Challenge vs. Opportunity: Restaurants in 2021
There are two unquestionable truths today. One, of course, is that most restaurants that have survived the last year are hanging by a thread. The other being that the world is chomping at the bit to gather, clink glasses and share meals again. The latter makes me extremely confident that restaurants will experience a glorious and well-deserved revival, returning to their critical role in tying our communities together. The former keeps me up at night, as I want everyone to make it to the proverbial pandemic finish line.
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Understand that there are very few universal rules. Restaurants, by nature, are unique to themselves. Below I will lay out several, over-arching challenges. However, I’ll also present the opportunities that can lie within each.
Challenge 1: The Mass Exodus of Talent
Approximately 16 million restaurant industry workers have faced long-term unemployment in the last 12 months. Even the most dedicated and passionate amongst them have had to seek new ways to keep a roof over their head. I’ve heard from dozens of professional industry workers that studied new fields or got certificates in coding, real estate, insurance and more. The ones who have fully replaced their income and gotten a taste of the “day-walker life” will be unlikely to return.
A hiring frenzy is almost certain. You’ll be competing in new ways to staff and select talent. There will be enough job openings that employee retainment will be more difficult and critical than ever before.
Opportunity 1: Reset and Reform
Besides your pre-opening planning and hiring, there has never been a better chance to have a clean slate. Do the hard reflection and honest review of your business. Scrap the last budget and start over with what you know now (and leave room for the unexpected). Hit the reset button.
Many of the chefs, servers, managers and service support who remain committed to the industry, are well aware of how establishments treated employees and showed care, for not only the staff they were able to keep, but the community as a whole. Hiring practices, benefits and security will be critical to attracting quality staff. Those who get this right, will be able to scoop up the best of the workforce waiting to come back.
If you had an hourly employee that showed great promise, call them and find a way to promote them. If you had managers who cultivated a team mentality, try your damndest to bring them back. Get input from these employees to build, hear ideas, consider areas of improvement and emphasize your strengths. Make any new employees you hire part of the conversation too. Conduct regular check-ins for team member needs. You may get anything from requests for more flatware to reports of harassment, but every suggestion and action thereafter holds you accountable and allows every person to feel heard.
Take this chance to serve guests again, by prioritizing service to your team too. You’ll be more successful in the long run.
Challenge 2: Bills, Bills, Bills
There are very few restaurants that will emerge without significant debt and past due payables. Whether it’s rent, food vendors or the electric company, most operations will be starting in a financial hole.
The government has been slow to act and what has been done has been insufficient. There is still hope for targeted relief, but nothing is likely to shore up the industry entirely.
The stress of moving forward is compounded by the knowledge that so much of the industry recovery will be focused on just getting current.
Opportunity 2: Relationships and Negotiation
Outside of utilities and the largest food and beverage suppliers, most of the people you owe money to are struggling along with you. The impact on restaurants has ripples that have hurt small wine distributors, linen companies, local food purveyors, cleaning and maintenance providers, and on and on.
First, tackle the rent. There are, of course, nightmare stories of landlords, but instead of just asking for deferral or free rent, present scenarios and solutions that are mutually beneficial. Negotiate terms that will cover back rent over an extended period of time. Consider adding a percentage rent to your lease until back rent is covered. Check the current market average sq ft pricing for new leases and see if you can get a reduction that reflects that. Be creative. Be proactive. And whatever you do, keep communicating and showing that you’re trying to right the ship.
After rent, prioritize your small vendors. They will appreciate the payments and your loyalty. Cultivate the relationship with those managers or sales reps. Request price stabilization for your most used products. If you can anticipate food costs more closely or know the price of your by the glass wines for the next 6-12 months, you’ll have valuable insight to forecast. There are beverage distributors who will extend terms or offer discounts for COD. I even know some who will consign you their wine! Pay them for what you sold at the end of every month.
If you keep the mentality that we are “all in this together”, then expect that the businesses you support will support you back. A rising tide lifts all boats, right?
Challenge 3: Little to No Operating Capital
Cash on hand? More like empty hands. Where most smart restauranteurs begin with at least six months of Operating Capital, almost everyone today is month-to-month or even day-to-day. What does this mean for staffing, ordering and preparing for full-service again? Realistically, re-hiring will probably be staggered and could impact the customer experience, menus may be smaller and beverage programs extremely limited.
You may struggle to update and maintain equipment, decide to narrow hours of operation or even stay at 50% capacity for a prolonged period. Every move and every dollar is analyzed and it’s a suffocating feeling.
Opportunity 3: Curation and Creativity
It’s not uncommon for even an amazing concept to lose some direction. Maybe it was a once a week burger special that, due to popularity, suddenly found a permanent place on your South Asian menu. Or with the increase of takeout you scrapped your most coveted items for travel-friendly, lesser versions.
The opportunity here is to use what you know and what you have to emerge focused and better. Think intimately of your menu and rotate dishes if needed. You don’t have to be the Cheesecake Factory or even present the same breadth of choices as pre-pandemic. In fact, changing a smaller menu daily or weekly may encourage loyal guests to come more often.
You’re likely sitting on a decent stock of wine and booze. Incorporate regular staff training on these products for their buy-in to help sell-through. Develop a truly special and unique beverage menu as you replace things. Source small producers, offer a high quality-to-value ratio and, for all that’s Holy, do not neglect a beverage program that can produce your highest sales margins.
Continue the creativity you’ve tapped into when surviving this last year. Move forward with take home kits and family-style carry out if it remains popular. Promote small events, think about throwing a reception to welcome back your regulars or develop incentives for your team that can accelerate sales.
The restaurant industry is the most innovative and adaptive collection of passionate people out there. I have no doubt the best is yet to come.
Oh. And if you didn’t take reservations before, please start. Everyone is over queuing in a line by now. It will serve you well and definitely serve the guests you want be there when this is all over.
