Michael Maxwell – Partner, Blue Orbit Restaurant Consulting
In the last few weeks, I have had some very difficult conversations with a lot of restaurant owners that I consider not only clients but friends. I’ve listened to them as they have made hard decisions to close one or all of their locations, worried about their employees while understanding that they could not financially take care of everyone for an unlimited amount of time. And worst of all, this hit fast and there was no time to PLAN. If you are not a restaurateur, you probably don’t completely understand how we think. There can be a blizzard outside, but we just make snow chains out of our dog’s leash, strap them on the car tires and pick up two employees on the way in. We turn on the fryers, fire up the POS, gather our team of 3 around us and make the PLAN on how to get through the day and serve as many guests as possible. Shutting down and going home is not something we know how to do, so it is understandable that everyone feels lost and is not quite sure what to do next. My advice is that we do what we do best, assess the situation and PLAN to reopen.
There are multiple pieces to this process:
- Make deals. Meet with all of your vendors, landlords, utility providers, and contracted services to assess outstanding charges. Defer payments and late fees, get credits for monthly fees that would be accrued while you are closed, ask landlords for rent concessions. Eliminate interest on loans. Make all the deals you can to minimize payouts.
Keep in mind during this process that you are not a shrewd heartless businessperson trying to bargain till the other guy breaks. All of the other guy’s clients are asking for the same things you are. Every concession they make for you, limits their cash flow and puts them one step closer to shutting down their business. It’s a tightrope we are all walking so be fair and considerate because you will need these relationships intact going forward. For example, you are going to need the help of your food vendors for better pricing, lower purchase minimums and more once you reopen, don’t ask for all of your favors now.
- Seek out every source of income. Meet with your banks and credit card companies. Know your borrowing and credit limits. Negotiate new loan deals. Many banks are offering immediate operating capital with lengthy payback periods and no payments for the first year. Some of you may be more interested in refinancing your current loans at lower rates with deferred payments. Contact your local SBA representative to get the details on disaster relief and other small business loans. Keep informed daily on the ever-changing help coming from the State and Federal Governments. Use local organizations like the Chamber of Commerce and your city or state’s Restaurant Association to help you understand all the assistance becoming available.
Once you understand what you have available, fill out the paperwork to prequalify for anything you might need. Have those loans lined up, ready to grab if and when you need them. We all know that no matter how much the government tries to help, the process is slow and cumbersome. Get in that line early.
- Determine how much money you need. Assume you will have no income until June, chances are it will be earlier, but this is a safe bet. Are you paying your staff during this time, just your mangers? Will you need to continue to make loan payments, partial payments on balances to vendors? Once you have this number add in your “reopening” expenses. For most that will mean just replenishing your perishable inventory. Take your order guide, determine what that order will be, and then cost it out. Write a schedule and cost out your first payroll. Also assume that you will need to train a few new employees and factor in those costs.
Now that you know how much money you need, return to your options and go get that money.
- Retain your staff. Most of you think this means keep paying them. Honestly that is the right thing to do, but for most of us it is not feasible. There are other ways to retain your staff. The first is to simply remind them that you care and that you are there for them. Help them navigate the unemployment process. Help them make the same deals you just made with their landlords and their creditors. Be aware of all social services available and recommend agencies that can help with specific needs. Lead them toward temporary work. Every grocery store and shopping warehouse in the country is hiring temporary employees right now just to restock their shelves. When this is over those jobs will go away and they can return to you.
Uncertainty of the future is the best way to lose your team. If you stay in touch, keep them informed of your plans to get the business up and running, talk about their future roles, and help them through these uncertain times, you will build loyalty and retain your team.
- Prepare for the new world. Until there is a vaccine produced in mass quantities, this virus is not going away completely. Habits we have learned quickly will stay with us, habits like social distancing and hand washing. Evaluate your dining room and remove a few tables or change configurations to allow more distance between tables. Place hand sanitizers where customers have easy access to them and where your staff can easily be seen using them. These all fall into the category of making your guests feel like it’s safe again.
Also be aware that takeout and delivery are now established as a part of our lives. Even generations who struggle with technology now understand how to use delivery services and order online or with a phone app. We’ve eaten a lot of meals at home now and it’s not so bad. Expect that trend to continue. If you haven’t retooled your systems and social media to promote takeout, you should do that immediately. Some of the most effective tools I have seen so far are daily emails with today’s takeout menu. Several restaurants are doing this and mixing up the offerings daily to keep it fresh and interesting. It becomes a daily treasure in your inbox that you look forward to receiving. Some restaurants are even offering “happy hour” takeout specials and others are adding cocktail mixes with the instructions for adding alcohol. When we “flatten the curve” on this virus, we are not done. It will continue to pop up across the country and certain areas may need to shut down again to lessen the risk. Understand that this is a very strong possibility and build loyalty to your takeout program immediately upon reopening.
- Re-engineer your menu. You are probably aware that people are hoarding toilet paper. A perception of scarcity means people hold on to their money. If your menu is not approachable and perceived as a value, you need to revisit it now. Lower prices where you can, introduce new menu items with great profit margins and lower price points. Do not veer from your brand identity but understand that value is now important and spending in excess will stop. Daily specials and all-inclusive meals are a great way to attract guests with a lower price point.
And while you are reworking your menu, look for opportunities to eliminate the number of ingredients in house, purchase less expensive brands, minimize prep, and make use of scraps, trimmings and what we have up to now considered waste.
- Up your service game. Hear loud and clear that I just suggested you remove some tables, focus on takeout business and lower prices. That in itself is not normally a recipe for success. Your servers are your soldiers. They now have to focus on first getting to know their guests and building a sense of community, if it does not already exist. They also need to understand that up-selling and speed of service are more important than ever. Guests who skip dessert should take one to go, a glass of water is no longer an acceptable beverage, and shared entrees are against the law. While that is an exaggeration, it is how servers should start to think as they finesse guests into spending just a little more money and lingering at the table a little less time. With less tables, table turn times become more important.
- Eliminate unnecessary costs. Or do more with less. I already mentioned that you should eliminate prep items where you can to cut labor. The same goes for all hourly positions, trim hours and minutes wherever you can. This is in no way asking you to get rid of staff, it instead asks you to remember that a few dollars make a big difference. If you eliminate just one hour of prep work every day at $15 per hour you are saving $3,900 per year. Trim that one hour also from one am and one pm line position and you are up to a savings of almost $12,000 per year.
Evaluate every line item on your P&L to look for expenses that can be cut. There is always something. Should you eliminate your cleaning crew and give those hours to your employees? Do you really need that fancy schedule generator, or can you do it with an excel spread sheet? Is your monthly maintenance contract more than the expected cost of repairs? Remember that small dollars add up and anything that you can eliminate without harming your business will help you to become more bulletproof.
- Ramp up your PR. In contradiction to every statement I just made telling you to cut costs wherever possible, I now want to encourage you to spend some money on Public Relations. If you have a good PR team within your company put them to work double time. If you do not, hire some outside help. Telling your story right now is more important than ever. Everyone is going to be fighting for the same dollars. The more visible you are the more likely you are to get those dollars. Once again understand the importance of community as we all recover from closing our businesses. Focus your PR first on your neighbors, their schools, their civic organizations, and their businesses. They will all have new needs and you can all