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Samuel Thoughts

The restaurant Industry

A friend who is in the restaurant industry recently shared a long article with me that outlined how the restaurant industry needs a bailout from congress, and how every individual consumer should shop directly with their favorite restaurants in order to help them survive.  While I understand the sentiment of both ideas, I have some major questions about why the restaurant industry is not changing quicker and I wanted to jot them down below. Additionally I was wondering if this type of situation is part of a larger move away from capitalism. On the surface I can see where people in the restaurant industry are coming from, over the past 10 – 15 years other industries have received bailouts. Which has had the unintended consequence of rich board members and CEO’s at these large companies realizing that they should operate the company’s close to the edge. Privatize all the gains to the select few in the upper management circle, and spread out all the risk/potential losses to the general public because if they operate their companies close to the edge when a disaster or hardships comes along (like in this case with COVID) then they can go running to the publicly elected officials for financial help. They often receive the help because they frame it as; if you don’t help our company and industry than XXX,XXX jobs will be lost because all the companies will quickly fail due to the poor financial situation they have been put in. The companies have typically been put in this precarious situation with large stock buy back programs and vastly inflated upper management salaries and bonuses. So on the surface I do see where everyone in the service and travel industry is coming from, but we are heading down a very dangerous path of privatizing gains and making losses public, which is not capitalism. And I am a huge fan of capitalism, its not perfect, its not 100% fair but its the best system that we have ever developed to equally reward effort. When the power to define winners and losers is concentrated into a small group of people (in this case of bailouts that small group is members of the congress and senate) it inevitably becomes corrupt and less fair than the system of capitalism. Additionally at some point we will devalue our currency enough to cause a huge disaster, its kind of like an earthquake in the since that we will never know exactly when the tipping point comes and our currency starts the unstoppable slide to ruin but if we keep our current trajectory up it definitely will come in our lifetime.

My friends post got me thinking about how much it would suck to live in a world with only fast food options and no cool restaurants. It seems many, many restaurants are in serious jeopardy or closing down during this pandemic and it seems strange that they are not adapting.  Asking for money from congress now, and or asking customers to order directly from restaurants that do not have a smooth or convenient process in place are not long term solutions.  They both could help stop the bleeding for a short period of time, but beyond that life will move on, in business efficiency will almost always win out over time and it would really suck to end up in a society with only fast food options.  The world is so much more fun when there is a unique and diverse set of food and entertainment options to enjoy.  It would really suck if every cool restaurant I enjoy just stuck their head in the sand and pretended like they could get back to business as usual in the next few months, and as a result closed down. Even beyond that, restaurants opening their doors and calling for people to come in to eat during the middle of a pandemic is irresponsible on their part.  It’s obviously a hard situation for them and I’m sure they are just stuck in the old frame of mind that they had, but asking for people to come in and eat and put themselves and everyone in the restaurant at risk just to eat some food is not good for anyone, and not something that we should encourage people to do.  I wanted to reach out and try to learn from your perspective to see if I can change my mind about this scenario.  I’m wondering if I am missing something because this is an industry and area I’m not familiar with, but from my vantage point I don’t understand why restaurants are not changing with the times faster.  We have tried ordering to-go from many different places and it’s probably about 30% of the time we have a good experience.  Obviously it’s hard for restaurants to pivot what their business does but it was very clear to see for the past 3 – 4 months that in a best case we would have to live with this virus and at least some form of open/lockdown/open/reduced capacity situation for at least the next year, so it’s confusing to me why restaurants have not gone to their landlords and renegotiated rent.  Every commercial landlord is literally facing a crisis of their own with an avalanche of people realizing they can work from home again might not need office space. Restaurants have leverage here. If restaurants can’t renegotiate with the landlord successfully, then its better for them to just default on rent because they are in a total emergency and literally don’t need in room dining capacity at all, for at least the next 6 – 8 months.  And even beyond that it’s very possible that business dinners and quick lunches are going to be greatly reduced moving forward as everyone works remotely.  The ground has moved underneath restaurants feet and it is more than likely never coming back 100% to what it had been.  Restaurants need to adapt now and greatly reduce their physical footprint and get an easy way for customers to order their food online. They need to completely avoid using a 3rd party services like grubhub or uber eats, they just need a great simple to use website or app of their own.  Something like Chipotle, or another more local place I’ve seen do this well is Mission taco.  Ordering from Mission taco is a freaking snap, it works flawlessly.  10 minutes after you order you get a text saying your food is being bagged up and will be ready for pickup in 5 minutes.  They have a smooth food handoff process; it is honestly something that will work moving forward.  With this success its seems like they could take the slight risk of keeping their physical locations open even though that is currently a drag on their finances.  But if they are able to keep their in-room dining and we get a vaccine by next spring/summer and then within 4 months or so enough people take it to get us to herd immunity then they will be in great shape to see if in-room dining rebounds.  But more than likely with the current state of our country, not enough people will even trust the vaccine to take it, and we will stumble along in this state of 4 months open, then hot spots develop and we lock down again, then another 4 or 5 months open and back to lockdown in another area again, so in summary it seems like the restaurant industry needs to change their business model in order to survive for the long term.  Asking congress for handouts, and asking consumers to inconvenience themselves is not a long term solution to this major problem they face.

One reply on “The restaurant Industry”

I am not sure, short of adding a streamlined online ordering system, you’d like restaurants to do to pivot more during this time? I don’t think a step like improving their online ordering is mutually exclusive from also needing government support. I think both need to happen.

One way to do this may be to suggest designers and engineers build online ordering systems/apps for their favorite restaurants gratis, because in this moment the restaurant industry doesn’t have the money to get this done/don’t have the skills to do it themselves.

One thing that is true about the industry is how tight their margins are, so if they have food costs and overhead costs, often simply trying to move to a take-out only model won’t sustain them. The return on food sales is so low, compared to the return on booze sales. So another thing that helps (that many cities have done) is okay cocktail and liquor/beer/wine sales with the food. And with a partner who is a chef, I know the love and allure of cooking is zapped when they’re told “adapting” means they need to be cooking to load food into boxes, endlessly. It’s hopeful to think of a day where they can return to normal service — and both pivots in their industry and help from the government can do this.

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