Restaurants Get Ready
Next to the travel industry no business sector in Minnesota has been as hard hit as restaurants and bars, closed by government order on March 17, nearly six weeks ago. I’ve spent the last week in off-the-record conversations with people throughout the industry and government gleaning what the new normal might look like.
- Most in the business believe they will be open by June 1. Outdoor patios may open sooner, though few restaurants would restart just to provide service to a tiny minority of their tables.
- When restaurants do reopen they expect to be subject to specific hygiene and crowding protocols that are likely to result in a 50 percent loss of capacity for an indefinite period of time. Diners may prefer the reassuring smell of bleach to typical kitchen scents. Look for restaurants to continue to promote an enhanced takeout capability to fill the eat-in void.
- Bars expect to be subject to the strictest regs, potentially reducing their capacity to as little as a third of normal.
The challenge of operating at half capacity is expected to test several longstanding aspects of local dining culture:
- No Reservations: This is not a reservations town. Most restaurants don’t take them and those that do mostly fill a small fraction of tables with them. Restaurants love overflow crowds at their bars and the buzz a lot of waiting diners generate. This will change. Crowding of unseated diners is expected to be a huge consumer turnoff if not be forbidden by authorities. Reservations are the likely solution.
- No Flexibility: Almost all local diners prefer an 11:30 a.m. to noon lunch start and dinner between 6 and 7:30 p.m. For restaurants to even approach moderate sales volumes they will need to half-fill the restaurant more than once each meal period.
The rumor mill is hyperactive with the names of restaurants and restaurant companies that will choose not to open at anything short of normal operations, which means defacto closings. Most of that list will come from restaurants that have been locked since March 17. Some of the rumored names would surprise you. Certain types of restaurants are poorly positioned to thrive in this shakeout:
- Investor-owned restaurants. Glam spots with high rents bankrolled by monied locals with no strong connection to their staff or customers will walk away fastest.
- Corporate-owned restaurants. Some will thrive due to deeper pockets or access to debt to ride out tough times. Many were adept at takeout prior to the pandemic. But specific weak outlets or brands not operating in the black prior to the pandemic will not dig deeper holes.
- Owner-operated restaurant groups with substantial debt or poor cash flow. Kim Bartmann’s group is a frequent used example of this type.
- Downtown restaurants and restaurants that rely on corporate spending. A subset of workers avoiding downtowns for an extended period of time, depressed business travel, and reduced corporate spend is a difficult equation to overcome.
- Food Halls. These high-volume spots moving large numbers of people through close quarters will face challenges thriving in pandemic safety codes that limit their volume.
Restaurants that will return and thrive in the vacuum include:
- Operators who own their buildings. The flexibility of not having to pay rent is a fantastic ace-in-the-hole right now for restaurants. Think Good Day Café in Golden Valley.
- Owner-operators involved in daily operations and close to employees and customers: The most committed sector of the business, these operators will get creative to keep the lights on. Think Tim Niver’s trio of eateries (Saint Dinette and the two Mucci’s) or Ann Kim’s restaurants (Pizzeria Lola, Young Joni).
- Quick-serve restaurants that were built with a hybrid model like Yum! or World Street Kitchen.
- Low-overhead operators like food trucks.
- Restaurants with multiple revenue streams such as catering.
- Private dining. Typically in recessions, private group dining is a frill. But some expect these spaces to be in high demand for small work or family groups who place a premium on being walled-off for safety.
And two big wild cards:
- Parasole Restaurants. The operator of Manny’s, Good Earth, Pittsburgh Blue et al saw a company sale fall through during the pandemic. Its founders are in their 80s and many of the restaurants are rumored to be struggling, carried by the exceptional profitability of Manny’s. Given the expected difficulty selling restaurants well into 2021, everyone’s eye will be on Parasole in May to see what reopens.
- D’Amico Restaurants. Another storied local group (Lurcat, Campiello, D’Amico & Sons) with aging founders that has ceded ground to more modern operators in recent years. How committed are the D’Amicos to maintaining a large presence in the Twin Cities?