Laid off from a senior restaurant position, Gourav Patel is now helping restaurants navigate the biggest crisis of our generation.
Like restaurants of all sizes and segments, Gourav Patel’s goals and direction changed overnight. In late March, Patel, then SVP of finance at Sage Restaurant Concepts, learned his job was getting cut in June. The company, which directs hotels and restaurants in 40 states, furloughed 5,000 of 6,000 employees as part of a corporate restructuring and attempt to preserve cash.
Sage closed all but a small handful of its concepts early on—it runs more than 30 restaurants, bars, and coffee shops and has developed and operated north of 400 hotels.
Patel didn’t want to exit the business, however. He’s been drawn to food since he started making samosas with his mom as a child.
So Patel put his cards on the table and got into business for himself. He started a consulting company, Provisions Hospitality Group, and signed three clients and reached $30,000 within six weeks. By July, he had seven and confirmed billings in the $60,000–$70,000 range with Year 1 aspirations of $250,000.
While rates hover around $175–$200 per hour, Patel’s one-stop shop model is more cost-effective than bringing on full-time finance, operations, and development executives, he says.
And the need for this blanket expertise has only heightened of late. The reality is most restaurants are passion-fueled. A proprietor wears every hat. They’re the CEO, CFO, CMO, tech guru, and human resources liaison. Yet still, they need to focus on why they got into the business in the first place—food and hospitality.
Patel says an entrepreneurial spirit has fueled operators for as long as there’s been restaurants. But they’ve never faced today’s hurdles. Just consider the Paycheck Protection Program, rife with pitfalls and legal mazes.
“Just being in this industry as long as I have, I saw some peril because there’s just some advanced analysis, I think, that needs to happen during this pandemic to ensure survival,” he says.
Things like accurate forecasting. Detailed cash-flow analysis. Running over expense lines. While margins have always been thin for restaurants, the closing, reopening, closing, and potentially reopening again process has rendered it nearly impossible to predict essential elements of running a business, from labor costs to rent to staffing levels. This is why it’s critical, Patel says, to know exactly what’s happening day-to-day and to understand where the opportunities lie.
He says consulting work so far has fallen into two main buckets. Restaurant operators are asking for help with existing operations, from forecasting to getting a better understanding of their financials and projecting how long cash will stretch. They’re trying to decipher the endless tech solutions on the market and grapple with delivery. Is first-party possible? How do I make third-party profitable, if that’s the route to take? If I choose to bring it in-house, what are the insurance ramifications?
“It’s very much a Catch-22,” Patel says. “Historically, most restaurants, I think they were lucky if they got 3 percent of their sales from delivery. So it never made sense to have their own solution. They partnered with the DoorDashs and Postmates of the world, and there’s enough information out there about the fees. But now, you have to embrace it. If you didn’t think it was a reality before the pandemic, it’s certainly a reality now.”
Another popular topic has centered on menu engineering. Patel suggests restaurants take the “Four R” approach, which essentially breaks down as follows:
Reprice high volume, below margin items. If a specific item is moving, indicating guest demand, look to see if customers would pay more. If not, according to the Washington Hospitality Association, you can evaluate the accompaniments and portion to potentially reduce cost.
Retain high volume, above average margin items. These are the core items at a restaurant that carry profitability and create an opportunity on the upside to increase pricing. The WHA says operators should adjust these with every menu change and make sure execution is flawless.
Replate or reprice low volume, above margin items. Simply, this is when a restaurant thinks it has a winner but, for whatever reason, it’s just not selling. Maybe it’s a value perception issue. Operators, in turn, can replate with higher perceived value accompaniments, the WHA says, so guests are persuaded to give them a try. It might be time to examine pricing as well and take a slight hit to boost volume.
Rethink low volume, low-margin items. Sometimes these are staples that have run their course, and the restaurant is reluctant to part ways with a past favorite. Instead of cutting, now could be a good time to reinvent the item or shift to an LTO that captures nostalgic demand. Don’t have the chicken parmesan on all year, for instance, but bring it back once a month for a “throwback dinner” event. The WHA says restaurants should make it a habit to think of how small they can make their menu to create room for new on-trend items.
That translates to today’s COVID-19 dynamic, too. Just think of the “on-trend” goal as off-premises ready products. It could be a way to present a simplified, pared-down menu that’s still exciting for consumers.
Generally, in a 50-item menu, the top 10 options make up 70–80 percent of sales.
“We really look at what’s selling, how it’s selling, who it’s selling to, and form a strategy around it,” Patel says. “I think if you can eliminate the bottom 15–20 percent of the menu that are potential dogs, then at least that’s going to help you with some of your food cost, waste, anything like that in a restaurant will inflate its expenses.”
The other bucket of his business has surprised Patel a bit. He’s had a number of clients who are looking at COVID-19 as a time to grow and develop. They either harbored dreams of opening a restaurant before and see today’s lowered barriers to entry as a welcome mat, or they’re well-equipped restaurants searching for opportunity in the “new normal,” as well as on the other side of coronavirus.
Much of this has focused on the same kind of tactics upstarts grappled with pre-virus. Labor models, capital budgets, structuring ownership equity, lease negotiations, and securing financing.
Patel says the COVID-19 landscape opened the door for a lot of veteran restaurant folks to get into business for themselves. More real estate is coming up, especially A plus locations that were overrun before. Rates, whether it’s a loan or money raised from investors, are running at all-time lows. And some key services, from contractor work to designs to PR, are easier to access. In sum, the cost of capital is lower.
“If you can get your investor based on a pretty conservative and safe projection, if you outperform that, you’re building more equity,” Patel says. “You’re building more investor confidence that will hopefully translate into your second, third, fourth location if that’s your goal.”
But it’s important to understand the challenges—to grow and develop with a realistic mindset that isn’t reliant on waiting COVID-19 out.
Having a plan and solutions in place to make it day one and survive after is the unlock, Patel says.
“When you open you’re either going to be running on all cylinders and you’re able to expand, whether it’s to different meal periods or delivery or just different areas,” he says, “or you’re finding yourself questioning what’s going wrong. How do I pivot? Those are the changes that need to be made, but it’s doable.”