Survival Strategies for Small Restaurants
The roughly 500,000 independently-operated establishments, which employ about 11 million people, are the most vulnerable.
(Bloomberg Businessweek) -- As you likely already know, restaurants are among the hardest-hit industries in the U.S. The roughly 500,000 independently-operated establishments, which employ about 11 million people, are the most vulnerable. Data from OpenTable, a restaurant-booking app, show bookings have dropped 99% from last year, Bloomberg News reports in its “Recovery Tracker: A Real-Time Look at the Post-Covid U.S. Economy.” In our part one of our look at small resaturants, we reported on advocacy efforts, loan and grant program limitations, and rent negotiations. Part two details several initiatives that are aimed at helping restauarnts, and offers a handful of other strategies you might be able to employ.
Remember: Don’t give up hope, says Katherine Miller, the James Beard Foundation's vice president of impact. “The chef and restaurant community—and the food community in general—are some of the most generous and also the most resilient. We’re all going to be dining in restaurants again.”
1. Takeout isn’t the only way forward.
For Samantha Safer, owner of 49-seat neighborhood eatery Otway in Brooklyn, offering a full takeout menu requies the same number of kitchen staff and other overhead costs as dine-in service. “It's still the same cost as if you were running a full restaurant,” she says. But takeout won't bring in nearly as much money, says Safer. Before the pandemic, she was on track to break $1 million in revenue this year. “So many people I know who were doing takeout have had to stop because it wasn’t profitable,” she says.
Safer has instead opened Otway on the weekends to sell bread, pastries, coffee, and bottles of wine for pickup. She’s also been posting prolifically on Otway’s Instagram account, to promote the items for sale and to share the story of her Paycheck Protection Program dilemma with her thousands of followers.
2. Instead of relying on delivery apps, experiment with other models.
Delivery apps have been savaged by some chefs for their ‘predatory’ behaviors, Khushbu Shah writes in a revealing article for Food & Wine Pro. “A 30 percent commission average is hard for owners to swallow, even during normal circumstances.” The NYC Hospitality Alliance is urging the New York City Council to pass legislation that would “cap third-party delivery fees at 10%, allow restaurants to disclose third party fees to consumers and charge different prices on different platforms, and regulate the industry in additional ways.”
Otway’s Safer doesn't work with delivery apps. “When you run the numbers, it doesn't add up,” she says. Her example: You sell a meal for $20, then pay 3 percent in credit card fees, then 30 percent to the delivery app. “And you're still paying around 30 percent on labor and 25 percent on the food costs,” she says. "It's just silly."
Minneapolis entrepreneur Danny Schwartzman employed about 45 people at Common Roots Café and Common Roots Catering before the pandemic. He now has a skeleton staff handling contactless deliveries of prepared foods, produce, and grocery staples such as rice, milk, and flour to customers’ homes. The orders bring in roughly one-quarter of the business he was doing before the virus. It’s worth it for him, though, because he wants to support his community and experiment with new business models as he grapples with what he calls “layers and layers of unknowns.”
3. Check out the Tock to Go app.
Nick Kokonas, co-owner of the Alinea Group, five high-end restaurants in Chicago, recently reimagined the online reservation app Tock: “Sticking to its roots in reservations, the app helps restaurants schedule pickup and delivery times to avoid a rush of orders at 6:30 p.m., a common problem with delivery apps that often overwhelms the kitchen,” Joel Stein writes in his Businessweek profile of Kokonas’s pivot. “Plus, Tock to Go tracks inventory, automatically pulling items off the menu when a restaurant runs out of, say, banana cream tarts. And the app sorts local restaurants, making them easy to find. Perhaps most important is what Tock to Go doesn’t offer: the actual delivery. That allows it to cap fees to restaurants at 3%, significantly lower than the 30% some delivery services charge.”
4. Connect with the Frontline Foods initiative
The goal is two-fold: Support local restaurants and get good food to health care workers. Volunteers at Frontline Foods rely on donations to find and pay local restaurants to make meals and deliver them to nearby frontline facilities. “Our restaurant friends need the business, and there’s no better place to try to send that food than to the hospital workers who could use some love and support right now,” says Ryan Sarver, a partner at venture capital firm Redpoint Ventures in Menlo Park, Calif., who in March launched the initiative with friends Frank Barbieri and Sydney Gressel, an emergency room nurse practitioner.
The initiative quickly expanded beyond the Bay Area. It recently partnered with World Central Kitchen in late March. Frontline has supported 800 restaurants and delivered 300,000 meals to 400 frontline teams in 56 cities. Hundreds of volunteers coordinate behind the scenes to match restaurants and hospitals using Slack. Neither Frontline nor World Central Kitchen take a cut of the donations. “It’s heartbreaking and heartening to see an industry get decimated so hard, yet also step up in the face of all that conflict and uncertainty and just get to work,” says Sarver.
5. Learn about the Dining Bond initiative.
Bloomberg Pursuits’ food editor Kate Krader described this initiative in an article when it launched on March 16, along with a few other relief efforts. Inspired by war bonds, the Dining Bond program is a way to sell more gift certificates by casting a wide net. You make them more appealing to prospective customers by offering them at a discount (spend $75 now and get $100 to spend on a future meal, for example). In order to participate, restaurants must establish a way to sell gift certificates. You get all the money; the initiative doesn’t take a cut. Dining Bond co-founder Steven Hall, a Manhattan publicist, says hundreds of restaurants are participating in the U.S. and overseas. The average amount raised is around $10,000, he says. “It’s gone from small to big.”
6. Check out Goldbellly.
Online gourmet food store Goldbelly “is one of the few success stories in the food world during the pandemic,” Krader writes in this article. “Cooped-up, bored people are willing to pay a premium for indulgent foods that make them feel better, and Goldbelly is accommodating them—especially those who might crave dishes from a place they can no longer travel to.” The service works with some 500 vendors including Walter’s Hot Dog Stand in Westchester, N.Y., and Snow’s BBQ in Lexington, Texas. Since the pandemic began, it has been fielding hundreds of requests a day from places eager to ship their specialty.
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Main Street Businesses Trying to Survive , 4/22/20
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