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Published in Food/Agribusiness
San Chez Owner Cindy Schneider says “we’ve looked at everything” to help reduce operational costs during the pandemic. San Chez Owner Cindy Schneider says “we’ve looked at everything” to help reduce operational costs during the pandemic. MIBIZ FILE PHOTO

Resilient and agile: Restaurant industry tackles a potentially long-term transformation as consumer behavior and buying patterns shift

BY Sunday, November 08, 2020 06:20pm

Restaurant owners have had to get creative and at times take extreme cost-cutting measures to keep their doors open this year, indicating the COVID-19 pandemic’s long-term effects for the industry.

These shifts are already evident seen in the way restaurants design menus, source ingredients, staff floors and kitchens, arrange seating both inside and outside, and interact with third-party delivery services.

Restaurants were among the first businesses to have operations restricted under state COVID-19 orders. They face additional requirements and indoor dining limitations under a recent Michigan Department of Health and Human Services emergency order that came as cold weather could take away valuable outdoor seating. 

According to a survey conducted by the Michigan Restaurant and Lodging Association, 23 percent of Michigan operators out of about 4,000 locations said it is unlikely their restaurant will still be in business six months from now. Nearly 75 percent of restaurant owners in the state reported that they do not expect their sales to return to pre-pandemic levels within the next six months. 

COVID-19 will likely reduce the number of restaurants in operation. The restaurants that do stay open will have more spaced-out seating while they will have to use a more multifaceted approach to reach customers, said James Berg, managing partner at Essence Restaurant Group LLC, which owns The Green Well and Bistro Bella Vita in Grand Rapids.

“Once we get to the 100 percent reopening stage, people are not going to want to sit right next to a stranger like they did a few years ago,” Berg said. “I have to be resilient and agile to accept the fact that things are going to change.” 

Daniel Estrada, CEO of 86 Repairs Inc., which helps restaurants increase efficiency in equipment repairs and maintenance, said the pandemic’s long term effects on restaurants will influence how they structure operations and maintain the ability to adapt.

“One of the things I would take away from the last seven to eight months is this industry is very innovative in the way it operates, and it has to be because the margins are tight,” Estrada said. 

Some restaurant owners have faced a tough choice of closing temporarily instead of staying open, Estrada said. 

“Restaurants that are trying to fight the system or just get upset and angry — that is not going to get you anywhere,” Berg said. “The rules are not changing. I just look at what we can do as opposed to what we can’t do.”

Restaurant owners must balance fixed costs like paying rent with variable costs involving staffing, menu item costs, and methods of food delivery.

“We’ve looked at everything,” said Cindy Schneider, who owns San Chez Bistro and Roam by San Chez in Grand Rapids. “We realized we don’t need as many towels and linens — those deep dives we do into everything we pay for right now is front and center.”

Preparing for winter

State agencies and municipalities have worked with restaurants, bars and downtown shops to alleviate some of the financial strain caused by the pandemic through allowing social districts, refreshment zones and the ability to sell to-go cocktails. But that has all come largely during summer months.

Downtown Grand Rapids Inc. (DGRI) is now accepting applications for a Winter Ready grant program. The initiative is designed to help business owners adapt outdoor operations to colder temperatures. Downtown restaurants, bars and retail establishments can apply for grant funding for materials that could include tents, outdoor heaters, fuel and lighting. 

The city of Grand Rapids recently seeded $200,000 for the program but could potentially add more funding, said Mark Miller, DGRI’s managing director of planning and design. 

“Overall, I think there is a lot of interest because restaurant owners realize they will need to keep some kind of seating expansion for people to dine in,” Miller said. 

Under the program, business owners would be reimbursed up to $15,000 for the costs to install outdoor structures. Additional funding for specific projects that exceed that amount would need Downtown Development Authority approval, Miller said. 

Schneider applied to the grant program to procure outdoor heaters at her restaurants. 

“We don’t see people wanting to sit outside when it’s super cold and snowy,” Schneider said. “But I think it will be used more in the spring because we might be able to open outdoor spaces earlier in the season.”

At The Green Well and Bistro Bella Vita, Berg plans to apply for the program and construct an outdoor space where patrons can have a drink and wait for their table this winter. 

“That would allow people to wait in a socially distanced space so they don’t have to wait in their car and they can have a drink if they want,” Berg said. “We’ll see how it works.”

Takeout, delivery

With recent COVID-19 cases at record highs in Michigan, restaurants are seeing increasing nervousness among patrons, causing businesses to pivot to more takeout and delivery options.

The Green Well and Bistro Bella Vita are not available on third-party food delivery services such as Uber Eats, Grubhub and DoorDash, Berg said. This is to protect the restaurants’ brand and because the delivery services come with a high cost to restaurants and consumers, he said. 

“We work so hard to build our brand and sharing that with a third party is so difficult,” Berg said. “The customer could get the product and it could be an hour later. Our product also doesn’t meet the delivery schedule that some other restaurants do.”

Berg is considering potentially creating a menu of delivery options that is smaller than his restaurants’ regular menus and doing delivery in-house.

“For us, the small sale we could get is not worth giving up our brand for a third party,” Berg said. 

Estrada is seeing an increasing number of restaurants getting creative and making their own channels for delivery rather than relying on a third-party service. These delivery services generally charge restaurants a fee of about 20-30 percent on the order, and also charge the customer a delivery fee. 

“Consumers are starting to get more educated about this and more are ordering right through the restaurant,” he said. “But every restaurant has to figure that out, and there is marketing value of being on those platforms.” 

While the fees make it difficult for restaurants to make money using third-party delivery services, it is also costly to do in-house delivery, said Peter Krupp, co-owner of CDKI Holdings LLC, which owns two Sandy Point Beach House locations, Mexo and the StreetEatsGR food truck court.

“The cost of a driver and a vehicle — it’s a tough one, but we probably will explore it in the near future,” Krupp said. “What we hope is to try to make the pickup as easy as possible. We have curbside pickup so you don’t have to get out of your car.”

San Chez and Roam use Uber Eats and DoorDash, but the restaurants also offer pickup and curbside service. 

“We don’t like paying those fees — they’re a little bit steep — but being on those platforms reminds people we’re still here and you can eat with us,” Schneider said. “It’s necessary to survive right now.”

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