It’s no longer a question of if or when the novel coronavirus, or COVID-19, will affect foodservice in the U.S. Instead, the question is how the fast-spreading virus is already impacting the industry.
On Friday, John Hopkins reported more than 100,000 cases of the novel coronavirus globally, and the U.S. death toll rose to 14. As cases and fatalities continue to increase, the fear of the virus is touching every industry.
While restaurant sales have not yet been impacted by the coronavirus—new February data from Black Box Intelligence reports that restaurant same-store sales remained modest-yet-positive in February for the second month in a row, with comp sales at 0.33 percent—there is still cause for concern.
On Thursday, the Dow tumbled 1,002 points due to fears of the virus. Restaurant stocks, in particular, dropped, with a group of majority full-service brands including Red Robin, The Cheesecake Factory, and One Group Hospitality experiencing sliding numbers.
While only time will tell as to the full effects of the virus on the U.S., the nation is readying itself for a healthcare crisis based on the early numbers. U.S. politicians ramped up efforts to fight the virus on Thursday, with the Senate passing an $8.3 billion emergency spending package already passed by the House. If they haven’t already, it’s time for foodservice brands to build their own strategies.
“It’s going to affect every area of operations for restaurants,” says Andy Rosenbloom, head of marketing for restaurant GPO and consultant service Consolidated Concepts. “Handling food is specifically personal.”
Safety is paramount
Coronavirus spreads mainly through respiratory droplets from the cough or sneeze of an infected person. The personal aspect of foodservice that Rosenbloom mentions is the most worrisome in regards to coronavirus, bringing with it the potential of sickness spreading to customers through affected employees or product prepared by affected employees, or to employees through affected customers.
On Friday, Pentagon officials warned that efforts to develop a vaccine might not be completed in time to curb the spread of coronavirus before next winter. With a vaccine still months away, brands have no choice but to double down on proper cleaning and employee hygiene measures.
At the top of the list of preventative practices is proper handwashing. The CDC recommends washing hands with soap and water for at least 20 seconds. Christine Schindler, the cofounder and CEO of foodservice safety company PathSpot, seconds this advice, adding that employees should remove all jewelry while washing hands or working in the back of house, and take extra care to scrub under nails and around nail polish.
“We’re seeing it everywhere, but it is true that the 20-second hand wash with soap and warm water, specifically, is the best way to wash your hands,” Schindler says. “But we’ve analyzed millions of hand washes at restaurants across the country, and from that data we’ve gone little deeper.” Contamination, she says, can get stuck underneath jewelry, under fingernails, in the crevices of hands, and around nail polish.
While hand sanitizer is better than not washing altogether, an alcohol-based hand sanitizer should only be used if soap and water are not available. Hand sanitizer can take up to 5 minutes to actually begin breaking down contaminates, and this wait time can be a hindrance in the fast-paced restaurant environment. Plus, employees may be unaware of the time needed for the sanitizer to do its job, leading to improper use.
In addition to allowing the designated time for hand washing, paying special attention to cleaning surfaces, and ensuring that sick team members stay home from work, Schindler says that effective monitoring tools are key in fighting coronavirus. These could be technology-based tools—like PathSpot’s scanner, which is placed on the wall beside handwashing stations and detects invisible contaminants—or additional human management.
“Restaurants need to check both the effectiveness of hand washes and also the number of hand washes,” she says. “In addition to training, ensuring that there are effective monitoring tools for all hygiene practices is going to be really important during this period.”
The National Restaurant Association (NRA) has also released a fact sheet for restaurants that includes information on how the virus spreads, symptoms, monitoring for the virus, and prevention measures. An FAQ webpage with additional safety information is available on the NRA’s site, too.
Supply chain will also be affected
Of course, more stringent food and employee safety is not the only step in protecting your brand from the coronavirus spread. Every area of operations will feel the effects of the virus, and operators should consider all of these areas, including supply chain.
COVID-19 began in China, a major supplier for the U.S. As China deals with the devastating impact of the virus on its labor and industry, shortages could arise domestically.
“We have our finger on the pulse of supply chain, and the main thing I would anticipate seeing is an impact on the disposables category,” Consolidated Concepts’ Rosenbloom says. “A lot of these products come from China, and China is having severe slowdowns.”
He says brands could see shortages in custom or logoed paper goods specifically. Many of these items—such as a logo-bearing napkin or specially sized cup—are made to spec overseas. American distributors often keep only limited stocks of these custom items on hand, and Rosenbloom recommends that brands begin looking for replacement paper goods that are produced domestically.
“As gathering places, restaurants will experience a significant drop in customer traffic and demand as the public self-quarantines,” says Michael Droke, a labor and employment partner at the law firm Dorsey and Whitney.
Ingredient-wise, he says farm-raised shrimp and packaged crab products, much of which come to the U.S. from China, could be in short supply. Clothing for chefs and others in foodservice is also largely manufactured in Asia, and brands could also see shortages here.
Tim Powell, managing principal at foodservice management consulting firm Foodservice IP, says that, particularly in light of the paper goods shortage and the popularity of off-premises ordering, brands should check with their distribution partners and develop an alternative distribution plan to fall back on.
“On average, a [quick serve] may use seven to eight distributors,” he says. “Certainly make sure you understand how your distributors are going to be dealing with this themselves, because they’re the ones who are really going to feel the shortages.”
As for alternative plans, Powell suggests brands consider all the distribution options, including club stores, broadline distributors, direct store delivery, and, in certain cases, cloud or shared kitchens.
“We’re in a delay period where a lot is unknown about how much this will affect the supply chain,” he says.
Customers (and employees) could stop going to restaurants
As panic over the virus spreads, it’s highly likely that people will visit restaurants less, leading to major drops in on-premises sales.
“As gathering places, restaurants will experience a significant drop in customer traffic and demand as the public self-quarantines. This business interruption will not be covered by insurance. Many companies are imposing travel and other business restrictions. This also drops restaurant customer traffic,” says Michael Droke, a labor and employment partner at the law firm Dorsey and Whitney, in an email.
Droke often advises brands in the foodservice industry. He is based in Washington state, where 13 people have died of the virus. He says restaurants should develop a staffing plan to handle both drops in customer demand and changes in server availability.
While in-store customer traffic is expected to decrease, opportunities could arise in the off-
premises delivery category as more customers stay in for meals.
“Customers have been increasingly leaning on delivery anyway,” Rosenbloom says. “So it’s not a bad time to shore up those off-premises programs, or add off-premises.”
However, operators will still be pressed to locate staff for making deliveries—particularly if their brand’s platform is powered by in-house labor instead of a third-party service—and staffing could become more difficult.
On the one hand, employees themselves could come down with the virus. Sick employees should under no circumstances come into work, and this could lead to scheduling changes and short-staffing. Most restaurant brands do not offer paid sick leave for employees at the store level, and foodservice workers who contract the virus could face significant financial strain, unless workers are compensated for self-isolating, as in the case of British breakfast and lunch brand Greggs. Furthermore, drastic scheduling shifts could result in legal issues for brands.
“Restaurants in some cities … such as Seattle … are subject to special scheduling ordinances. The ordinances impose a penalty on restaurants that make short-notice schedule changes or require workers to go home early,” Droke says. “Those ordinances have some exceptions where the entire restaurant closes, but often impose a penalty on restaurants that send just specific workers home early.”
On the other hand, even without high instances of sick workers, hiring and retaining could be issues in the throes of a coronavirus panic. Foodservice employees are exposed to countless customers on a daily basis, and the human interaction element could be the source of higher-than-usual turnover until the virus is curbed. Furthermore, dropping sales could point to lower wages and, thus, fewer available employees for operators.
“Employees relying on tips as a substantial part of their income will experience a drop in income even when they are allowed to work. This can cause uniquely high turnover in the restaurant industry,” Droke says.
Planning ahead is key
While unknowns abound and panic is on the rise, the best course of action for operators in the face of coronavirus is to think proactively.
“Waiting to respond to the coronavirus outbreak until after it begins impacting your operations can not only hurt your bottom line, but your company’s reputation as well,” Marsh Risk Consulting senior consultant Renata Elias says in an email.
She recommends reviewing and updating any existing emergency response, business continuity, crisis management, and crisis communications plans (such as precious plans created for outbreaks of SARS) and updating them for today. Then, she says, brands should identify and assess their main vulnerabilities; contact insurance brokers to brush up on purchased coverages and how each will respond to a potential outbreak, epidemic, or pandemic; and, finally, familiarize senior leadership with all response plans.
“They say practice makes perfect,” Elias says. “And while not every scenario can be anticipated, business leaders should feel prepared to make the best decisions possible under crisis conditions.”
In the end, no one can fully predict the challenges waiting for foodservice operators. The best approach is to stay calm, be flexible, and work to develop an operating plan that could survive a potential outbreak. After all, even in the worst of times, people have to eat.
“A lot depends on hysteria,” Foodservice IP’s Powell says. “The responses, from the manufacturers to the restaurants, have to be unified in that the food is safe.”