“The empires of the future are the empires of the mind.”

That quote may have been uttered in the context of war, but it could be applied to any large-scale endeavor that requires planning weeks, months, and even years in advance. The most successful leaders—be they politicians, inventors, or captains of industry—can intuit the future landscape and then start laying the bricks to build their empire from idea to reality.

But what happens when the future you’d been building for vanishes like a mirage?

That’s an existential question that’s become all too concrete for many people as they try to glimpse the terrain of a post-coronavirus economy. For some, it’s a matter of regaining lost ground. But for those who had big growth in the works, it’s a gnarlier undertaking.

“It’s so weird making plans for something when you have no idea what it’s going to look like,” says Chris Simms, founder and CEO of Lazy Dog. The California-based casual-dining concept has nearly 40 restaurants across the country, plus half a dozen more that were soon to open before COVID-19 struck. “Obviously we want to keep growing, [but] so much of it just depends on what everything looks like in the next several months. It’s hard to make decisions when you have no idea what your sales volumes are going to be.”

It’s a sentiment echoed by all operators. When the coming months and year are murky at best and completely opaque at worst, how do businesses react?

Quick reflexes

While bigger players in the industry have greater resources and more defined infrastructure, emerging brands with growth in mind are nimbler.

Within the very first week of March, East Coast Wings + Grill founder and CEO Sam Ballas had a strong sense that the coronavirus would soon immobilize the U.S. much in the same way it already had Europe and Asia. Ballas began researching the situation, putting contingency plans into place, and sharing his concerns with professional associations, even going so far as to address the issue at a franchise conference and warn fellow leaders that the coronavirus could soon pummel traffic.

“And all the C-level people looked at me like I was on something,” Ballas says. He and the East Coast Wings leadership quickly assembled a white paper and distributed it to franchisees. “From a full-service restaurant perspective, if our Chicken Little thought process turns out to be accurate, we’re going to be hit the hardest.”

Shortly thereafter, the company sent out a second white paper—this one with the latest data from the Centers for Disease Control and Prevention.

Although East Coast Wings is a mostly Southern chain, Ballas was paying attention to the Northeast, where many states had already implemented restrictions. On March 14, the executive team began building a model of how the company—comprised mostly of franchisees—could operate under dine-in bans and other regulations. By March 17, when East Coast Wings’ home state of North Carolina made the call to close dining rooms, the model was ready. “If you didn’t do that, you were 100 percent behind the eight ball,” Ballas says.

Compared to other full-service concepts, East Coast Wings did a healthy amount of takeout and delivery (about 22 percent) prior to COVID-19 thanks to its core offering (wings) being a popular option for special events like the Super Bowl and at-home group gatherings. Still, that leg up was no guarantee of success; Ballas watched a number of fast casuals struggle to find their footing under the new restrictions, even some that were doing a roughly 50/50 split for on- and off-site orders.

In response to the dine-in bans, East Coast Wings bolstered its existing off-premises options and added curbside service. “Of course, curbside hasn’t existed since maybe the mid-60s,” Ballas says, adding with a laugh that he half expects to see staff members bringing orders out on roller skates.

Another brand, Walk-On’s Bistreaux & Bar, also reconfigured its operations to better suit the times. Similar to East Coast Wings’ curbside, the sports pub doubled down on the “To-Geaux” side of its business with curbside service, which founder and owner Brandon Landry describes as a “quasi–drive thru.” In addition to an extensive menu of Louisiana-inspired pub fare, select locations also serve family meals and grocery options including take-and-bake items, market goods like pasta, alcohol, and even paper products.

“We’re full-service dining, and so we do anywhere from 10 to 15 percent of to-go sales on an annual basis. We basically had to try to get 100 percent of that overnight, but you do what you have to do when times are tough” Landry says.

About a month into the dine-in ban, Walk-On’s was doing about half of its usual business—impressive given the circumstances and the brand positioning. After all, sports grills generally do the best business when sports are actually being aired; losing March Madness revenue was a huge blow to many operators. “Fortunately for us, we have good food, and there’s a lot of white space with our brand just because of that. Our food sales are over 70 percent systemwide before this even happened,” Landry says. “People come to eat first at a Walk-On’s versus watching a sporting event or drinking at the bar.”

Riding it out

The uncertainty around the pandemic—from the virus itself to differing restrictions across markets—makes the upcoming months more difficult to grasp than a year or two down the line. Even as state and local regulations loosen, many brands like East Coast Wings and Walk-Ons plan to continue offering services like curbside until a vaccine is developed. The possibility of a second wave of COVID-19 makes it a prudent move, but unpredictable consumer sentiment is what makes it downright necessary.

Throughout the pandemic, reactions have run the gamut, with some people not leaving their homes at all and others gathering in groups to protest the government-mandated shutdowns. Most fall somewhere in the middle of these two extremes, but even among the more measured are various shades of gray.

Stephen Loftis, vice president of marketing at emerging chain Firebirds Wood Fired Grill, expects people will fall into one of three camps. The first, he says, will be eager to get back to a sense of normalcy, which likely will mean visiting their favorite restaurants and bars. The second group will be more tentative.

“One subset is going to be sitting on the fence. They may come dine with you, but they might wear a mask and have gloves. They may want to sit in a certain part of the restaurant and not touch the menu and be a little more cautious,” Loftis says. “A third subset are still going to stay home other than maybe going to work or the bare essentials.”

With the latter two groups, takeout and delivery could be crucial for another year or two, Loftis adds. Depending on how things progress, the brand may also tweak its store layout with booths and tables spaced farther apart and a special area—possibly with shelves and its own entry-exit point—for to-go orders. One thing Firebirds is not planning to alter, at least not in 2020, is its expansion; Loftis says it will honor the commitments it has made to open new stores.

As improbable as it may sound, restaurants—chains and indies alike—are opening in the midst of dine-in bans. Walk-On’s 38th location made its debut in Spring, Texas, in late March when most businesses were still processing the implications of the coronavirus and dine-in bans.

“For the first time ever, we opened a restaurant as to-go only,” Landry says. “The community has been nothing but supportive, and we’ve been doing great sales out of that location. We’ve seen comments through social media that they can’t wait to come in and see the actual restaurant versus sitting in their car in the parking lot.” Despite the setbacks, Landry expects Walk-On’s will have added about a dozen units to its system by year-end.

But for the majority of brands, adding units is either up for debate or completely out of the question. California-based casual-dining concept Eureka! went from a 26-unit operation down to six locations offering pickup and third-party delivery only when the dine-in bans began. The experience-driven, bar-centric brand had only started offering third-party delivery about a year and a half ago and didn’t have its own online-ordering platform pre-COVID-19.

“Only six units are open now, so for those next 20, I’ve got to protect those managers first before we worry about signing future leases. We’ve got to get those engines started,” says Eureka! cofounder and CEO Justin Nedelman. In addition to getting the entire system back up and running, Nedelman says the company is working on operations that would help stores quickly pivot. “We need to flex into some sort of partially occupied dine-in experience—which may be government or consumer restricted—and then flex back to delivery if [COVID-19] comes back, and then flex back again. We’re thinking about the business that way for at least the next 18 months,” Nedelman says.

Even once restaurants have optimized their operations and adaptability, they are still faced with a larger quandary: making rent. Many operators would consider themselves lucky to be doing half their usual business under the dine-in bans. Furloughing or laying off employees has become a necessity for restaurants of all sizes, but in highly competitive—and pricey—markets, those cuts may not be enough to break even.

“You first have to take a partnership approach with your landlord. You have to figure out how you can make enough money to reopen, and I think you have to incentivize the landlords to want you to open in their center versus another competitive center where you might have a unit as well,” Nedelman says.

For the immediate future, that might look like rent forgiveness or reduced costs. But looking farther ahead, Nedelman thinks COVID-19 will bring about a paradigm shift in the commercial renter-landlord relationship. “Up until the last couple of years, it was landlords getting the most amount of rent and restaurants finding the cheapest rent,” he says. “Now, in order for shopping centers, strip centers, or malls to even survive, it has to be a partnership. I think you’re going to see an elimination of fixed rents and see a percentage-rent-only structure take hold.”

Before and after

Beyond real estate and landlord dynamics, the restaurant industry is facing a litany of macroscopic changes, forcing many to reflect on how they’ve been doing business and how that should change.

In Oklahoma City, restaurateur Rachel Cope has built a small empire of five concepts under the 84 Hospitality umbrella. Early March marked double milestones: Not only was it the company’s first replication of an existing concept, but it was also its first foray into a new market. But within a week of opening Empire Slice House in Tulsa, Oklahoma, dine-in bans began sweeping the nation.

Even though Cope had an area director on the ground and had herself been living in Tulsa part-time leading up to the opening, the new Empire Slice House didn’t yet have the infrastructure and brand recognition to sustain itself. That location closed so 84 Hospitality could concentrate on off-premises business for its more established concepts. Four brick-and-mortars are open for carryout and delivery, while the fifth concept is now sharing space with one of its sister restaurants.

After two days of what Cope calls “sad time,” she dusted herself off and began taking a hard look not just at her expansion strategy, but also at the core of each concept. Gun Izakaya, the most upscale in the 84 Hospitality collection, was the first one she set her sights on, especially since it’s been sharing space with Gorō Ramen amid the dine-in restrictions. That’s not to imply the restaurant wasn’t turning heads—the chef (and Cope’s business partner), Jeff Chanchaleune, was named a James Beard Award semi-finalist in February—but it had yet to become a profitable enterprise.

“It’s going to have to change if we want to see success,” Cope says. “It was doing fine, but we thought it could maybe be better. Now we’re exploring how you make this a little more casual, a little more accessible for people price-wise, because it was a special occasion–type restaurant for a lot of people.”

For Gun Izakaya, change could come in the form of adding lunch, changing the seating arrangements inside, and expanding to the patio outside. Empire Slice House could become more of a hybrid in terms of service format. As a laidback pizza concept, it has offered to-go since 2017; Cope had even considered making it a quick serve, but the space was more conducive for a full-service operation. At only about 1,600 square feet, Gorō Ramen may also retool its layout to not just increase in-house seating, but to also make room, literally, for carryout as a permanent service.

“Gorō did zero to-go before. … We didn’t think we could handle in-house dining and to-go just because we don’t have enough space,” Cope says. “But it’s been able to do about 50 percent of its normal sales volume in to-go, so we’ve been pleasantly surprised by that. Now we’re worried that people won’t accept it when we say, ‘OK, we’re going back to not doing that anymore.’”

Some foodservice operators (mostly those on the quick-service side) are calling COVID-19 the final nail in the coffin of full service as a competitive restaurant segment. But those who are actually running the brands know better. Rather than write off an entire service model, they are embracing certain aspects of limited service, much the same way chef-inspired fast casuals pulled inspiration from upscale restaurants.

Even before the coronavirus, Lazy Dog had been upping the ante on its off-premises business by taking concrete steps like streamlining operations and fine-tuning packaging. It has benefited from that foundation and kicked things up a notch.

When the brand first made the switch to takeout- and delivery-only, it condensed the menu to core items, which was still quite the selection, including some two-dozen entrées as well as starters, small plates, wine, beer, and dessert. Going a step farther, it has added a variety of pantry kits; most are interactive, DIY meals like the Pizza Night Kit and the Backyard BBQ Kit, but customers can also order the Home Essentials, which includes kitchen staples like a loaf of bread, eggs, milk, chicken breast, and, of course, toilet paper.

“I have seen these communities rally around us and use us both as a restaurant and as their supermarket,” Simms says. “People don’t want to constantly listen to the doom and gloom. Instead, they want to have that lightheartedness in their lives. We really see that in the pantry kits.”

Lazy Dog will likely continue offering these carryout packages even after the restaurants are back up and running since Simms, like many other restaurateurs, anticipates some hesitation on the consumers’ part, especially when the threat of a second wave of COVID-19 cases hangs in the air. The team is also exploring ways to integrate more technology into the dine-in experience. Simms believes some of the no-touch systems that many grocery stores and retailers have already adopted (such as RFID credit card processors) could be utilized within the restaurant environment.

For Eureka!, embracing technology more wholeheartedly serves the double purpose of easing customers’ minds and cutting costs. An online system for to-go streamlines the process, helping  the back of house organize orders and cut prep times while freeing up staff to do other tasks instead of fielding phone calls. Nedelman thinks the pandemic has already nudged some consumers to be more tech savvy, pointing to his own parents as an example; they have become infinitely more comfortable using smartphones in just a few months.

But for as much as Nedelman is embracing cutting-edge technology, Eureka!’s future will be a throwback to the past in many ways; the restaurant was founded in the height of the Great Recession. Simplifying the menu, cutting fixed costs where it can, and becoming a leaner concept overall are some of the ways it’s returning to its roots.

“Everything should be on the table, including things that were untouchable pre-crisis. I believe you need to be a blank slate. Now you get to look at everything you do,” he says.

Like many industry professionals, Nedelman saw the restaurant world ballooning toward an unsustainable girth. Simply put, the number of restaurants had outpaced consumer demand. Under this line of reasoning, the pandemic only hastened the inevitable. “This COVID-19 virus is like an accelerated Darwinian reality for restaurants. Anything that was going in that direction is sped up by like five years, whether that’s technology, whether that’s the pressures associated with certain costs at full service versus limited service or fast casual,” Nedelman says. “There are going to be fewer seats out there, so those [restaurants] that are really scrappy should thrive post-crisis.”

He predicts the new restaurant landscape will be heavily populated by concepts that marry the best of full service (high-quality food, nice atmosphere) with the best of limited service (quick throughput, competitive prices) and bring a strong bar program to boot.

Semi-silver lining

As bleak as the upcoming year or longer may be, the restaurants that weather the storm could be rewarded with favorable conditions, from a more stabilized market to better growth opportunities.

For example, when 84 Hospitality began laying the groundwork in its second market, Cope found it difficult to find and attract employees for the Tulsa location of Empire Slice. Like most places in the U.S., the city was already filled with restaurants, plus the brand didn’t yet have the street cred in Tulsa that it enjoyed in Oklahoma City. Cope imagines that once the dust settles, the group will not only have a larger labor pool to hire from, but it will also have more real estate options at competitive prices.

“It’s not really the silver lining because, no matter what, it’s sad for restaurants across the country. But in some of these areas where things were so saturated and there was such high demand, … the rent was astronomical. That’s going to change now,” Cope says. “There are going to be a lot of restaurants that close, and [the spaces] are going to be available. They already have the infrastructure built instead of having to build something in a blank shell, that costs a lot more. … It might allow us to do some expansion for less than it would have been before.”

Although real estate prices will likely fall across the country, emerging brands might still do better keeping growth closer to home, even if that means passing up opportunities to plant flags in far-flung locations at a bargain price.

For East Coast Wings, the coronavirus has marked an inflection point in its expansion strategy. The chain was already concentrated in the Carolinas, with outlier operations in more distant markets of Texas and Pennsylvania. Until a vaccine is developed, it will refrain from selling new franchises, but even after that, the company won’t seek partners thousands of miles away.

“This pandemic has allowed me to really look at the brand, at its strengths and weaknesses … and say that over the next 5–10 years, East Coast Wings + Grill is going to look like more of a super-regional franchise model instead of a national model. And we’re going to stay in the Southeast,” Ballas says. “There’s enough market share in that piece of the United States that this brand could probably have as many units as the national players. By making that call now, I think it will make the brand much stronger because it will help us not only with supply chain focus, but also with managing any type of future catastrophe like this again.”

But for all the operational refinement, strategic adjustment, and general preparation, restaurants are playing a game of chance, trying to divine what the future will look like both in the coming weeks and months, as well as much farther down the line. Firebirds’ Loftis says the fate of many restaurants—all the way from mom-and-pop independents to emerging brands to 100-unit chains—could very well hinge on a relatively short time frame.

“If this thing is [improving] by maybe mid-June, and if folks were able to bridge that gap with some stimulus money and additional revenue, maybe they’re in a bit better personal income shape to come back out and dine and get back a sense of normalcy,” Loftis says. “If this thing goes on through August or September and consumers are dipping into savings or living paycheck to paycheck, which is the vast majority of folks, I think it’s a very different conversation.”