Delivery, Takeout, or Complete Closure? Caring for People Is the Only Viable Business Strategy
Charles Bililies, founder and CEO of San Francisco’s Souvla restaurants, came up with a plan. He implemented a system loosely based on the DEFCON alert system used by the U.S. armed forces, a rating of 5 through 1 (1 being the highest) in response to various scenarios. This way, amid news of the growing coronavirus pandemic, he and his leadership team could quickly assess what to do as the situation evolved.
A few weeks ago, he made the call to close the dining rooms in his four San Francisco restaurants, the equivalent of a DEFCON 4. But in the span of about 36 hours, he and his team arrived at their version of DEFCON 1, a complete shutdown.
After several weeks of life inside a global pandemic—with what looks to be many more weeks ahead—restaurant operators are facing more tough decisions: Stay open indefinitely with a modified business model, or close and hope to reopen on the other side.
The nature of this disaster is unprecedented. Previous rules don’t seem to apply: businesses that did robust takeout and delivery saw drop-offs in business; others that never offered the option saw eager adoption after quickly introducing the model.
Pre-pandemic, about 60 percent of Souvla’s business at its four physical locations and one virtual kitchen was takeout and delivery. After the company closed its dining rooms, a decision that then became a mandate from the city, Bililies expected to see similar numbers. Instead, he said, off-premises business dropped overnight by about 50 percent.
“In non-Covid-19 scenarios, our delivery numbers and to-go numbers are remarkably consistent,” he said. “We started to run those numbers and the business would have been, in short order, operating at a considerable loss.”
Then, he said, there was the physical safety of his employees, most of whom commuted to work via public transit. “We need to do everything possible to be a part of the solution here to help flatten this curve. If that meant shutting down our restaurants, I put the health and safety of all of the women and men that work at Souvla above everything else.”
Chef Danny Grant is chef/partner at What If...Syndicate, a four-concept restaurant group based in Chicago. As conditions changed quickly, the restaurants pivoted to a takeout and delivery-only model in about 24 hours— something that they previously hadn’t offered.
Initial demand was high. On the first night, he said, they did four times the amount of sales they expected. “We were sold out by 8 p.m.,” he said. The company decided to match orders with gift cards in the same amount in an effort to encourage customers to return to the dining rooms when it’s safe. (Grant said he’s not worried about their ability to honor the gift cards. “I think there’s going to be a balance of supporting and understanding,” he said. “Not every single person is going to show up on the first day we reopen.”)
A couple weeks in, business has started to fall into more traditional patterns: a slow start on Monday with increased demand through the week. Weekends are very busy. Still, he’s planning to stay open seven days per week, mainly to support his salaried staff. “The only reason we really would [adjust operating schedule] is to save on labor, but at this point we’re using pretty much all of our salaried employees, so our labor is more or less a fixed rate,” he said.
In fact, supporting his staff is why Grant says the restaurants chose to stay open in the first place. “We’re not looking to make any money at this point. We’re in survival mode,” he said. The restaurants are also offering care packages of food to staff, many of whom were furloughed.
Scott Landers formerly led New York-based Dig’s delivery efforts now works as a consultant on off-premise strategies. His number-one piece of advice to a business navigating an operational shift: leverage your core asset. It’s the only way a brand new business strategy will work long term.
One of Landers’s clients is Tampa, Florida-based Naked Farmer. The restaurant, an upscale “chef-driven fast-fine concept,” was scheduled to open on April 1. Instead, it opened early, with a completely different strategy.
“Right now we’ve built out an $800,000 delivery kitchen, basically,” said Naked Farmer founder Jordan Johnson, since plans for a 68-seat dining room are on hold indefinitely.
Instead, Johnson launched the Naked Farmer’s Market, leveraging the farmer supply chain that he had spent the last eight months building. Customers can order a box of fresh vegetables delivered to their homes via Uber Eats or orders placed on the restaurant's own website.
Johnson said he knows timing worked in his favor since he hadn’t yet hired or trained restaurant staff. Plus, he said, demand for the farm-fresh produce outpaced initial supply in a market where access to these foods was more challenging than some other parts of the country. He plans to open the restaurant eventually, now with a revised strategy that includes the Naked Farmer’s Market. “There’s a business model here. We didn’t think about it initially, but now we’re seeing it. We’re learning that there is a market here.”
The decision to stay open or modify operations is as much personal as it is financial. No responsible business owner wants to put the safety and security of their team in jeopardy, and none take the decision lightly. Operators who choose to keep doors open said they feel deep responsibility to the communities they serve and the employees and families they support.
On March 25, Pok Pok’s Andy Ricker announced he would suspend operations at his Portland restaurants through the duration of the pandemic. “I did not make this decision with [a] heavy heart,” he wrote in an Instagram post. “I made it with determination and a sense of urgency and with regret I did not have the strength to do so more quickly.”
Circumstances are changing quickly as the situation evolves. Operators rely on each other for support and information, and just because a business is open today doesn’t mean it’ll stay open tomorrow.
“I was on the phone with another chef this morning,” said Bililies. “He’s reopening his restaurant and doing a modified contactless pickup. I explained my rationale and he saw that side of it as well. There’s no right or wrong here. And we’re all navigating this in different ways. I think that we’re going to continue to evolve.”