A Path Forward
Restaurants all experienced COVID-19 in essentially the same ways. First there were the sanitation measures they all took as cases started to break out, and then there were all of the dining room closures once it became a full-blown pandemic. But the responses to the pandemic since the spring have been varied. Restaurants have found success with everything from bundled meal options to curbside carryout service to ghost kitchen–powered virtual concepts.
Here’s how five limited-service concepts adapted to the new normal and carved a path forward in the midst of an unprecedented crisis.
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In the years following the Great Recession, the fast-casual boom led to a wave of elevated counter-service concepts with one big selling point beside quality food: premium hospitality geared toward more of a dine-in experience.
Mendocino Farms was one such fast casual 2.0 concept, serving premium sandwiches and salads in relaxed, big-box environments at about 35 locations in California and Texas. The brand featured uniquely decorated dining rooms, foosball tables, and an overall vibe that invited guests to stay a while.
Then came COVID, and like countless other restaurants, Mendocino Farms was forced to pivot in a big way. It scrapped its deli case where guests could sample foods, rolled out curbside service, and developed family meals and bundles to support more dinner business.
Kevin Miles, who joined Mendocino Farms as CEO in 2019, says the brand had to figure out how to communicate its “Eat Happy” mantra through its off-premises business. “We’ve always prided ourselves on hospitality and our in-room dining experience, as well as our delivered catering,” he says. “We always had great food to go, but we had to retrain our team on how we … deliver that continually through curbside and something in a bag that’s getting walked out to the car.”
Mendocino Farms was planning to open 12 new locations in 2020; by year’s end, it expected to have opened about five or six, Miles says. While future expansion will be tempered by the pandemic, he says, it will also be reoriented to the realities of a post-pandemic landscape. For example, it’s looking into drive-thru pickup windows, as well as a new ordering style that might incorporate customers ordering via QR codes at their tables. The company is also rebuilding its catering program, which had accounted for more than 20 percent of sales before being “decimated” by the pandemic, Miles says. Part of that might include a “Farm Stand” program where Mendocino Farms drops off individually packaged group orders at offices.
Like many companies, Mendocino Farms is also diversifying its growth opportunities by dipping its toes in the ghost-kitchen waters. It opened its first ghost kitchen in Long Beach, California, in the fall. But Miles doesn’t buy the fact that the future of foodservice is entirely virtual. The relationship between a restaurant and its guests is emotional, he says, and requires more than a digital presence.
“You have to build a brand through brick and mortar and have the guest experience it so they can trust what they’re buying from you,” he says.
As for that signature experience Mendocino Farms offers inside its restaurants? Some of that will change. Miles says the brand will likely focus on smaller footprints in the future, possibly with less square footage committed to dining rooms and more committed to patio seating. But even if communal tables are a thing of the past, hospitality is not. After all, he adds, every dollar matters to a guest during seasons of uncertainty, and they’ll pay for a better experience.
“For brands like Mendo,” Miles says, “if we can continue to deliver that great quality, that great innovation around food, and then that great hospitality and service with a smile—whether it’s in a bag sent to your house or you’re dining on our patio or in our dining rooms—I think that’s going to be critically important.”
The better-burger wars may not be as intense as they were a decade ago or so, but BurgerFi has established itself as a rising star in the space. The concept opened in West Palm Beach, Florida, in 2011 and has since expanded to around 120 locations serving premium burgers, sandwiches, hot dogs, shakes, frozen custard, and even alcoholic beverages.
Charlie Guzzetta, BurgerFi’s president, says the brand had focused much of its pre-pandemic attention on growth through franchising and licensing, including in nontraditional locations such as airports and military bases. But after COVID-19, that attention quickly pivoted.
Aside from cleanliness and sanitation, he says, off-premises became one of the biggest focuses. That business of course surged in 2020; Guzzetta says the pre-COVID split was 65 percent dine-in, 35 percent off-premises, and that today those numbers are a near exact reversal. But BurgerFi isn’t simply accepting third-party delivery as a reality and waiting for those numbers to return to normal. In fact, it’s taking some big swings in the off-premises game, betting that it’s the wave of the future.
One of those big swings is drive thru. The company recently opened its first drive-thru location in Florida, and Guzzetta says there are plans to aggressively pursue this type of growth. And that’s not just with your standard drive-thru operation; he says the company is looking at everything from a traditional drive thru to a mobile-order pickup window to drive-thru-only kiosks. It’s even considering drive thrus for third-party delivery drivers.
While BurgerFi resisted drive thru for many years, Guzzetta says the pandemic put into focus the fact that drive thru carries big potential for fast-casual concepts. “Chipotle has done it. The Habit Burger has done it. Panera Bread has done it. And those guys are the leaders in the industry,” he says. “We knew that we had to try it, and I think COVID just accelerated that concept in a very aggressive format.”
Another big off-premises swing for BurgerFi is ghost kitchens. The brand partnered with REEF Kitchens earlier this year to expand into new markets like Seattle, Nashville, Minneapolis, and Houston, where it will operate as delivery only. More ghost-kitchen development is expected this year.
Helping all of this growth along the way is BurgerFi’s recent move to go public. In June, it announced a $100 million merger with special purpose acquisition company OPES Acquisition Corp., which resulted in BurgerFi International Inc., a Nasdaq-listed public company. Guzzetta says the massive capital infusion will be deployed for corporate store development, which will grow in parallel with the brand’s franchising efforts and move into ghost kitchens.
Guzzetta sees plenty to be excited about in the years ahead, as the silver lining to so many restaurant closures is plenty of available real estate. He says BurgerFi plans to capitalize on “a significant amount of inventory that comes available within the next 6–12 months.”
“Some of those regional, smaller burger players that were recently entering the space—or were entering the space without enough of a differentiation toward their brand—are going to have a tough time,” he says. “The brands that are unique and are different and are leading the space, we’ll have room and market share to grow.”
Plant-based foods were having a moment before the pandemic, with meat analogs like Beyond Meat and Impossible Foods gaining traction even in major quick serves.
That was good news for Chicago-based Native Foods, a vegan fast casual that got its start in Palm Springs, California, all the way back in 1994. The concept launched with the message of being compassionate toward animals, but was riding the plant-based wave with a menu that included 100 percent vegan burgers, sandwiches, salads, and bowls. Carin Stutz, whose resume includes leadership stints at companies like Cosi, McAlister’s Deli, and Red Robin, joined Native Foods as CEO in 2019—an opportunity, she says, to lead a startup with significant potential.
But 2020 proved that being a small company also has its disadvantages.
“You really feel that every single dollar counts, and we’re doing our very best to stay on the right side of that,” she says of business during the pandemic. “We’ve got a private equity group behind us that believes in the brand to make sure that we’re going to be around. But I will tell you, it is not easy.”
Native Foods’ 12 locations are spread across four states, which made responding to the COVID-19 crisis particularly difficult, considering the patchwork of state regulations. But the brand slogged through. One of its first responses was to offer grocery items, including plant-based proteins. It also introduced family meals and QR codes for contactless payment.
For now, Native Foods is still focused on getting its existing restaurants through the pandemic. Stutz says that so long as it can do that, any new money that comes afterward will be directed toward growth. Like many other fast casuals that had focused most of their growth on walking-traffic-heavy, urban real estate, Native Foods will start expanding into suburbs, which could include some drive-thru locations, Stutz says.
In preparation of growth, Native Foods is working on a rebrand and repositioning that focuses the brand’s message around being better for your health but also better for the planet. “There is no better way to make a conscious choice on how you can help the planet than choosing a plant-based meal,” Stutz says. “There’s so much written on how much water it saves, how much … it reduces the [carbon dioxide] footprint and greenhouse gas emissions and things like that. There’s just an overabundance of facts on why plant-based dining really makes a huge difference in saving our planet.”
Dallas-based Velvet Taco sells enormous amounts of tacos. The 18-unit fast casual boasts an average unit volume north of $4 million, on a menu mostly made up of $4–$5 tacos.
Prior to COVID-19, the bulk of that business was dine-in, as Velvet Taco featured a laid-back atmosphere, premium margaritas, and restaurants that often stayed open until 2 a.m. on weekdays and
4 a.m. on weekends. Figuring out how to convert that massive sales volume, casual experience, and premium quality—more than 20 chef-crafted tacos grace the menu—to new service styles and daypart traffic became priority No. 1.
Selling margaritas to-go was one clever tactic, but Clay Dover, Velvet Taco’s president and CEO, says the brand has primarily adjusted to the pandemic via back-of-house upgrades. “We now have a double-sided line in our restaurants, one side doing takeout and one side doing dine-in,” he says. “Because during this pandemic, we’ve jumped up to over 60 percent takeout. That’s been huge for us.”
Dover adds that the pandemic slowdown afforded the brand some time to look closely at its operations, which especially included attention on its speed and efficiency. Velvet Taco was already in the process of enhancing its technology capabilities, but ramped up those efforts with new POS and kitchen display systems. It also focused on labor redeployment that maximized its crew members through cross-training. The result has been a more efficient operation and improved profit margins.
“We’re seeing better efficiencies, better order accuracy, quicker times,” Dover says. “We make everything fresh and to order. It’s not just an assembly and there you go. The difference of a 7-minute ticket and a 5-minute ticket is huge for us, and the output is just a game changer.”
By fall, Velvet Taco’s sales were back in black, and Dover says the brand is looking to expand aggressively next year with as many as 10 new locations. It was already planning to invest in drive-thru pickup windows, but that will especially be the case moving forward; Dover says new stores will likely skew smaller with more attention to off-premises business. And Velvet Taco is also relaunching its catering business to include better packaging and more individualized items.
Ultimately, Dover says Velvet Taco’s plan to weather the pandemic downturn is to continue hanging its hat on menu innovation, which includes outside-the-box taco combinations and a Weekly Taco Feature. “People still love tacos. They still love our brand,” he says. “What we’re seeing and hearing from guests is that they still want that innovation—even more than ever.”
Chill-N-Nitrogen Ice Cream
When you drill down restaurant success during the pandemic to the individual categories, it’s clear that some have been affected far more than others. Pizza and wings (perfect for group dinners) have been soaring, while breakfast (an on-the-way-to-work event) was left scrambling.
Ice cream might seem like the kind of category that suffers from social distancing and quarantine, as it’s a more social, special-occasion product that’s generally best eaten right away. But at least at Chill-N Nitrogen Ice Cream, the South Florida brand that has grown to eight locations since launching in 2012, business has been steady after a brief dip in the spring.
“People are hunkering down and maybe not going out to eat or not spending a lot of money, going on vacation, or buying that car,” says David Leonardo, CEO of Chill-N. “But they’re going to go out and treat themselves to a guilty pleasure.”
Chill-N’s typical experience is one in which customers pick an ice cream flavor and toppings and watch as their treat is mixed and frozen using liquid nitrogen right in front of their eyes. But like most restaurant concepts, it had to pivot to off-premises channels, especially delivery, early in the pandemic. Delivery accounted for about 10 percent of business prior to COVID-19, but Leonardo says it reached as high as 90 percent early in the pandemic before settling to account for around 25–30 percent of sales today.
Chill-N managed to crack the code on how its ice cream could travel without melting. “If we know that your product is to go or if we know it’s a delivery order, what we’re going to do is we’re going to add a little bit more liquid nitrogen,” Leonardo says. “That additional liquid nitrogen pretty much guarantees that for the next 10–15 minutes, it’s going to stay in a solid state so that by the time you get it delivered to your house, it’s almost as if you’re basically handing it to someone over the counter.”
One other big change Chill-N made this year was to introduce a larger package size after it recognized that more families were purchasing bulk orders. Its largest size was previously a pint, but it introduced a quart in response to the pandemic shift. It also rolled out a Survival Kit in the early days of the coronavirus that included two quarts of ice cream and a roll of toilet paper delivered to customers’ doorsteps.
Leonardo says Chill-N is ready to step on the accelerator and is looking at franchising across the Southeast U.S.
“No matter how big a crisis is, there’s always opportunity,” he says. “You should always put aside some time to figure out and strategize how you can capitalize on this and how we can beat the competition, whether it’s a new product development or marketing or value proposition.”