Will Restaurants Rebound?
By Andrew Dickow
Michigan restaurants and bars have been forced to either shut down completely or to shift to limited curbside pickup and delivery. In an industry where margins are already razor-thin, it is hard to envision a rebound in the short-term if the current state of the industry persists late into 2020. Although nobody is certain of when demand will return to “normal” levels, one thing is certain, people will return to restaurants.
Although our social media has been filled in recent weeks with everyone thinking that they are now Gordon Ramsay because they roasted some cauliflower or added some fresh chives to their morning omelet, consumers are yearning to return to their favorite establishments. They are longing for the brands and specialties they had become accustomed to and now realize, had taken for granted.
However, no matter how much someone is craving their favorite dish, they will still have the health and safety of their family front-of-mind when deciding when, and how they will return to restaurants when they do reopen. So what does a return to restaurants look like?
From a logistical perspective, it will most likely resemble the first week of March before the official shelter-in-place was implemented, but the public began taking their own precautions. Consumers still felt relatively comfortable visiting Quick Service Restaurants (QSR) such as Chipotle and Starbucks and were cautiously visiting sit-down dining establishments with what soon become referred to as proper “social distancing.”
As the state and the country works through a phased reopening, demand for restaurants will certainly follow with its own staggered approach. Consumers will naturally return to QSRs first. They are already accustomed to getting their food to go at these establishments and these restaurants were still able to provide limited service throughout this pandemic via delivery or curbside pick-up, so there is already a natural level of comfort. For example, Starbucks will have already opened over 80% of its stores in the U.S. by the second week of May. This is a great example of how QSR will be successful in the months to come as leaders in the space find creative ways to meet consumer demand safely.
The next sector of the restaurant industry to return will be casual dining. There will be more of a barrier for this sector given that there is more trust that needs to be placed by the consumer in these establishments and the slightly higher price points. How frequently are the tables and dishware being sanitized? How will patrons be spaced from other groups?
These are the questions that will be in the mind of consumers, but as certain individuals have more of an appetite to rush back for their favorite meals, so will those in their circle of friends. Ultimately there will be a trickle-down effect to their broader network as there will be a fear of missing out. Nobody will want to be home on a Saturday evening when their friends are having a great time at the local wine bar.
Human beings are social creatures and over time there will be a return to casual dining establishments, but which ones? The restaurants that were thriving before this crisis and built their business around their employees, great customer service, signature dishes, and high-quality food will be the ones that not only survive but thrive in the years to come. Establishments that may have been able to get by because they had a favorable location or overcharged on certain menu items will struggle to find their way back.
The most concerning sector of the restaurant market will surely be fine dining. Not only do they face the same challenges as QSR and casual dining, but they have the added element of the economic crisis that has followed. Large footprint steakhouses will be few and far between.
Many large chains will need to rethink their business models as they will not be able to afford the combination of high overhead and low demand for an extended period. Over the past 75 years, the typical recession lasted approximately 14 months from start to finish, which would infer returning to a new “normal” some time in the middle of 2021. For fine dining establishments, this will likely evolve into smaller footprints and more gastropub-type layouts, albeit challenging from a short-term social distancing perspective. Anything over 5,000 square feet will be a thing of the past outside of major business and shopping districts.
Overall, the restaurant segment will be challenged, but those that have innovated during this shutdown will not only survive this challenging time but will come out of it with new revenue sources. Whether it be online ordering, e-commerce retail, or other revenue streams, certain restaurant owners that have refused to accept their fate will be rewarded for their ingenuity.
As many groups have simply focused on getting state and federal funding, others have pushed the envelope on being creative and re-opening a more efficient and viable enterprise. The owners and teams that have taken the time to think about their businesses holistically and questioned the status quo will be the ones who ultimately win.
Just because the doors are closed today, doesn’t mean there aren’t things restauranteurs can be doing to give themselves a better chance tomorrow. It all starts with rethinking every aspect of your operation and how it will work when we reopen. How will your raw material and supply ordering change? How will you manage customer expectations differently? How will you create an environment where your patrons have a high level of confidence that every possible measure has been taken to ensure they are as safe as possible?
Customer service and high-quality food will no longer be the only benchmarks for success. The bar will be raised and the only question will be, who will step up to the new standard of excellence?
Andrew Dickow is co-owner of 1701 Hospitality.