It was always clear that the COVID-19 outbreak would hit restaurants particularly hard. At least, it’s been clear since March 11, when the World Health Organization declared the outbreak a pandemic and cities across the U.S. quickly instituted social-distancing orders that encouraged consumers to stay home and in many instances shuttered public dining rooms. But as the U.S. continues to struggle, weeks later, to contain the virus, the outlook for the foodservice industry is increasingly grim. Restaurant owners and employees are justifiably panicked, but there are steps they can take to avoid the worst consequences of the crisis and come out stronger on the other side.
On March 18, the National Restaurant Association penned a letter to President Donald Trump, Speaker of the House Nancy Pelosi and Senate Majority Leader Mitch McConnell, urging Congressional leaders to take action to prevent the worst-case scenario for the industry. In the letter, the Association predicted a decline of $225 billion in sales across the industry over the course of three months, resulting in a loss of five-to-seven million jobs.
Today, that early prediction seems to be on track. New York City restaurants alone lost $2 billion in sales in 22 days, and a recent analysis by the Pew Research Center projects a dramatic spike in unemployment among food service workers, disproportionately affecting young people.
Understandably, restaurant workers are scared. Leaders need to alleviate that fear while being transparent about the challenges facing their business. That can be a tough needle to thread, but it all comes down to communication. Restaurant owners should set up text and email threads or even intranet hubs with regular updates about the business and resources for employees who need help. Doing so will advance idea generation and empower teams to work proactively, rather than defensively, to face their challenges.
Throughout March, Congress passed a series of bills aimed at relieving people and businesses affected by the coronavirus crisis, culminating in the Coronavirus Aid, Relief and Economic Security, or CARES Act, a sweeping $2 trillion relief bill that touches nearly every corner of the economy.
The CARES Act provides a number of provisions designed specifically to support the restaurant industry, including small business loans, tax benefits, unemployment insurance and Quality Improvement Property fix, which will allow restaurants to write off costs associated with facility improvements and can be applied retroactively.
It is essential that business owners educate themselves and their employees on the opportunities available to them. Wading through the bureaucracy of government loan and grant opportunities is never easy, but businesses simply cannot survive this crisis on their own; they must take advantage of every available resource.
Legislative measures aside, many restaurant owners have taken it upon themselves to adjust their businesses to meet a strange new landscape of consumerism, one in which customers rarely leave their homes and are wary of any risk of exposure. Takeout and delivery have become prerequisites for survival, and restaurants that were not previously designed for off-premise service are coming up with innovative solutions to reach customers. This is a time for restaurant owners to take a clear-eyed look at their unique selling points and think about how they can adapt those virtues to a new consumer paradigm.
Even brands that cannot directly service their customers during this crisis should make every effort to engage with them. If a restaurant is counting on its customers returning when this crisis is over, they can’t afford to let customers forget about them. Owners should set up creative new marketing and communication strategies to provide updates and offer incentives.
But reaching customers is just one challenge facing restaurants in an economy increasingly threatening to eclipse the 2008 recession. Even restaurants that are still grasping onto a trickling revenue stream are dealing with supply shortages and struggling to meet increased minimum-wage requirements enacted in states across the country in the past few years.
Restaurant owners are going to be forced to make some difficult decisions. They would do well to look closely at their cash flow, particularly as it relates to their operational model, and start making cuts and adjustments wherever possible. There are need-to-haves, and there are nice-to-haves. The latter items have to go.
Predictably, franchise brands and chains are faring slightly better than their independent counterparts, thanks largely to the leverage offered by a larger network of businesses. Many brands are negotiating rent and real estate deferrals on behalf of their franchisees, and some are even waiving or postponing royalty payments.
Franchisors should do everything in their power to support their franchisees right now, even if that means collecting a little less revenue in the immediate term. As sorely needed as that revenue may be, it is not a franchise brand’s most valuable asset. The franchisees are. Franchise brands depend on the success of their franchisees, so franchisors must do everything in their power to keep them in business. When this crisis is behind us, franchisors who did right by their franchisees will have an entire network of owners singing their praises to anyone who will listen, including new franchise prospects.
Today, there is still no clear end in sight for the crisis that has brought much of the world economy to its knees. But the restaurants poised to survive this dire chapter are not those waiting for a light at the end of the tunnel. It’s the restaurants that are pivoting their services and taking advantage of the resources made available to them that are likely to stick around. And it’s those restaurants that are going to dominate the post-coronavirus landscape, whatever that may look like.
Nick Powills, CFE (Certified Franchise Executive) founded No Limit Agency in 2008 and serves as chief brand strategist for the Chicago-based firm. Powills also founded 1851 Franchise Magazine and estatenvy, two content marketing publications and platforms. Powills currently leads a staff of writers, media strategists, designers, social media experts, and digital producers in an office think-tank where brands are humanized for strong, compelling media stories. Prior to starting No Limit at the age of twenty-seven, Nick spent three years working at a PR agency, where he mastered the art of building rapport with media outlets and creating newsworthy pitches for earned media placements. He holds a bachelor’s degree in journalism from Drake University in Iowa. Powills has been featured on CNN Business, FOX Business, Fox News, CNN, NPR, Wall Street Journal, Washington Post, Entrepreneur Magazine, QSR Magazine and more.