Starting a new restaurant is one of the most daunting business ventures, as they have a failure rate of around 60 percent—during normal years. The pandemic has obviously put an incredible additional strain on the industry, but many operators have found ways to roll with the punches.
Bars and restaurants that didn’t generate a lot of carryout revenue prior to the pandemic had to scramble to put those operations in place once COVID-19 hit. Some were able to pivot more quickly and successfully than others.
Brenton Schrader, vice president, retail leasing and marketing at HSA Commercial Real Estate, specializes in restaurant advisory services. Among his clients is Darden Restaurants, the parent of restaurant brands such as Olive Garden, LongHorn Steakhouse, Seasons 52, Bahama Breeze and Eddie V’s.
According to Schrader, Olive Garden redeployed its servers as delivery drivers in some locations, which not only reduced the need to furlough employees, but it helped maintain the customer experience. The casual Italian chain was able to put this plan into place so quickly because they already had their own proprietary system for carryout orders.
For restaurants that don’t have that infrastructure in place, software developed by restaurateurs at Tock, Inc. allows restaurants and pubs that don’t typically offer take-out or delivery to leverage their own staff—who would likely otherwise be filing for unemployment—to better adjust via tools like two-way text messaging for contactless deliveries. This is the better option for many businesses than popular online delivery outlets such as DoorDash, Grubhub and Uber Eats whose fees can all take sizable portion of the restaurants’ revenue.
“What these restaurants are losing by customers not coming in is that they typically aren’t ordering appetizers, cocktails or side dishes when they order for pickup,” said Schrader. “The restaurant is losing on margin so one smart thing we’ve seen is to pre-package so they can drive up those margins on carryout orders as well.”
For many restaurants, the high-margin menu options aren’t entrees but the add-ons like drinks and appetizers. Creating “date night,” “family meal” or similarly themed pre-packaged options makes it easier for the customer to order food that will drive more revenue to the restaurant.
Though food delivery services like DoorDash can eat into an establishment’s revenues, they are still a lifeline for many smaller bars and restaurants during the pandemic. Businesses should be cognizant of how their space can allow these delivery drivers to safely and efficiently pick up orders.
“I think restaurants would be well served to reorganize their physical space to create a dedicated area for takeout orders and delivery drivers that’s separate and distinct from the host stand,” Schrader said. “If you’re cluttering the host area with delivery drivers and takeout orders, that could ultimately fluster dine-in guests. You don’t want to disrupt that customer experience.”
Restaurant and bar owners are by their very nature entrepreneurial people, so they have found ways to maximize the dead space that would normally be occupied by paying customers. With restaurant dining rooms at limited capacities, a lot of the operators have repurposed their front-of-house areas for staging of takeout orders.
As the weather turns colder here in Chicago, the outdoor patio that has buoyed many a business will become less useful. There are products on the market such as inflatable igloos that allow patrons to stay warm, but they hardly seem viable during a pandemic.
“We’ve seen a lot of tents erected in parking lots with four sides on them and a ceiling,” Schrader said. “I’m no epidemiologist, but my sense is that that’s probably not going to do anything to stop the spread of the virus.”
Patio heaters have been able to extend the al fresco experience for some businesses, but these devices are actually in short supply at the moment. In the end, they wouldn’t be able to prevent the inevitable anyway, which is the fact that there’s going to be a cold winter around the corner and restaurants will have to determine how to survive on a combination of takeout delivery and indoor dining.
To make the most of limited indoor dining, Schrader suggests that restaurants look at how best to make use of their spaces. This could mean covered patios and keeping windows open to the outside deeper into the season than they typically would. Right now, customers feel more comfortable in open-air spaces, so the more that operators can do to increase airflow as much as possible despite the temperatures will certainly help.
“I think customers are going to be more accommodating than they have been in the past because they recognize that this may be the only way in which they can comfortably go out to restaurant spaces,” Schrader said. “People are still eagerly looking for ways to socialize in a manner that’s safe and if that means wearing a pair of gloves or a jacket while you sit outside for dinner I think that folks are willing to do that. Up to a certain point.”
In a post-COVID world, many of the innovations that are helping restaurants to survive will likely stick around. Some businesses have turned to app-based menus that customers can activate by using a QR code. This, along with contactless payment options, reduces person-to-person interactions and helps to prevent the spread of the virus. In the future, it may also allow restaurants to cut costs by reducing staff.
“As with any time of rapid evolution or crisis, the strong survive. With regard to restaurants, that means that the well-capitalized operators with strong concepts are going to emerge from this and they’re going to have tons of new opportunities to grow and expand their restaurant businesses,” said Schrader. “While the older and more tired concepts with limited resources will likely go the way of the dinosaurs, that’s okay, because I think that the long-term result will be a more vibrant, more diverse restaurant scene.”