Changing the Restaurant PlaybookBy David Helbraun
on May 8, 2020 in Coronavirus
Question Du Jour w/ Answers
Thank you all so much for the many submissions. You will find many of them below. Many good ideas were brought forth and you can expect the conversation to continue in upcoming newsletters.
Today’s Question was: How would you modernize the restaurant business plan?
Here are your thoughts:
I’d begin by raising the salaries of all my staff to real sustainable levels—not the “living wage” but an actual middle-class income that would adequately reflect the value of the work they do—so say averaging in the $50k range for cooks.
I’d also build the business model around including other “real job” perks, like paid vacation and insurance.
I’ve written this model for my own business or a version of it—and it means we’d raise menu prices around 30%. I think we could make that work if restaurants worked together as an industry and weren’t stuck in a a race to the bottom (or rather, if weren’t all stuck on the bottom, having raced here years ago).
– George Weld – Egg Restaurant
The fundamental problem with the restaurant industry is that people don’t want to pay what it actually costs to get a meal to the table. We talk about rents going up and wages going up and food costs going up. Sure, but that’s been happening since time immemorial and restaurants have raised their prices accordingly. Inflation. The question we need to answer is why won’t the public accept real prices now?
Or maybe they will and we’re just scared that they won’t. My fear is that this crisis will push more restaurants to choose technology over people to save money. We could end up with affordable fast-casual assembly lines and ridiculously expensive table service restaurants, with nothing in between. Regardless, I want to educate the American consumer as to what a meal really costs.
– Brian Keyser, Casellula
-All employees in the tip pool.
-Eliminate “support positions”
-Cheap base rent + percentage rent after a True Break Point
-Landlords = Partners. Don’t sign a lease with someone you don’t like or trust.
-Focus on versatility in build out + operations (ex. To go windows)
-Band together to share knowledge on how to be successful and how spending money in small businesses differs from large businesses.
-Commit to a ratio of earnings from ownership to lowest paid employee somewhere between 5:1 and 9:1 depending on scale)
-Lobby to deregulate small businesses from large ones. We need incentives for staying small or sharing equity.
-Vesting equity opportunities for management
-Elimination of “ influencer” culture
-Shifting media focus to the good guys, and not necessarily talented people who are assholes. Defeat restaurant elitism.
– Adam Weisblatt, Found Oyster (LA)
When restaurants are allowed to re-open…it will be with limited
capacity for sure. During the following months the capacity will be
allowed to increase but it will be quite some time till full capacity as
we know it will be achieved. Therefore new pathways need to be
promulgated to make patrons feel the most comfortable at your
Emerging from these trying times make the most out of “ the new
norm “ takeout and delivery. You can review your menu and provide
family style portions to increase sales and give the consumer a
chance to feed the whole family or have food for another day. Sell gift
cards at a slight discount like restaurant.com. Creative ideas that will
generate revenue which is so needed as a result of the limited
capacity of dine in patrons.
Share with your patrons the processes that you have put in place
to ensure that you hold the safety and security of each and every
patron close to your heart. It is tantamount that patrons feel that they
are entering the safest and healthiest environment possible for dining.
I think that having the ability to order ahead of your dining in
appointment is a great idea, as it will allow for less time in the
restaurant and better turnover of tables.
–Mitch Levey (retired small business owner and father of Joey Regs)
We would love to expand our operating space to include the sidewalk. We currently do not have outdoor cafe rights. This could be helpful in maintaining some capacity until we find a vaccine for COVID-19. Patrons could congregate 6’ apart inside and outside of our bar. We would like to add a ledge, not tables with light stools along with a bar cart for empty glasses to keep the streets clean much like Europe has operated for many years.
What we need:
City approval for open container and use of sidewalks.
Reduction of rent until we are at full capacity.
Reduction of SLA license fees until we are at full capacity.
Guidance for app development to expand our delivery service.
– Jessica Klaus, L’Wren
Off the top, I think expanding this to include people from outside the hospitality industry and involving savvy business people from all walks of life and industries who don’t have any preconceived notions about restaurants and bars is paramount.
Besides that, I’ve been giving a lot of thought in how a restaurant can begin to transform itself from a service-centric operation to a product-centric operation. Invest in figuring out the metrics of what customers are coming in for and align your unit economics to deliver that at high margin. Move away from looking to please everyone coming through the door and just make some small margin, and begin to figure out what people come back for and then build your operation through that.
– Nichola Mouchel – In House
1. We need to change the perceived value of food. It’s a significant challenge, but ultimately we pay our staff way too little in order to keep menu prices down. We need to start thinking like Henry Ford, and pay our staff enough so they too can afford a night out at our restaurants.
2. While a vaccine is promised within 18 months, the fastest society has ever created one is four years. So my fear is that the restaurant world is delivery-only for many years ahead. In that scenario, a private chef cooking in your home, booked through your favorite restaurant, may be the answer to supplement revenue.
– Bill Fletcher, Fletcher’s Brooklyn Barbecue
1. The HVAC systems will need to be rethought. People will want to know how often air is circulated.
2. Leases will have to make more sense and should move to a % of sales versus a ridiculous number that isn’t sustainable.
3. Restaurants will need to be reconfigured. I have noticed over the years they just get more and more crowded and quite frankly it really takes away from the dining experience when you are on top of a table full of loud mouths or you are just hoping to have quiet chat with your spouse. Obviously-this means less business and that is why leases must be renegotiated.
4. Obviously-takeout and delivery will also become a bigger piece of the business. Consideration as to how to operationalize this in a proactive manner will be essential. Menus will need to rethought with items more conducive to takeout.
5. A more proactive approach to delivery might be like a stitch- fix model. In other words, set up automatic food and beverage sampling that can lead to bigger orders.
I own an art gallery and home store. These are just my thoughts looking into the restaurant business. Before the pandemic my husband and I went out almost every night so I do feel like a professional diner. It’s been sad to see the amount of restaurant closures even before this crisis. We really loved sitting at the bar-worried that might be gone now…
– Mary Jo Pile – Collier West
The time is now to hit the reset button…
- Refocus on service included model and the living wage
- Incorporate a complete pooled tip system that included FOH & BOH
- Flatten the organizations and make accountability and responsibility more intelligently spread out with less of a hierarchy
- Focus on up-skilling and cross training departments and jobs to support a flatter organization
- Integrate more technology and IT to focus on efficiency and guest experience
- Design and build takeout/delivery as a stronger revenue stream as part of the space from the jump
– E. Noel Cruz, Ichicoro
This time is an opportunity we should not squander. I think it gives us all great comfort to brainstorm ideas for a future that improves upon the circumstance of our past problems, but we would be remiss not to address that we don’t just need a business plan – we need to overhaul the state of the industry sector as a whole. We’ve always resisted operating on a collective level, but perhaps this is a chance to create a model that can function to benefit both the business owners and employees, rather than existing in adversarial roles. Gabrielle Hamilton wrote a beautiful piece for the NY Times and illustrates a point of view that I believe many of us share about the future of our industry in a world that will not need us in the same way anymore. Along with the shortcomings of our fragile health care system and the intense economic divide that disproportionately affects black and brown communities, this pandemic has illuminated the failures we have simply accepted about the bar and restaurant industry. As Ms. Hamilton writes it; “The coronavirus did not suddenly shine light on an unknown fragility. We’ve all known, and for a rather long time.” Many of our businesses will end up casualties of this pandemic because many of us were already operating on such untenable margins – an economic situation which is largely a product of regulations and operational fees that make it impossible to thrive. It would be ultimately self-defeating to ignore the opportunity to save our small businesses through the sheer force of our combined civic capital. It has never been more apparent that what we need to modernize and empower our industry is a collective voice with appropriate political representation. How is it that a group that employs such a large percentage of Americans, generates billions in revenue, and pays out exorbitant amounts in sales tax and other contributions also has such an inadequate role in controlling our future in this economy? The reason airlines and hotels and cruise ships receive bailouts and priority from the government is they have lobbyists and unions. Is our collective buying power not worth the same attention and value? And how can our seat at the table be represented by men such as Danny Meyer? Do his best interests truly align with those of the owner-operated 30-seat cafe that didn’t get any of that PPP money and couldn’t use it to their benefit anyway? In the Meatpacking District, our property tax increased when the area became a Business Improvement District so a portion of what we pay goes to . . . I guess, some fancy bollards and tables in the public square? I honestly don’t even know. But, we pay it because it’s included in our taxes. What if instead we allocated a portion of the taxes we pay (anywhere from 0.1 – 2.5%) toward a unified collective with adequate government representation that actually equates to the reckoning power that we yield? Why are we always at the shit end of the bargaining stick with landlords and city agencies when it is the revenue that we generate that they rely on so readily? Every one of us at some point has had to face the scrutiny of our local Community Board. It is stressful and frustrating to validate your business model to a group of people who have probably never worked in nightlife or hospitality. We’ve all had to suffer through arbitrary and annoying health inspections that don’t really achieve their purpose but serve as an annual reminder that we are all ATMs for the city to draw funds from when and as they see fit. Now, we all have our heads over a barrel trying to negotiate with landlords who get to pawn off their property tax onto us on top of the rent while we try to figure out how much people will pay for a burger they now know they can make at home for a tenth of the cost we charge. We are being called on to revive our industry in a time when the one thing we provide that you cannot make at home or buy in a store – atmosphere – is the thing that we have to fear as long as it may mean passing along a virus. We’re being pushed to rehire employees to revive an economy that will probably not have the disposable income required to buy $18 cocktails and $8 beers. We’re being asked to risk losing everything we have on a gamble to reopen an economy that desperately needs us not just for the community and culture we provide but more for the money we are able to attract and spread around. That great responsibility supposedly comes with great power and I think it is time we figure out a way to actually use it.
– Marisol de la Rosa – Brass Monkey
It’s December 2020. Holiday time. New York City is open, the virus is gone. People are enjoying being able to go out and congregate in restaurants and bars, holiday parties are in full force with everyone celebrating and having a good time.
The restaurant owners are finally able to breathe a fresh air of relief. City government finally put regulations in place to make NY great again! They lowered the rents on all commercial spaces that were not owned by a bank, Starbucks or Duane Reade.
– Alicia Rodriguez – Mekelburg’s
Good night and good weekend. Rest up for another 10 rounds next week. I have a feeling it’s gonna be a doozy.
David Helbraun is the Founding Partner and Chairman of the firm. He is a lifelong entrepreneur who has been running successful businesses in New York City for years.