It’s been almost a year since the coronavirus pandemic forced restaurants across the country to change the way they operate. A massive surge in off-premises dining has allowed some restaurants to stay in business, but for many, the transition has been arduous and the future is uncertain.
Rather than set unrealistic goals of returning to business as usual, restaurateurs would be wise to focus on making off-premises sales a sustainable part of their business for the foreseeable future, a panel of independent restaurant operators said during a webinar hosted Feb. 17 by the University of Maryland’s Robert H. Smith School of Business. Restaurant operators from Maryland and Washington, D.C., shared their stories of transition and discussed plans for what comes next.
Off-premises shift requires reinvention
Eateries that already had takeout or delivery programs in place before the pandemic were able to get them up and running faster after the initial shutdown, according to panelists, but the transition required time and money. About half of US casual dining operators said they devoted more resources to expanding the off-premises side of their business since the beginning of the outbreak last March, according to the National Restaurant Association’s State of the Restaurant Industry report.
Janet Yu, owner of Hollywood East in Wheaton, Md., said the restaurant “had a good carryout following” before the pandemic, but keeping it going over the past year has required her to make major changes. Working with a smaller staff to meet increased takeout demand drove Yu to revamp the menu to make it more cost effective, and the restaurant is closed two days a week to give cooks time to prep.
Updating menus, perfecting takeout packaging and figuring out the best way to take and fulfill an influx of off-premises orders can seem almost as complicated as starting a restaurant from scratch.
“Every time we pivot, that’s the same as opening a new concept,” said Josh Phillips, general manager of Espita in Washington, D.C. After adding a grocery operation, off-premises ordering and patio dining at the Mexican restaurant, Phillips and his team took the leap of actually opening an additional concept. The virtual brand — Ghostburger — took about three weeks to launch with a menu of burgers and cheesesteak sandwiches that Espita’s staff prepares and guests can order online.
The ghost kitchen immediately surpassed Phillips’ expectations, pulling in $26,000 in its first week. Thanks to the success of its off-premises business, Espita has been able to bring back 31 employees, and Phillips said he’s “planning on doing Espita side-by-side with Ghostburger forever.”
Another D.C. restaurateur making permanent changes to his business model is Peter Opare, chef and co-owner of Open Crumb in the city’s Anacostia neighborhood. The eatery, which had generated most of its revenue supplying hot bar items to Whole Foods Market, saw sales fall 70% when the pandemic brought a swift end to self-serve prepared foods. Since March, Opare has focused more on takeout and delivery, including a family meal service. Open Crumb has offered family meals for several years, but the recent acquisition of a packaging machine has allowed Opare to scale up, and he plans to launch prepackaged meals soon.
Third-party services take a bite out of the bottom line
The rise in off-premises orders has forced many restaurant operators to rely on third-party delivery services. While these services can help restaurants reach more customers, they are seen as a double-edged sword by many because of the high fees they charge both restaurants and diners.
Opare said that eating the cost of these fees has been a necessary trade-off to growing off-premises business, and recent restrictions put on these charges has helped. Washington, D.C., capped the commission fees that third-party delivery services can take at 15% back in May as an emergency measure to provide relief to the District’s restaurants. Several other cities, counties and states have enacted or are considering similar rules, but the caps are temporary and several panelists pointed out that 15% is still a high price to pay for struggling restaurants.
The panelists agreed that the best way to avoid these fees is to encourage customers to place orders directly with restaurants and opt for takeout rather than delivery. It’s an approach that’s becoming more common — almost three quarters of casual dining operators have added curbside pickup since March, according to the National Restaurant Association.
At Espita, Phillips uses a mobile payment service called GoTab, which charges a 1% fee for online pickup. Eric Shu-Pao Wang, co-founder and partner of D.C. restaurants Toli Moli and Thamee, said he avoids dealing with delivery services by essentially having customers hire their own. He asks customers to use a service called Skip the Line to arrange for someone else to pick up their carry-out order.
Yu said some of her regular customers will often coordinate neighborhood orders, with one person coming to pick up as many as a dozen orders. Hollywood East has been in business 25 years, and loyal customers from the surrounding community have been key to its survival.
Rather than try to expand through third-party partners, Yu said she had to ask a delivery service to take her restaurant off of its website because of issues with customer payments. Restaurateur Jackie Greenbaum, who co-owns Little Coco’s and Bar Charley in Washington, D.C., and Quarry House Tavern in Silver Spring, Md., echoed Yu’s frustration with third-party services. “We used to have huge fights with Postmates and DoorDash,” she said, citing issues with apps listing old menus featuring dishes that hadn’t been offered at the restaurant in years. These types of errors on the part of third-party companies make restaurants look bad because it takes the customer interaction out of their hands, Greenbaum said.
Communication drives community support
Fortunately, more consumers are catching on to the fact that the best way to help their favorite restaurants and make sure their order is handled correctly is to order directly from the restaurant. In fact, 64% of adults said they prefer to order directly through the restaurant, rather than from a third-party service, according to the National Restaurant Association.
Greenbaum said most of her customers opt for pickup, and credited the news media with educating consumers about the drawbacks of third-party services for both diners and restaurants. Opare concurred, explaining that while there will always be some people who prioritize convenience over all else, most of his customers know that ordering takeout directly is “better for us and them.”
All five panelists emphasized the importance of communicating with customers about the issues restaurants are facing, and how patrons’ continued support is essential to helping eateries weather the storm.
“If anybody wants to know how to support their local favorite restaurant, I think the best thing they can do is call…and ask them how they would like to be supported,” Phillips said. “Restaurants are part of communities. When we treat restaurants as a part of a community, the community thrives, the restaurant thrives.”
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