With the outbreak of coronavirus, everything changed for the restaurant industry. Many restaurants, particularly in full service, saw their business almost completely disappear, and some were forced to close. Those that stayed open pivoted to exclusively off-premises business. And everybody got a crash course in food safety and employee health.
While uncertainty remains in how long COVID-19 will affect industry sales, one thing is for sure: Restaurant operators did not take the crisis lying down. Here are snapshots at how the industry is responding to massive business slowdown that resulted from the coronavirus, with some practical tips on what you should be doing, too.
Coronavirus Hope No. 1 for Restaurants: Keep Staff Employed
While thousands of restaurant employees were put out of work by the spread of the novel coronavirus, some chains continued to hang up help wanted signs.
Pizza Hut, Papa John’s, and Domino’s announced plans to hire tens of thousands of delivery drivers, pizza makers, and managers at stores across the U.S. as on-premises dining ground to a halt.
“While many local, state, and federal rules are closing dine-in restaurants, the opportunity to keep feeding our neighbors through delivery and carryout means that a small sense of normalcy is still available to everyone,” Domino’s CEO Richard Allison said in a news release. “Our corporate and franchise stores want to make sure they’re not only feeding people, but also providing opportunity to those looking for work at this time, especially those in the heavily impacted restaurant industry.
Likewise, Jet’s Pizza, known for Detroit-style pies, announced it was hiring delivery drivers for all of its 386 locations across 20 states. The chain publicized that out-of-work teachers and restaurant and bar workers could land positions that pay $13–$16 per hour.
David Falato, an owner and franchisee of stores in downtown Chicago and Austin, says business was down sharply, with no more corporate catering gigs or downtown lunch traffic. “It’s almost like the Christmas break,” he says.
But with schools canceled to help slow the spread of COVID-19, some workers had trouble finding other childcare arrangements. The global pandemic also had many retail and restaurant workers concerned about possible exposure because of their interactions with the public.
“We’re full at this point, but literally 5 minutes before I got on the phone someone walked out and said, ‘I can’t do this anymore, I’m going home,’” Falato says. “One person had a child that was susceptible, so he didn’t feel comfortable coming in. People are generally just scared.”
Falato says his stores benefited during the Great Recession because of the brand’s affordable menu. He expects that may hold true through the coronavirus downturn and resulting recession as well, as workers across all industries suffer historic layoffs.
“We’re all going to be hurting for money,” he says. “Pizza was always meant to be the working class’s solution to a dinner back in the day when it was created—the poor man’s dinner.”
The National Restaurant Association predicted total U.S. sales may decline by as much as $225 billion in three months, costing as many as 7 million jobs. That grim forecast is all the more noteworthy considering most operators struggled to hire earlier this year at a time of record-low unemployment rates.
Jay Bandy, president of Goliath Consulting Group, says restaurant chains flattened their management ranks as they made cutbacks during the Great Recession. While many of those organizations are leaner now, he expects to see similar cutbacks in home offices as companies respond to rapidly declining sales. “It’s going to wipe out some middle managers,” he says. This has already come to pass; at the quick-serve level, FOCUS Brands and Shake Shack are just two examples of companies that have made many corporate cuts, while the full-service side of the business has seen layoffs and furloughs left and right.
Gary Stibel, founder and CEO of the New England Consulting Group, says the question isn’t so much whether the U.S. will experience a recession—generally defined as two consecutive quarters of declining gross domestic product—but rather how long the recession will last. His consultancy predicts the 2020 recession will be deep, but maybe not particularly long lasting. The nation may climb out of it as early as the fourth quarter of this year, he says.
“But we will feel a lot of pain between now and then,” Stibel says. “And unfortunately, the restaurant industry will feel more pain than most businesses.”
While few will be spared, Stibel says the quick-service space is well suited to survive this period. With dine-in service mostly banned, it became obvious that brands that already exceled at off-premises execution had a leg up in this environment that revolves around carryout, delivery, and curbside pickup.
“[Quick service] is probably going to do the best because they have done a better job of everything from drive thru to pickup to delivery,” he says. “So we think [quick service] is better positioned than fast casual or white tablecloth. But it is going to require even for them a pivot.”
In the meantime, operators should focus on trimming costs and holding onto their teams. “People first, because they are what keeps you in business—not your customers, but your people, your crews, your staff,” Stibel says.
In light of his projection of a short-lived downturn, Stibel recommends brands start preparing now for brighter days ahead. They can keep tipped workers by moving them to support more robust delivery programs.
As uncertain as these times are, many restaurants are trying to hold onto the staff they have.
Washington, D.C–based fast casual &pizza expanded sick leave for employees and waived waiting periods for health care coverage for new employees. The company also increased hourly wages by a buck and promised unlimited pizza to employees and their families.
Likewise, Chicago’s Brown Bag Seafood worked to support and retain its 75 or so hourly employees. For the last two weeks in March, the company committed to paying 70 percent for hours that workers lost from the business slowdown or for time needed to care for themselves or family. (After that time period, the brand was forced to furlough hourly workers and apply for a loan from the Paycheck Protection Program.)
CEO Donna Lee says the company has built a culture around open communication. During these times, leaders are working to calmly make and communicate decisions on how to proceed.Brown Bag Seafood has worked to be there for employees, “letting them know exactly what the plan is going forward with the information that we know and communicating that to them in a very human way, not in a way that’s like, ‘Here’s a piece of paper on a window, here’s what’s going on with your life,’” Lee says. “We brought everybody together to tell them what the plan was and had something of a town hall, if you will. And I think that it put a lot of people at ease.”
Zach Flanzman, the company’s chief strategy officer, says the 70 percent commitment meant hourly workers could, for a time, count on making their next rent payment. “It’s going to be challenging for every single restaurant out there,” Flanzman says. “But a lot of times we don’t have a big challenge going on and we’re lucky. So when it comes to figuring out what we do in these circumstances, it’s part of the job, too.” —Kevin Hardy
One Key Strategy for Life After Coronavirus
The coronavirus outbreak—and the devastation it wreaked on the restaurant business—revealed many things to restaurant operators about how healthy their organizations were in normal times. Those companies that couldn’t quickly pivot to an exclusively off-premises business model and aggressive promotion strategy were the first to fade and even close up shop.
One problem for many restaurant companies was they had no easy way to communicate personally with their loyal customers, and therefore couldn’t get the word out about any service changes, deals, or discounts. But one industry expert says operators still have time to enhance this part of their business so that they’re positioned to thrive once coronavirus subsides—and so that they’re prepared for any future crises.
Zachary Goldstein is founder and CEO of customer relationship management (crm) platform Thanx, which works with several restaurant companies to personalize their loyalty and ordering experiences. Speaking in mid-March, Goldstein was optimistic that restaurant traffic would bottom out and slowly climb back to more regular levels as consumer trust in the food system was restored. But even after social distancing, sales likely won’t include much dine-in business, at least for the short term.
“That’s going to make off-premises consumption, digital, and the ability to run personalized communications to your customers that represent a large portion of your revenue … critical muscles for restaurants to be focused on,” he says.
The full-service category, of course, suffered more from the outbreak than did limited service, mostly because those restaurants were so dependent upon a dine-in experience. While some full-service brands got creative with meal kits, subscription services, and gift-card solutions as a way to bring dollars in even while their dining rooms were closed, it was impossible for many of them to communicate those special deals to customers because they hadn’t already built a robust CRM platform.
There’s a lesson in that for restaurant operators who aren’t prepared to talk directly and personally with their regular guests.
“This is where the [brands] that seemingly invested ahead in customer databases, CRM, and loyalty are having a little bit more success, because they have a direct channel to their customers and can tell their customers, ‘Hey, this is a totally different way of consuming our food than you’ve experienced before,’” Goldstein says. “They are seeing more success than the ones that have no direct channel to customers and previously relied on word of mouth, location, and consistency of experience. It’s a lot harder to communicate that you’re now open for pre-packaged meal pickups when the consumer has never thought of you that way.”
Personalization is also key to strong communication with customers. Goldstein says the days of blanket, untargeted messages to thousands of consumers in your trade area are long gone. Instead, restaurants should carefully tailor their promotions around what they already know about their regular guests—for example, they should send one message to guests who order primarily via digital channels and another to those who more often dine in. Personalized offers have a four to 10 times higher engagement rate than those that are generic, he adds.
A perfect example of how this can save a business is Chipotle. The Mexican fast casual struggled mightily in the aftermath of an E. coli outbreak in late 2015, and the various messages and promotions it rolled out immediately after the food-safety incident failed to right the ship. Goldstein recalls receiving a mailer from Chipotle that was addressed to “valued customer”—the opposite of a personalized message.
But after Brian Niccol was hired as CEO in early 2018, the company redirected its efforts to be more focused on digital ordering and a loyalty and CRM program. “And over the last couple of years, those two initiatives have been the No. 1 drivers of their growth,” Goldstein says.
Even though restaurant operators today are just trying to keep their heads above water, they should also be thinking about the long-term and what their companies will look like in a post-coronavirus world. Brands should understand where their revenue is coming from and capture data around it, he says, and they should also own their digital channels rather than be dependent on third-party platforms that won’t relinquish valuable data.
“As hard as hard as it is to think about spending energy and money focused on technology and digitization, we’re going to see a new normal on the other side of this crisis,” he says. “That’s a necessity now especially given that we don’t know how long demand will be depressed or people will be hesitant to walk into restaurants.”
And restaurants especially shouldn’t make short-sighted decisions. Goldstein points to one concept he frequents that put a temporary stop on customers using loyalty points they’d already accrued—a decision, he says, that will likely cost it loyal guests in the long-term, even if it might help it with cash flow in the short-term.
“You really need to focus on being positioned to gain on that upswing, because that’s when winners and losers will be defined,” Goldstein says.
There are silver linings to the challenges posed by coronavirus. Goldstein says the restaurant industry was already well on its way to a more digital reality, where customers have more options in purchasing food in ways other than visiting the restaurant, and where brands have more data at their fingertips available to help personalize promotions to guests.
“This is just going to further accelerate some of that investment in modern technology and in the digitization of restaurants,” he says. “And that’s not a bad thing long-term for restaurants, even though this is a little bit—or a lot bit—of a more painful route to getting there than we would have liked to see.” —Sam Oches
The Importance of Staying Positive
The news isn’t very cheerful these days. Coronavirus devastated the economy. Restaurant sales immediately tanked. Some companies closed up shop. Many employees lost their jobs or were furloughed.
Despite all the doom and gloom, one fast-casual CEO is determined to spread positivity to customers and other restaurant professionals. Anthony Pigliacampo is cofounder and co-CEO of Modern Market Eatery, a fine-fast chain based in Denver that, combined with sister brand Lemonade, has 50-plus locations in six states. He’s been leading the charge in promoting the hashtag #SaveRestaurants, encouraging both consumers and other restaurant professionals to double down on supporting restaurant businesses so the industry can collectively get through the difficult season brought about by the coronavirus.
“We’re seeing consumer habits change at a pace that, frankly, has never been observed,” he says. “There’s no precedent for this. There’s no playbook. And so we’re just trying to adapt to it. We keep telling our teams we’re an essential service. … People need to be fed throughout all of this, and you can’t just do it with the grocery stores.”
He’s hoping people remember that takeout and delivery are safe ways to eat—possibly even safer than grocery stores, which are packed with people storing up supplies. He’s also asking people to spread positivity on social media and promote their local restaurant businesses, using the hashtag #SaveRestaurants.
He’s asking everyone to order out as much as possible, even if it’s from your competitors, and even if you’ve closed your restaurant. Still have an email list? Use that to promote ordering out.
“We need our food distributors to come out of this in one piece. We need all the companies that service our restaurants in a variety of ways to come out of this in one piece,” he says. “And so anything we can do to educate all of our guests that … the industry needs saving, that benefits all of us in the end.”
While there will certainly be a shakeout in the restaurant industry and many will close because of this business downturn, Pigliacampo says the industry will be stronger for what it goes through and the lessons learned. Brands are getting a crash course in food safety that will pay dividends in the future, he points out, and if they weren’t fully invested in off-premises before, then they are now.
“This event is going to be a forcing function to have people double down even more on all of those things,” he says. “They were the right trends to bet on two months ago, and they’re even more so the right trends to bet on now. And I think the industry is healthier because of that.”
And for those who have had to unfortunately close their restaurants, they should take the time to consider how to make their businesses better when they turn the lights back on, he says.
For now, though, running a restaurant operation can feel like surviving day-to-day. But Pigliacampo says restaurant operators should go on the offensive, taking advantage of knowledge, ideas, programs, and other resources available to the industry. Whatever it takes, he says, to get customers through the proverbial doors.
“Get volume through your restaurant; that’s going to benefit the community at large more than anything else,” he says. “Short-term problems right now are irrelevant. We are the support infrastructure here, we’re the front lines. We’re giving people food that they need. So let’s keep doing it.”
For more on what Pigliacampo and Modern Market are doing to keep positive and stay open throughout the coronavirus outbreak, stream a podcast conversation with him at QSRmagazine.com/coronavirus. —Sam Oches