It brings up a significant dilemma: When it’s time to do dine-in business again, how can restaurants do so at limited capacities and still afford to operate?
While it sounds plain to say 25 percent business is better than no business, it’s not so simple. There are costs associated with reopening, from pantry to labor, utilities, and much more. Not to mention just trying to figure out how many employees it takes to cover limited shifts, and whether the full equation makes sense in the end.
Rick Camac, the dean of restaurant and hospitality management at the Institute of Culinary Education, spoke with QSR about the reopening process, from best-practice tips to understanding how to maximize revenue at a lowered capacity.
Let’s start with the first and most critical reopening question there is. Regulations or not, how can a restaurant decide whether or not to open if they cannot make a profit? What kind of questions does an operator need to ask themselves when debating?
Operators should consider the following:
- Have they considered all the safety issues and can they ensure to customers and employees that they’ve mitigated risk to highest extent?
- Budget—can I afford to do all that is necessary to ensure the above?
- Marketing—A restaurant wants to stay relevant and top of mind for their customers. Being closed is problematic for more than just budgetary and financial reasons. Make it clear you are opening, show the changes being implemented for your customer’s safety and describe your new offerings (be sure to include great pictures). Most importantly, get the word out there that you are happy to be back open and are operating safely.
- Staff—You may want to open back up even though it may not be profitable or only marginally profitable just to keep more staff working. Bring back the key employees you need the most, however the risk is that you may lose some of your best employees. While some loss is inevitable, there may be employees that you 100 percent want to stay with you. This is a time (coming out of the pandemic) that you will see a lot of job movement and employee poaching.
Once the green light is given, however, there are a lot of sides to this. It’s not just flipping a switch. Let’s start with the employee element. What are some essential reopening tactics restaurant owners must consider to keep their employees safe (and to make returning to work as seamless as possible)?
Consider changes you may need to make to your restaurant to allow for social distancing. You may conclude that there is no way to allow for it and therefore cannot open or choose not to.
- Offer and supply employees with protective gear.
- Properly sanitize, as per local, state and federal recommendations.
- Consider what you can make contactless (payments, menus, etc).
So what are some tips on how restaurants should reopen, including how to maximize revenue at a lowered capacity? Naturally, this is a dilemma easier answered by quick-service restaurants, but what about larger full-serves that welcome close to 90 percent of their revenue from dine-in business?
I have suggested a three-part plan for how to start back up:
1: Create a 6 month, 12 month, and 24 month plan. In each plan, based on where we are with regulatory / safety requirements, add offerings such as retail (sell your sauces and meal kits), a separate takeaway section (even if for just 6 months), offer delivery, etc. As each period ends, determine what worked and what stays (and what goes away) as the business world evolves. Some solutions may just not work for your style of dining, and if so, staying closed (evaluating all the pros and cons that go with that) just may be the best solution.
2: Before considering any of the above, the first call you have to make is to your landlord. I cannot emphasize enough that you must get a percentage (of sales) rent deal in order to make any concept work. If you cannot get that ratio in line with pre-COVID industry standards of 10 percent or less, you will not make it. I’d suggest asking for 5-6 percent of sales for two years.
3: Determine how you can operate more efficiently. Consider what labor is not essential and strongly consider lessening your menu choices (for ease of purchasing and labor). Reevaluate (and try to renegotiate) every line item on your financial statement.
There’s been a lot of talk among the full-service restaurant community, especially fine dining and independents, that operating at 25 percent capacity isn’t financially feasible. Is this something you’ve heard as well? And is there some equation or idea to understand what capacity limits do make sense?
I can make an argument that 75 percent isn’t financially feasible. While there are things you can do to mitigate losing money and maybe getting to a small profit, but 25 percent capacity makes little financial sense. You can lower your labor and COS (COS is easier than labor), but without a new negotiated rent, that’s a fixed cost that negates the small profit margin you may have had prior. You need to do the following:
Negotiate a new rent for at least two years. Ten percent of sales as rent (and less if you can get it, optimally 5-6 percent). You could save 10-plus percent here as once you are at 50 percent sales (based on less diners), your occupancy will go up to 20 percent plus.
Create a smaller, more profitable menu with no low profit items. If you need to keep that item due to diner demand, rethink the recipe. You should be able to gain back 2-5 percent here. Determine how to lessen waste, as well.
Whether through technology or otherwise, lessen your labor by 2-5 percent. A smaller menu should mean less labor in the kitchen. If not, rethink the menu.
Are there any tips for determining staffing under these restricted openings? Are there some new roles that should be added, like a safety check specialist, etc.?
I think the last thing we need to do is add more positions to an industry that can barely keep labor costs under control prior. New expanded roles for existing positions, the use of technology and the expanded role of an owner will all be of paramount importance for a small independent operator. We cannot afford to attack this problem with manpower.
What should customers expect to see from restaurants in this “new normal?” Beyond just spaced out tables and employees wearing PPE?
As restaurants begin to reopen, the way we eat out will change. Diners should expect to find the following:
- Marked spaces to eat or drink.
- Tables separated further apart (this will vary based on federal, state and local guidelines).
- Areas that will sell groceries.
- More areas specified for takeaway.
- Restaurant prepared meal kits to go.
- Restaurant staff and employees wearing masks and disposable gloves, including FOH (servers, bartenders, cashiers, etc.) and BOH (including cooks, chefs, etc.).
- Disinfecting areas of the restaurant far more frequently and definitely between the turnover of any tables / chairs.
- Time limits on seating.
- Set seating times.
- Eating later or earlier than usual.
- Prices going up at least 25 percent and possibly as much as 100 percent.
- Contactless payment.
- No in person menus. I expect to see more menus you can see and order from your own phone.
- Changes in tipping. The tip pool may go away at many venues and ultimately, tipped minimum wage may disappear.
Among these changes, are there some you think will stick for the long-term?
Especially on the payment side? Yes, I think contactless menus and payments will stick around for the foreseeable future in all but the highest end venues. Some cleaning and sanitizing guidelines will remain as well.
What would you say will be the most disruptive change to come out of COVID-19?
We are social beings. We don’t go to restaurants (and especially bars) to stay away from other people. And, that’s what we sell—not food or drink but experience! Unfortunately, the overall experience will suffer greatly.