Beef ‘O’ Brady’s CEO Chris Elliott understands this is guesswork. But what’s the alternative? There is no COVID-19 playbook for restaurants. No case studies. No mistakes or best practices to learn from.
“It’s an educated guess at this point,” Elliot says. “Everybody’s having to do it to manage their cash and to see when they can start paying their bills.”
Elliot is referencing a model and timeframe the 150-unit chain is working against as it tries to navigate strange times. When COVID-19 struck with full force in mid-March, sales dropped off about 70 percent at Beef ‘O’ Brady’s. Roughly 15 percent of locations decided to close altogether—a decision made case-by-case by franchisees. The rest shifted to take-out and delivery, including self-delivery and even grocery service in select stores. FSC Franchise Co., LLC, the chain’s franchisor, also runs sister concept, The Brass Tap. Roughly half of its restaurants shuttered temporarily as well.
As many chains witnessed, sales improved somewhat the following week—down 60 percent at Beef ‘O’ Brady’s, suggesting bad news evolved to less bad news, and we might have cleared the bottom. Elliott credited this to heightened consumer awareness with takeout and delivery, and just the simple fact Beef ‘O’ Brady’s got more efficient with added reps.
The real early win, he says, was the company’s ability to keep 40 percent of its hourly staff working and all of its corporate team and store management in place.
But let’s look to the future.
Elliott says Beef ‘O’ Brady’s financial models are based on dining rooms reopening in June. A continued shutdown in April and May with the curve flattening, coming down, and people started to test the social waters again before July. “If that changes, then our situation will change. But we’re confident if that happens we’re in pretty good shape,” he says.
And here’s what it might look like.
Elliott believes dining rooms nationwide will turn the lights back on cautiously. When mandates lift, crowds won’t flood into the streets like the aftermath of a parade. Social distancing will remain part of guest behavior in those early weeks, he says, because people have been conditioned to stay away from one another for some time. If June is truly the moment, we’re talking three or so months where consumers have been asked to do everything they can not to come into contact with others. So even if that changes, from an official message perspective, Elliot says the reluctant logic will linger.
Whether or not this becomes a regulatory thing forced upon operators by city and state laws, Elliott says Beef ‘O’ Brady’s will likely roll out precautions that look pretty similar to the early days of COVID-19. Staff will wear masks. Dining rooms will be cut back in size, with space installed between tables, and restaurants will start operating on reduced hours, “because I just don’t think the business is going to be there in the beginning,” he says.
Elliott hopes he’s off base. Yet there’s plenty of logic and consumer studies that suggest a wary customer well past the current state of things.
The notion that people are going to storm out overnight and everything will return to normal is probably wishful thinking. It’s possible some demographics embrace the ideal more than others—perhaps the same group that resisted social distancing in the first place. Or it might flip completely. We just have no idea. But thinking that high-risk patrons, such as older consumers, are going to flock back en masse is a flimsy thing to bank on. It will likely happen, with heightened demand for social, affordable gatherings (like restaurants). It’s just hard to fathom on day one.
In an April 3 1,000-consumer study conducted by Datassential, 64 percent of people said they were still “definitely” afraid of dining out. That’s a 44 percent hike from March 10. Twenty-one percent said they were “nervous,” but would still eat out (down 18 percent since March 10); and 15 percent said they had no concerns whatsoever (a drop of 26 percent over that same timeframe).
For the “definitely not” category, here’s how it broke down by demographic:
- Men: 60 percent
- Women: 67 percent
- Gen Z: 50 percent
- Millennials: 58 percent
- Gen X: 61 percent
- Boomer: 78 percent
- Married: 66 percent
- Single: 57 percent
- With kids: 55 percent
- No kids: 68 percent
Over the weeks, “single” and “Gen Z” have mostly hung near the bottom. So can you safely guess those two groups will be the first to come back out? Maybe. Throwing darts at coronavirus trends is thing is like aiming a pin needle at a bottle cap. Everything could change before you let go.
Elliott says he knows people in the industry who feel differently and expect a quick rush back to business. “Frankly, I hope they’re right and I’m wrong,” he says.
Today, however, there’s no denying the widespread paranoid. Rightfully so. “And I just don’t think they’re just going to rush out overnight and everything is going to be back like it was,” Elliott says.
How Beef ‘O’ Brady’s expects this to go:
If dining rooms reopen in May, sales could shift from down 60 percent, as they are today, to roughly 50 percent. Elliott says business should then improve significantly in July to negative 20 percent, year-over-year, and then 10 percent in August. And by September, Beef ‘O’ Brady’s comparable sales decline will be about 5 percent. Toward the last quarter of the year, sales will approach flat, year-over-year.
In total, COVID-19 would imprint an eight-month dent into the company’s business.
Yet this hangs by a fragile thread, too, Elliott admits. The model depends on the coronavirus not coming back in the fall, which some experts anticipate. And, critically, whether or not pro and college football returns. If it’s cancelled, all bets are off, Elliott says.
For bar and grill chains like Beef ‘O’ Brady’s, a year without football weekends would be nothing short of catastrophic. Especially compounded with this spring’s setback.
“Hopefully by the end of the year there’s a vaccine or there’s effective treatments,” Elliott says. “And there’s testing more widely available with quick results. If you have those three things, I think we’ll get back to normal way faster. But I think it’s going to be touch and go until there a vaccine, until there’s a more effective treatment. There’s essentially no treatment right now.”
Given those realities, it’s hard to imagine government directives providing enough incentive to get people to drop social guardrails. It’s why restaurants are going to have to continue pushing the envelope, even if officials reopen the economy. Sanitization measures and other food safety efforts are going to be as important as they were the first week of March.
And to Elliott’s point, the potential of half-closed dining rooms and reduced hours appears very real.
There are other changes Elliott expects to carry through. Beef ‘O’ Brady’s has started offering different variations of its menu to better fit to-go and delivery orders, including meal plans, grocery offerings (in certain spots), and beer and wine where possible. You can check out the menus below.
“Everybody is getting a lot of experience in their takeout and delivery business, online ordering, all those things,” Elliott says.
In the opening weeks, Beef ‘O’ Brady’s offered 20 percent off all delivery orders to introduce the service to customers. It then developed five different family meals, which have been the most popular off-premises bundles in the company’s history thus far, Elliot says.
Historically, Beef ‘O’ Brady’s worked with third-party delivery. It still does, but it also moved quickly to onboard in-house delivery, Elliott says, so the company could find additional jobs for hourly employees. And it’s also a more margin-friendly approach.
The new menu is a collection of the top four or five best-selling items in each category. It’s less complicated and requires fewer people in the kitchen. There’s also less product being thrown away at the end of every shift. Additionally, the size of orders, being smaller, run a lower cost to franchisees.
Elliott isn’t sure if the self-delivery program will continue post COVID-19. “We’ll just have to see,” he says. The drawback would be competing directly with third-party providers already delivering Beef ‘O’ Brady’s—companies that have a much broader built-in base.
The question, though, Elliott says, is how much of that off-premises business will shift back to traditional channels. A lot of the people accessing delivery and takeout from Beef ‘O’ Brady’s during COVID-19 are the same core guests that were dining in before. When things open back up, will that business return to the” four walls? Will those guests elect instead for delivery? Will they do both?
“We don’t really know how much of this is going to stick,” Elliott says.
He does think Beef ‘O’ Brady’s will do more delivery and carryout overall. Just how much it hangs on to from current levels is impossible to figure. Most things are these days.
One thing Elliott does think operators can bank on is value. Beef ‘O’ Brady’s was off to a very strong start to fiscal 2020, he says, before the anvil was dropped.
And much of that stems back to a push started five years ago. Elliott, a former El Pollo Loco franchise CEO and Cinnabon and Church’s Chicken leader, took the reins in 2010. Four years later, Elliott says, Beef ‘O’ Brady’s scoped its competitive set, brands like Applebee’s and Buffalo Wild Wings, and asked “How can we compete with these guys?” And this as a regional player going toe to toe with billion-dollar brands.
The answer: Beat them in value.
This set “daily deals” in motion, things like Taco Tuesdays, which have run $5.99 for five straight years.
Beef ‘O’ Brady’s saw tangible, promising results. Average-unit volumes steadily increased in that window, from $854,000 to $1.2 million in 2018. And it reported positive same-store sales seven of the last eight years at an average of 2 percent.
In recent years, casual-dining chains of all stripes have jumped on the value bandwagon. But that wasn’t so much the case in 2010.
Elliott expects heightened competition after COVID-19. “Value is going to be big,” he says. “Look, millions of people lost their jobs. Discretionary income across the country is going to be significantly lower than it was before. So people are going to be deal shopping big time. That’s why these family meal deals that we put together are selling so well.”
He also thinks today’s climate exposed some flaws in brands that were addressed. Things like packaging, curating products for delivery and carryout that travel well. Systems and technology that streamline those processes.
“Anywhere there was something a little bit wrong, it got magnified,” he says. “So I think people who come out of this well will have gone and perfected their capability in those areas.”
Meaning the off-premises share battle is going to be a fierce one across the landscape. It won’t just be an incremental conversation anymore.
Yet no matter when this happens or how exactly, Elliott says, restaurants are in this foxhole together. And everybody is simply hoping for the best.
“We have calls every day with our senior staff,” he says. “We’re all just updating our efforts and checking and measuring what’s going on. We’re trying to keep all these things to a minimum, as much as we can.”