By Wallace Hite

As we speak with many of our clients there is a great deal of deliberation about what business will be like after the pandemic. In those discussions, we talk about the number of variables that are involved in those determinations. Questions like “how will social distancing be employed and for how long? When will regular business operations be allowed?” If you are diligently following the news as most are, the answer is a state by state, governor by governor and mayor by mayor answer.  So how should we start and what should do is the first set of questions we need to answer.

The first answer is to survive. The answer to the second question is to make the decisions that potentially allow the company to survive which relates to furloughing, salary reductions, vendor negotiations/payments and landlord or bank payments. The third part of survival relates to sourcing enough capital to survive. Fortunately, the government programs through the SBA helps and there are still merchant banks and finance companies that are lending. Source and borrow what you need to reach the reopening of the business and add at least 50% to that number.  There are hard money lenders whose interest rates are exorbitant. However, high interest rates versus survival is a hard question you may have to answer.

The business today is another important element of this consideration. Most clients and friends we have spoken with are in the delivery and carryout business. They have scaled down their menus with a focus on more family meals in their offerings and of course liquor, beer and wine. Some industrious folks are selling toilet paper and the like. From the numbers we view daily, lunches are significantly lower in relation to dinner sales and weekends, as always, are the strongest for sales. Additionally, curbside pickup is stronger than delivery for full-service clients. The good news is that the business muscles developed for delivery and carryout will be a stronger and more efficient part of business post pandemic.

Here are a few more thoughts about where we find ourselves today. Many clients and friends are discovering expenses and overhead that they really did not need. They are eliminating those expenses. Many are taking a close look at the quality of their staff and employees and making the hard decisions that they would not have made without this calamity. While that sounds harsh, a strong business employs many people directly and their business feeds other businesses too. If the business does not survive, the impact is much greater.

What will our industry look like after this? What are the benefits and what are the negatives after the pandemic? The first observation is the saddest. Many independent single operators, small chains and franchises both Zors and Zees won’t survive. Many good people who loved and worked in our industry will never come back. However, we will have a smaller competitive set with which we share our markets. The potential for growth at the existing restaurants and for new locations should be good. Another obstacle is that financing for small companies that want to grow but are still somewhat illiquid will be difficult. Lenders will take a deep dive into the decisions and actions those companies took during the pandemic.

What do you need to do moving forward? The big question! What we learned from 2008 economic crisis and part attempting being a prophet are where we find the answers.  Here are some “thoughts” about what others are doing and what others did during the recession. The first thing is to be sure your four walls operations are strong. The opportunity to, as us old guys say, is to put the aces in their places. There will be an opportunity to improve the quality of your staff and management. Exercise that opportunity. Take a hard-thoughtful look at the size and price points of your menus. Focus on what you are known for and what you do best. Train or rather retrain your people like it was a new opening in a new city. A wise old marketing guy told me that you should always market to your strengths in an economic downturn while always remind customers why they love you. He also said to market to the closest 30,000 people.

The prophetic part comes next. The prophecy comes from talking to folks outside of our business. Some say there is significant pent up demand to get out of the house. Others say that fear may mediate the pent-up demand. The governors and mayors may impact the demand by gradually allowing in restaurant dinning with 50% seating or other social distancing measures. Those decisions are out of our control but not necessarily out of our influence. Prophecy: Lunch will be a slower build because companies will continue to allow workers to work from home. Malls and shopping centers traffic will come on weekends. So, if your locations are in those proximities be prepared for weekend action at lunch. In fact, my contact in San Francisco (much younger) says that weekend lunch irrespective of location and dining at night all week. He also says that the amount of time that they sit and socialize will be longer than before the pandemic.   So, table turns will slow. The weekend business will increase from 54% of weekly sales may move dramatically to 65% or more.  Unfortunately, for the restaurants that are driven by convention related customers, it is 2021 before you will see any return to full sales. Tourist areas may return all but slowly along with cities that are the tourist destinations follow that thinking. The last thought has to do with acquiring locations and companies. If you are ready, this will give you a once in a business lifetime opportunity to grow through acquiring chains for their locations or just acquiring locations. Overall, the sales picture once the full dining is allowed should be above same periods 2019 unless you are in a convention driven area.

Lee Cohn, myself and our team are available to walk along beside you as you plan and prepare for what comes next. Our thoughts and prayers go with all our friends, clients and the restaurant industry.   

Sincerely,

Wallace Hite

615-377-1120
info@reconstructionpartners.com