The 5 Biggest Concerns of Every Restaurant Owner Post COVID-19
Many restaurant owners have deep concerns regarding the COVID-19 timeline, not just because it’s an unknown and invisible assailant; it resembles nothing similar to anything we have experienced before. There are 5 primary concerns we are exploring.
Many restaurant owners have deep concerns regarding the COVID-19 timeline, not just because it’s an unknown and invisible assailant; it resembles nothing similar to anything we have experienced before.There is no precedent, no manual, not even a movie, that provides direction on what has happened and the possible scenarios that will come to life in the next3 to 6 months.
As more regions begin to reopen, US restaurant business sentiment is variegated with many restaurateurs uncertain of the outlook. This, of course, has been compounded by the USA’s civil unrest [late May & June 2020], which has impacted cities and communities throughout the country. While May 2020 unemployment numbers were lower than expected, 2.5m workers went back to work; this was an obvious turn of events. The combination of PPP loan funding (part of the CARES Act) alongside businesses re-opening under a softening of the quarantine restrictions were the drivers behind the slight reversal. However, that still leaves unemployment at13.3% or a staggering 21 million still out of work.
While the civil unrest augmented economic instability concerns amongst already nervous business owners, the primary trepidation is the unpredictable volatility driven by the pandemic.
From our research, 5 primary concerns have metabolized from the restaurant industry, these are as follows:
- Brand Relevance Post COVID-19
- Consumer Mindset
- Financial Ability to Finance Necessary Changes
The economic impact of COVID-19 is not just about its enormity, but also its velocity and alacrity. Indeed, we can’t even say “not since the 1929 recession” as within only a 10-week timeframe, COVID-19 unemployment is worse than any other recessionary point in time. While the overall unemployment numbers reduced by 2.5m inMay 2020, this was due to PPP loans and a softening of the Lockdown resulting in some unemployed/furloughed workers returning to work. Unemployment levels, currently at13.3%, remain near historic highs. Employers have yet to add back 19.6 million jobs lost since February. Indeed, job losses of the enormousness we experienced represent more than double the 8.7 million jobs lost following the GreatRecession of 2008/9 and in a far shorter period.
While every historical period manifests its own inimitable circumstances, there are far more economic parallels to the end of WW2 than the end of the 2009 recession. Firstly, unemployment is already 3 times higher than the Great Recession’s (2009) 8.7m unemployed in 2009 at over 33m by mid-May2020. However, the last recession did not involve government mandated business closures, travel restrictions, and so on. Equally, the 2009 recession was mainly created by an inflated housing market resulting in thousands of borrowers ultimately being unable to afford their loan repayments. The COVID-19 scenario is significantly different than the Great Recession.
Based on the post-WW2 recovery, there are three parallels which possess similarity to today’s circumstances:
- We have been restricted in our movement (quarantine)
- Our purchasing and lifestyle patterns have changed due to the one-off circumstances presented to us
- We have been presented with enormous economic challenges and job loss
Overall, the challenge to restaurants economically is somewhat extreme. A high unemployment rate combined with the parallel contraction of multiple ‘feeder’ industries (eg: hotels, airlines, and convention sectors) has produced a unique crucible of economic uncertainty.
Brand Relevance Post COVID-19
Pre-COVID-19, the majority of restaurants were in line with consumer needs and generally remained relevant in their messaging and offer. The ever-growing industry remained relevant through opening off-premise options for guests along with healthier menu options.
However, since mid-February 2020 much has changed, and the consumer is not today who she/he was in February. Right now, consumers are pretty freaked out. From nowhere, the consumer is fighting this new thing called a Global Pandemic, being isolated, starved of socialization, not to mention being faced with remarkable shortages and chaos in what were normally predictable every-day environments such as grocery and drug stores. Compounded by the demonstrations and subsequent riots, consumers are both worn down and anxious.
Pre-COVID-19 consumers were dealing with a wide span of weighty anxieties. They were faced with a uniquely divisive political climate, the impact of climate change, the visibly deteriorating natural environment, the literal burning of a continent (Australia) along with multiple other wildfire hotspots, square miles of plastic waste floating around the oceans, and the enormous flooding seen in various parts of the world. These all weigh heavily on the population’s mind and, in today’s world of over communication through every form of media, there is no respite from chronically worrying news.
Prior to 2019, research agency The Hartman Group continually observed obesity/weight management as the US consumer’s most prevalent concern.However, in The Hartman Group’s latest Health & Wellness research, they state “63 percent of consumers say they are treating or preventing anxiety or stress compared to 61 percent who are treating or preventing being overweight.”The surge in the management of anxiety or stress is mostly driven by consumers preventing health conditions, especially among Millennials and now Gen Z.
Restaurant operators are concerned that the remarkable events in the first half of 2020 will shift their brand relevance and thus impact their ability to perform within what will ostensibly be a new market post-lockdown.
Restaurant operators are used to safety. They are legally bound to adhere to strict health department and FDA regulations as well as undergo government health and safety audits typically four times a year. However, COVID-19 has produced a whole new range of safety requirements that add both cost and liability to an already wounded industry.
The consumer is poorer now than 3 months ago, and by a lot. As of June 1st, 2020, unemployment is presently around 20 million.That does not account for the millions of gig workers, self-employed workers, and business owners who have been affected by the crisis and are seeking, or will be seeking, assistance. Equally worrying are the pending job layoffs as businesses re-budget to align with the adjusted economy. These layoffs will impact higher earning executives at a faster rate, creating further tension on unemployment and the economy.
Consumers have therefore tightened their wallets and eliminated most discretionary spending due to lost jobs, lower wages, and the uncertainty regarding the length of the COVID-19 pandemic. This has been compounded by the unique civil unrest we have seen since the end of May 2020.
Consumers are facing a very new landscape: toilet paper is out of stock, chicken and meat are being rationed, and those shoppers who are willing to venture into stores are having to stand in line and are ushered in like they’re boarding an airplane.
Consumers have already begun to economize. PiperSandler consumer spending survey(4/13/20) reported the following:
- 53% -spending less
- 50% -increased online shopping
- 67% - more likely to cook at home; more than prior (not great for restaurants)
- 85% - reported some type of change in prior shopping habits
- 88%- stated belief that the virus will have some level of disruption to their lives
This is of course compounded by the fear of catching the coronavirus and the multiple precautions consumers are adopting to protect themselves through changing daily routines, which amongst other activities, include holding back from eating in restaurants.
In general, consumers now have less disposable income, therefore eating out will become more of a luxury than an everyday activity. Restaurateurs understand this and worry that the restaurant experience will need to be quite different to be appealing to the new post-COVID-19 consumer.
Financial Ability to Finance Necessary Changes
It is not a surprise to learn that financial strains on restaurant economics are a primary concern for many restaurant operators. Restaurants are a cash business; no cash means no business. Many sit-down restaurants have not been able to pivot to delivery and takeout at a meaningful economic level.
Additional costs such as personal protective equipment(PPE) and enhanced cleaning requirements combined with reduced customer frequency and reduced capacity adhering to physical distancing are unfavorable factors when attempting to restart a restaurant business.
In summary, these 5 concerns add up to a worrying cauldron of problems that are facing today’s restaurateurs.
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So what now?
Naturally, the pan-conomy represents the most worry given the interlaced uncertainty between the pandemic’s impact and the corresponding reaction by the economy. There is little data to measure the future kinetics of the pandemic nor the congruent economy that reacted so vehemently.However, the mesmerizing events of March and April 2020 may be a one-off, even if there is an escalation in infection levels.
The point of the shutdown was not just about avoiding infection; it was equally about preparation, and most will agree we were not at all prepared! Once the health services are better prepared to address an influx of COVID-19 infections, the lesser the need to shut down. As of early June, while we still face medical equipment shortages and infection rate volatility, our healthcare infrastructure is vastly better prepared to manage COVID-19 than it was three months ago. There are more ventilators, PPE, and a generally better understanding of COVID-19. With confirmed COVID-19 cases worldwide surpassing 6.4 million and continuing to grow, scientists are pushing forward with efforts to develop vaccines and treatments to slow the pandemic and lessen the disease’s damage. Some of the earliest treatments are most likely to be drugs that are either approved for other conditions or have been tested on other viruses.
Also, the general public are far more aware of the pandemic and the safety cautions they can take through wearing masks and social distancing.
The point being that while COVID-19 is by no means under control, the chances of another lockdown are far less likely, even with an infection surge.
What we do know is that we will not just snapback to a pre-COVID-19 economy. Consumers have less disposable income. Equally, the restaurant experience will be quite different with security style protocol sand table dividers.
But all is not lost; while the economy cannot be shaped by consumer-reliant restaurants, restaurants can shape themselves to work within new economic boundaries. Restaurants generally operate with three physical assets: 1) Commercial kitchen 2) Modifiable customer space 3) Communication platform. While many restaurants were generally designed to accommodate guests to dine in, the fact is that they can modify their business operating model to eat out. Indeed, we have seen this across the US where restaurants have entered the takeout, delivery, and retail spaces and have also developed meal kits that customers may cook at home.
There is one incredibly positive factor for the restaurant industry: EVERYONE eats. Therefore, while economic instability can be somewhat unpredictable, there is always a demand for food. Thus, the challenge is not the economy but instead how to move the restaurant offer to the new consumer demands.
2. Brand Relevance Post-COVID-19
How does a restaurant remain relevant during this new pandemic? Given the unique situation in which we find ourselves, I would recommend taking the pulse of customers through customer research by asking questions about what matters most to them and then adapting menus accordingly. This can be executed inexpensively by working with online survey sites such as Survey Monkey. Alternatively, there are many research firms for hire. I like BigMouth Survey. I find them well balanced between cost and providing technology that generates informative data that assists businesses in improving the customer experience, workplace happiness, and bottom-line profitability. There are of course other options; a quick online search will generate a range of potential providers with various cost structures.
Whatever the approach, I believe it is reasonable to assume that restaurants need to think in value and safety terms for the next 12-24 months. I recommend exploring strategies that will present your brand as appealing from a value perspective. While many will understandably adopt this approach, I am not suggesting heavy discounting. Instead, evaluate menus and consider lower cost dishes that maintain a healthy margin. Consider family meals and the like.
Position menus to reflect some economy meals while maintaining brand values and signature items. Just a note, some restaurants address cost by reducing portion sizes. This has backfired in multiple instances as customers identify the lower amount of food. The same portion size consisting of lower cost but good quality ingredients is normally the most successful direction in economy-driven times.
Equally, the messaging is important. Showing photos of products in sealed containers and of staff in the best PPE provides confidence that the restaurant is taking matters seriously and they care about the safety of the consumer as well as their employees.
The consumer will only care about your business when your business first demonstrates they care about the consumer.
Safety is now center stage when it comes to restaurants. Customers present a big risk to restaurants and are the hardest to manage. On one hand, you don’t want to offend any customers, especially in this climate. On the other hand, you don’t want them to infect your team or other guests. Clear signage about hand washing and good general hygiene, as well as new table and chair placement and/or dividers will all go a long way to mitigate risk. I do recommend giving a disposable sanitized towel to guests at the start and end of their meal.
The establishment will need to be cleaned by a certified environmental cleaning company, then the certificate should be posted, similar to the Health Department signs. Groups that are EPA- and CDC-approved provide credibility and commitment, demonstrating the restaurant is taking safety seriously.
Digital menus, contactless payment, individually-wrapped cutlery and flatware, and condiment-free tables will be the future. Buffets are probably history for now. Investment will need to be in restrooms, where designers will need to create a contactless experience. Door foot handles will be one of COVID-19’s most important inventions.
Safety also means familiarity. The consumer is now risk-averse whether they survived quarantine infection-free or were indeed infected by COVID-19 and experienced the illness. There is an acute understanding of the power of a pandemic, thus they are less likely to try anything new for the foreseeable future. Consumers will be more likely to frequent their regular restaurants.
4. Consumer Mindset
COVID-19-related quarantine orders have both prompted and affected multi-generational consumers to shop differently, shifting the consumer mindset for the foreseeable future.
While many consumers have begun to venture out, restaurants remain a concern. Consumers are waiting for key milestones such as a COVID-19 vaccine, antibody tests, or a meaningful and consistent drop in infection levels.
Very importantly, consumers are looking for a genuine commitment to safety.They are noticeably avoiding restaurants where employees do not wear masks and are adopting a cleaning regimen that maintains safety through regular sanitization and physical barriers.
What does this mean for restaurant operators?
Essentially restaurants would fare best if they employ four key strategies:
- Promote the safety measures in place, including cleaning, sanitization, physical barriers, curbside pick-up options, and safe delivery protocols.
- Modify the menu to offer family and economy meals in addition to a comprehensive delivery program.
- Introduce food kits that people can put together or cook at home along with selling brand relevant retail items e.g. proprietary sauces, desserts, etc.
- Modify the marketing message to recognize the consumer and address concerns regarding safety while introducing new product and service programs that are relevant to the new landscape created by the pandemic.
5. Financial Ability to Finance Necessary Changes
There are multiple predictions regarding the ability for restaurants to survive through the pandemic and none of them are particularly positive. With that said, there are equally many survival techniques that should at least carry a restaurant through this troubled time.The following are tactical endurance moves to support the business model:
- Produce a new budget that aligns the operating cost ratios with the new operating model. Professional assistance is available from most restaurant consultants.
- Consider contactless order and payment systems such as Cheqout.
- Consider government assistance programs such as PPP (Paycheck Protection Program); just be mindful of the loan and forgiveness terms.
- Consider operating matters such as opening hours. There is no point opening at 9am if your business doesn’t generate meaningful income until after 10:30am.
- Purchase more prepared ingredients to reduce prep hours in the kitchen (again, be careful of cost increase and quality).
- Revisiting every ingredient cost and checking if they can be purchased for less elsewhere.
- Negotiating lower prices with vendors or looking for comparable replacements. While this is often difficult, given we are all in this together, vendors normally understand that it’s in their best interest to help their customers in their time of need.I have found that good vendors always work well with their customers in recessionary times, so it is certainly worth having the conversation with your vendors before taking action.
- Modifying the menu to reduce food cost, therefore introducing lower cost dishes that generate higher margins.
- Strategize the takeout, delivery, retail, and offsite catering operations with COVID-19 in mind. As of today, the pandemic is expanding, not contracting, and will be with us for the next 12-24 months.
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