Part I: Full Service of the Future

When we solicited restaurant operators for a bird’s-eye view of the situation, asking what the enduring consequences of the pandemic would be, three macroscopic topics emerged: the advent of convenience in full service; market contraction and polarization; and wide-ranging consumer sentiment. Ironically enough, many restaurateurs have observed that the coronavirus didn’t necessarily bring about new changes but rather accelerated their evolution.

Takeaway: Convenience

Convenience has been creeping into the full-service sector for the better part of a decade with more operators embracing off-premises dining options as a way to compete against more elevated fast casuals. During dine-in bans, takeout and delivery were compulsory, and like putting the genie back in the bottle, it will be difficult for restaurants to stop offering such services. For smaller spaces, this could mean retooling the restaurant layout or even investing in a separate ghost kitchen.

“I believe delivery and carryout business is going to permanently increase because of this pandemic. That trend was already in effect, and this event accelerated movement in that direction. Full-service restaurants are going to need to better support off-premise sales, whether that be delivery, carryout, or small-group catering. One of the ways they can support this is by expanding in-house delivery methods. Floor space and square footage may also be used differently in order to create more space for carryout areas.” — Ryan Zink, CEO, Bad Daddy’s Burger Bar, Lakewood, Colorado

Takeaway: Market Contraction

Even amid sky-high real estate and a hyper-competitive landscape, restaurants had flourished to the point of oversaturation in recent years. From single-location independents to major chains, leaders are predicting that the pandemic will cull concepts that were already struggling. The silver lining, they say, is that the surviving restaurants will be in a better position to succeed without as many competitors.

For full service specifically, some operators have speculated that the remaining restaurants will pool in the extremes due to consumer finances. Fine-dining may raise their prices considerably; infrequent, special-occasion guests may curtail their visits to more expensive establishments. To make up for this the restaurants could theoretically raise prices without their high-income, more regular diners being deterred. On the flip side, the vast majority of customers will be seeking value-driven dining experiences, at least for the immediate future.

“The number of restaurants already on the edge of financial insolvency, prior to COVID-19, unfortunately, will not survive. The unchecked proliferation of restaurant openings±both multiunit operators and independents—has created extremely weak sales per unit, coupled with business costs increasing ( i.e. rent, insurance, utilities, employee payroll) will directly negatively impact survivability.” — Christos Giannes, Owner, Kouzina Christos

“It’s heartbreaking to know that many small, mom-and-pop locations won’t make it through the pandemic. It’s these locations that provide authentic, locally inspired cuisine and offer an at-home dining experience.” — Scott Taylor, President & COO, Walk-Ons Sports Bistreaux

“High-end, casual dining (those that survive) will benefit from being a destination, but middle-market [restaurants] will have to adjust to a significantly smaller mix of dine in.” — Ketan Pandya, CMO, Arc Group

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Takeaway: Uncertain Consumer Base

Just as the coronavirus will leave an indelible mark on restaurants, it will also alter consumer behavior. The problem is that, as many operators are predicting, those behaviors could run the gamut with some rushing restaurants as soon as they reopen and others remaining cautious and reclusive. The longer the pandemic lasts, the more accustomed guests become to the idea of carryout and staying at home. Restaurants of the future will be balancing sometimes contradictory consumer demands.

“We will come out of this facing guests with three schools of thought: The first does not buy into this at all and wants to get back to normal ASAP. The second will be cautious but ready to explore as long as you present a reasonably safe environment. The last group will be still looking for the worst to come. … The final group will be hard to reach, but the first two can be.” — Mark Hall, VP of Operations, Gatherhouse Concepts, Houston, Texas

Part II: Change Begins With You

To adapt to current and forthcoming market conditions, restaurateurs are acting fast by either laying the groundwork for future changes to their business or implementing new tactics in real time.

Takeaway: Safety First

One area that is top-of-mind for operators is safety/sanitation. Although the industry has always held itself to high standards in this regard, restaurants will be doubling down on these practices, expanding them to encompass COVID-19 considerations and emphasizing existing procedures. For many operators, that means changing the layout of their stores and adopting new, contactless technologies.

“If anything, there will be a renewed and regenerated awareness of the importance of basic hygiene such as hand washing, covering your cough, keeping your space clean, etc.. The landscape of the business itself will return to its standard image and trust on the part of the consumer will be the new governing body.” —Chris Heinrich, Food & Beverage Director, Harmony Golf Club

“Contactless payment will need to be supported and embraced by operators. In Europe, this is almost always the case, where pay-at-the table is the norm. That is going to become the norm here, with things such as app-based payment or text-based payment becoming more prevalent, as customers now prefer not to hand over their credit card to third parties for health-related safety on top of already existing security reasons.” — Ryan Zink

Takeaway: Engaging the Consumer Base

Amid dine-in bans and later capacity restrictions, restaurants adjusted how they interacted with and marketed to consumers. While the emphasis on safety and sanitation in current ads and outreach may dwindle once a vaccine is developed, operators are likely to promote value for much longer as cash-strapped consumers seek deals. Similarly, the crisis has spurred many operators to engage with their clientele via social media. Even when in-person business ticks back up, restaurants are likely to keep the digital conversation going.

“As an independent, our strongest selling point was our personal interactions with customers.  Customers came to our store to see staff and other regulars. The experience is not the same when they consume our product at home. … Social media is our means of contact with staff and customers. It is nowhere near the same as face-to-face interaction. Somehow we have to provide that personal interaction, style, and personality through computers today.” — Bernadette Bradley, Owner, Bradley House Food & Spirits, Anchorage, Alaska

“Procedures to make people feel safe will have to be front-and-center of all advertising and marketing strategies.” — Matt Tice, Owner, Pizza House, Ann Arbor, Michigan

Takeaway: Cutting Costs

Consumers won’t be the only ones on tight budgets as a recession of undetermined length settles in around the U.S. and the world. To stay in the black, restaurants will look for ways to become leaner, more cost-efficient businesses. Whether this goal is achieved through incorporating automated systems, streamlining the menu, or renegotiating leases depends on the concept.

“[Restaurants will] continue to look for alternate revenue opportunities aside from the core business, budget for contingencies, tighten costs, and understand that menu pricing may not return to 2015–2020 levels. The consumer is looking for even greater value.”—Michael Klein, Senior Director of Food & Beverage, Lanier Islands Resort, Buford, Georgia

Part III: Outside Assist

Although the government’s economic response to the coronavirus crisis came swiftly, many restaurants grappled with the Personal Paycheck Protection (PPP) loan. Certain stipulations, such as three-quarters of the funds going toward employee salaries and benefits, were not applicable for businesses that had, for want of business, operating as a skeleton crew (was since changed to 60/40). Looking ahead, restaurants are hoping for economic relief in the form of tax breaks and better loan options. Many would also like to see temporarily relaxed alcohol laws become permanent. But regardless of what comes, operators want to be a part of the conversation.

Takeaway: Financial Aid

In our survey, many respondents said low- to no-interest loans could be a lifeline to them. Similarly temporary tax breaks or cuts could prove more effective in galvanizing the food industry than PPP loans.

“We need help with cash flow after we get going. As much as I hope for a quick return to pre-COVID guest counts, I fear it will be a slow build. The PPP helped on labor as long as you were one of the lucky ones, but another big shot would be a tax holiday for at least a full quarter. This would in effect be another boost of cash that could be used to pay rents and vendors and not switch the burdens to them.” — Mark Hall

“I believe long-term loans with low interest rates to modify our building and how we operate will allow us to change to reality instead of hoping we will be back to how it was before the shutdown.” — Bernadette Bradley

Takeaway: Drinks to Go

At the height of dine-in bans, restaurants, especially full-service ones, were able to regain some lost ground thanks to a fresh revenue source: off-premises alcohol. Across the country, different states relaxed their restrictions though the particulars varied; some permitted restaurants to sell alcohol via pickup or delivery, but only if the bottles were sealed. More permissive states allowed operators to deliver fully concocted mixed drinks to their patrons. Restaurateurs are, understandably, reluctant to revert back to the old standards.

“Alcohol to-go will be a big push for the restaurant associations. The guest will want it mixed when it comes to them in the comfort of their own homes. They don’t want to have to mix themselves. Besides, if we sell the bottle on the side then it will be considered wholesale, and the government will not be able to tax it. They will want their taxes, so mixing and selling it is the way to go.” — John Mayes, VP or Operations, El Toro Mexican Restaurants, Baytown, Texas

Takeaway: Communication Is Key

Before solutions, aid, or new policies come to pass, restaurants want to be represented in the decision-making process. Once changes are implemented, they expect the government to be clear and open in their communications—a particularly salient point given the confusion around the PPP, dine-in ban specifics, and off-premises alcohol sales.

“Allow representatives of our industry to become a part of the solution in defining what life after the stay-at-home order ends from a restaurant’s perspective.” —Tammy Boetsma, CEO, Hacienda Mexican Restaurants, La Señorita Mexican Restaurants and BarBici Italian Street Food, South Bend, Indiana

“Forthright and timely communication with the public and professionals will be key to winning confidence from a industry segment that is questioning the national and local response to this pandemic. Even now in our state [Georgia], the governor is reopening restaurant dining rooms when most of us question the safety of doing so. No reasonable explanation given and little science to back up the decision. While it is important to allow states to lead during this type of emergency, local leadership is more in touch with the needs of the businesses and citizens.” — Michael Klein