traditional local British pub. At least two of my locals have converted their meal approach to order by phone and takeaway. Someone locally has also set up a Facebook group specifically for these businesses to make people aware of what they are doing and allow customers to give feedback via online.

Richard J. George, Ph.D.
BrainTrust
While COVID-19 is a terrible threat to our health and economy, this represents a hidden opportunity for the foodservice industry. I understand that most restaurants that have evolved as “dining in” establishments, normally eschew any “takeout” business. However, this is the hand the industry was dealt and should be thankful that it is being treated like an “essential business.” Now the challenge to the foodservice industry is to offer their tasty table-delivered meals for home consumption. How do they profitability do this? There are two things they must do: 1. Re-engineer the food for takeout, 2. Rethink take away packaging. Reengineering includes ingredients and preparation modifications. There’s a reason why most french fries are unappetizing when eaten at home. There are over 20 quality variables of french fries. The differences are imperceptible when consumed immediately and therefore don’t warrant the expense of better quality fries. However, this is not the case when consumed later, even if reheated. Packaging needs to move beyond plain white styrofoam. Now there is an opportunity to develop packaging that reflects… Read more »
Bob Amster
BrainTrust

This is going to be tough on a lot of us. People will hopefully come out and support these restaurants by ordering takeout meals. In many cases restaurants were already doing a takeout business that patrons in the dining areas didn’t notice. Time to rally around your local businesses.

Patricia Vekich Waldron
Staff

Our go-to neighborhood places are offering discounted gift cards, delivery of groceries as well as meals, daily specials and are taking “special requests.” All are active on social media and appear to have support from regular/local guests. It’s heartbreaking – these individuals do it because they love it and have a passion for food and feeding guests. I hope that they can survive. An interesting side note: Weed stores are considered “essential” and not subject to same closure restrictions under California’s stay-at-home rules as restaurants.

Lisa Goller
BrainTrust

It’s heartbreaking to see even gifted chefs being laid off this week. A glimmer of hope is that we all need to eat. Restaurants that adapt to serve pockets of strong demand will have a better chance to survive longer.

For instance, indie restaurants can focus on:

  • Special needs: Elderly and mobility-challenged consumers may not have the ability or network support to cook all their own meals, especially if they must keep their distance from loved ones for weeks.
  • Dietary needs: Vegan, gluten-free and diabetic-friendly diets will remain in demand due to lifestyle/values, allergies and food intolerance.
  • Local: Align with consumers’ sincere desire to support their local economy and jobs by emphasizing the use of local ingredients and network partners to show community within their supply chain.
  • Local marketing: Promoting discounts, deals and gift cards through targeted Google, Facebook and Instagram ads could drive local awareness and traffic.
  • Omnichannel options: To-go, delivery and mobile orders can help to make restaurants convenient and appealing amid social distancing.
Ken Morris
BrainTrust
The article highlights important dynamics at play in the restaurant sector, now but I believe we must bring the conversation back to baseline; how many restaurants even have the capacity for online ordering and third party delivery? An operator must have these options available to even be “in the conversation” when it comes to interim survival. The larger discussion we need to be having for those that don’t have mobile/online or delivery options available, is how do we help them get that technology and get it quickly? I do agree that going all-in on third party delivery is a mistake. However, the GrubHub example needed to be expanded. According to Forbes the offer to “suspend fees” is actually a short-term fee deferral only that applies to commission fees and not delivery or processing fees. The contract also stipulates that restaurants stay on the GrubHub platform for at least one year, a term that many restaurant owners could easily miss during the crisis. Essentially, GH is only addressing one very small part of the equation. I… Read more »
Craig Sundstrom
Guest

And what about the servers? The question, I think, isn’t really so much can the restaurants survive as the collapse in revenue is offset by a collapse in expenses as well, but “can the restaurant workers survive?” Guess what the biggest expense reduction right now is.

wpDiscuz
Braintrust
"It's very sad, but I fear we're looking at a decade's worth of damage to the economy. I hope I'm wrong."
"An interesting side note: Weed stores are considered “essential” and not subject to same closure restrictions under California’s stay-at-home rules as restaurants."
"Some interesting creative things are happening already. In the U.K. fast food restaurant Leon is converting to a mini-supermarket."

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