Person sitting inside restaurant with "relax" on the window.
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Change doesn't always have to be bad.

How COVID-19 is Changing the Restaurant Industry

Unordinary times could offer a chance for some restaurants to rethink a few key strategies and operations.

Throughout many communities across the U.S., COVID-19 has forced restaurants to adjust their operations on the fly. As of April 28, most states will be under full stay-at-home orders into May with others only partially reopening in the coming weeks. In accordance with CDC guidelines, all but seven states have imposed temporary closures of dine-in restaurants and bars to limit large gatherings. States are allowing places to stay open for only delivery and takeout.

Switching to delivery and takeout seems like a good compromise, but it's not always a guarantee that everything will go smoothly. While some restaurants have been able to pivot quickly to the new normal, others have been forced to cease operations.

Business Insider projected that nearly 110,000 restaurants could close permanently in the coming weeks due to the coronavirus pandemic. That not only paints a harsh picture for owners, but it also could put more servers, cooks and bartenders out of work.

However, these unordinary times could offer a chance for some restaurants to rethink a few key strategies and operations. Those in the foodservice and restaurant industries offered ways to navigate the current pandemic and adjust when it's over.

How unprecedented is this for the industry?

The word "unprecedented" is often used to describe COVID-19's impact on everyday life. Those in the foodservice and restaurant industry would agree wholeheartedly.

"We've never seen anything like this," said Robin Ashton, principal at Ashton Foodservice Consulting and publisher/editor of The Ashton Report. "We've seen downturns. You’ve got to go back to World War II to see anything like this kind of situation but even that is not quite the same. When else have we had a situation where nobody can go out?"

Ashton has been a key cog in the foodservice and restaurant industry for 42 years. He is the founder and former publisher of Foodservice Equipment Reports and made the transition to consulting in 2018.

"There's a lot of foodservice just shut down or doing about 20 percent of the normal volume," Ashton said. "It's a tough time. The hard part is do you have enough cash to get through it?"

Carl Sobocinski echoed Ashton's sentiments at the unique nature of the hardship the industry is facing.

"We are in the hospitality business and have never had a situation where the entire country has had to close restaurant dining rooms and either completely close or revamp our operations to a 100 percent takeout and curbside pickup business," Sobocinski said.

Sobocinski is the founder and president of the Table 301 Restaurant Group, which operates 10 restaurants and food trucks in and around Greenville, SC. He opened his first restaurant, 858, in the mid-1990s and established Soby's New South Cuisine in 1997.

"The restaurant industry was as strong as it has ever been in history during 2019," he said. "Now, by mid-year 2020, we will be in the weakest and most broken condition we have ever been in as an industry.  I would not be shocked if the attrition rate of restaurants hits 50 percent by July of this year." 

What can restaurants do in the short term?

Congress passed the CARES Act Fund in March to help address the economic fallout from the coronavirus pandemic. A portion of the $2 trillion bill offers assistance to restaurants and staffs in different ways, including tax breaks, rehiring and payroll incentives and community development block grants.

While the CARES Act offers much-needed aid, Sobocinski said it might not be enough for small restaurants to keep operations open.

"There are over 30 million small businesses in America," Sobocinski said. "[There is] not enough to cover our utility bills for a month, let alone rent, insurance, payroll and benefits. The numbers just don't add up."

So what can owners do in the short term to keep their businesses running? Ashton advised they do "everything they can to preserve the business."

"You might have to lay people off because you’ve got to preserve cash," he said. "Try to stretch out your suppliers as long as they'll let you. It's what you have to do to hold things together."

While owners are impacted, everyone from servers and bartenders to dishwashers and cooks are feeling the brunt of it. Even for establishments changing to a delivery and takeout model, there is still a great challenge when dine-in operations are paused.

"Servers are the most affected in this," Ashton said. "In some cases, [restaurants] still have the line and prep cooks working, though very few independent casual dining restaurants have the takeout and delivery volume to support a full kitchen."

Ashton also said that operators should try to take care of service workers as best they can. For restaurants who need to lay off or furlough staff, he advised that owners research programs through the federal and local government as well as local restaurant associations. By sharing and helping workers transition as smoothly as possible, it could leave the door open for their return when social distancing guidelines loosen and business picks back up.

Sobocinski and his team thought it was crucial to financially coach laid off and furloughed staff.

"We had set up early timeslots where employees could come consult and receive help and guidance on everything from contacting their creditors and asking to defer payments to eliminating non-essential expenses to helping find employment in industries that were essential and hiring during these times," Sobocinski said.

For restaurants with enough cash flow to operate off just delivery and takeout, Sobocinksi said now is the time to help retained staff learn new skills.

"If a restaurant or restaurant group was in a relatively strong financial position and can limp along with takeout and curbside delivery, they can attempt to work with their staff on continuing education, staff training and tightening up standard operating procedures," he said.

Ashton shared similar thoughts in terms of rethinking business models during this time. He advised restaurants to examine everything from procedures to menu structure, so they can come back stronger than ever.

"Use this time to assess your business," Ashton said. "Look at your processes, marketing strategies and those kinds of things. It's time to reexamine your business. Try to use the time productively to accomplish tasks like that."

What will be the new normal?

Another term being used a lot lately is the "new normal." It describes a wide variety of changes to daily life, including the need for social distancing. But what does that mean for restaurants?

Before the COVID-19 pandemic, the restaurant industry saw an increase in delivery and takeout. According to a February 2019 study by The NPD Group, restaurants noted an annual growth rate of 23 percent in digital orders since 2013. The same study projected growth to triple by the end of 2020.

The National Restaurant Association, which released its Restaurant Industry 2030 Report in November 2019, also anticipated a massive shift to delivery, virtual restaurants and grab-and-go models over the next decade.

Crystal Rinker sees these trends through a slightly different lens. Rinker is the director of marketing and sales for Burkett Restaurant Equipment & Supplies, a Toledo-based company that helps restaurants equip and conceptualize commercial kitchens.

Rinker noticed that many restaurant owners started adapting to customer demands for delivery and takeout when conceptualizing their kitchen space. While the current circumstances are challenging, she noted that this could lead to more innovative restaurants in the future.

"We're recognizing that our restaurants have an unprecedented need to try new things," Rinker said. "Fortunately, we have the technology. We have the mobile apps, making delivery easier than it ever has been. So there is a lot to be gained for not only the existing restaurants looking to pivot and change but also new concepts as they start popping up.

"I don't know if any of us can accurately predict what the new normal will look like, but I think there is agreement within the industry that normal is going to be something different. So there is going to be that added need for safety."

One popular concept that could grow following the current pandemic is ghost kitchens. These establishments have no dine-in and walk-in areas and serve only as a location to prep and cook food. They operate solely for delivery and typically do not incur the high rent costs associated with dine-in restaurants in high-traffic urban areas.

These off-premise locations are ideal for an industry that started shifting toward more delivery. It started with quick-service restaurants before more independent restaurants started jumping in. The effects of the pandemic likely will expedite this shift, Rinker said.

"There may be new regulations coming out at the state and national levels," she said. "We don't know what that is going to look like long term, but having the ability to focus more of the industry toward these ghost kitchen concepts and off-premise kitchens, I think we're going to see more and more of it."

Some in the industry have mentioned a possible increase in contact-less delivery, where delivery people leave food at the doorstep for patrons to grab at their leisure. Rinker acknowledged the need for it now, but was unsure if it's a viable long-term solution.

However, she noted that all ideas should be on the table as the restaurant industry forges on.

"Some of these changes are not even bad," Rinker said. "They're just opportunities and ways for us as an industry to look at things differently."

Matt Gentile is a Senior SEO Content Specialist with Parts Town, the market-leading distributor of genuine OEM foodservice equipment parts.

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