As they reopen their businesses, restaurant operators are trying to cut costs while taking advantage of growth avenues.
Taverna Opa owner Katerina Coumbaros, speaking on a Brixmor webinar, advised her peers to cut costs and renegotiate contracts with vendors. “Reevaluate your credit card processor, your internet, your food costs, your purveyors,” she said. “It’s a financial reset: looking at your numbers again and saying, “Could we cut here without hurting the integrity of the brand?” Taverna Opa, a Florida chain of three Greek restaurants with a full experience that includes belly dancers, is constructing a fourth unit.
Communicate with customers and court them with price cuts and promotions, BrewBurgers managing partner Michael Bacon advised. “Any way we can communicate with our consumer base and get them to be rabid fans will be important. We need to be reaching out to people on an ongoing basis and keeping them in the loop about what we’re doing.”
Taverna Opa is reinvesting in digital advertising, as well as getting the word out the old-fashioned way. “I feel like we’re back to Year One, heading back to hotels and convention centers and letting them know we’re open. They’re slow, but during those peak weekends when they do get those guests in, we want them to know we’re open,” Coumbaros said.
Landlords and fellow retailers are a good source of ideas, said Laureen Sustachek, vice president of lease administration and facilities at First Watch, which operates 300 daytime cafes. “Work with your landlord on what opportunities there are for outdoor seating,” she said. “Not everybody has a patio. Is there something to do on the sidewalk? Is there something to do in the parking lot?”
Outdoor dining will be a big challenge and opportunity for the foreseeable future, Bacon said. His locations are both in Venice, Florida. “How do we make it comfy and cozy when it’s 92 degrees out?” he said. “We’re adding misters and putting games outside for kids so they can play in the grass.”
But restaurant operators in less sunny climates should look beyond outdoor dining when tweaking their business plans, advised Adam Williamowsky, director of restaurants at consulting firm Streetsense, on an ICSC Connect Virtual Series called Reopening for Restaurants. “In half the country it’s going to go away in a few months,” he said. “It’s temporary.”
Now is the time to expand and grab market share if you can, Brewburgers’ Bacon said. “We’re looking to expand our footprint,” he said. “We’re actively working with our landlord to find other spots where our concept would work. There are places that are going to go out of business and it’s unfortunate, but we have to take this opportunity to better our options and look for avenues for expansion.”
Brewburgers added revenue streams like a ghost kitchen and a food truck. Other restaurant operators have launched a buffet of virtual-only brands to provide multiple delivery services from their kitchens. Applebee’s, for example, has a hit with its online-only Neighborhood Wings brand, Williamowsky said.
Pasadena, California-based ghost kitchen operator Kitchen United is bringing in new business by cutting deals with multifamily buildings to deliver food for residents, said Joy Lai, chief marketing officer. The firm, which provides kitchen space to restaurants for delivery-only meals, is also in discussion with landlords of distressed malls and other retail properties that are seeking to activate patios and open-air spaces with food service, she added. “We’re trying to figure out how to use technology to create alternate dining spaces,” she said.
For fast-casual and quick-service restaurants, smaller dining rooms are starting to make a lot sense, Williamowsky, said. The key to success is a well-located pad site with a drive-thru, he said. “Why not downsize and put that capital into even better real estate so you’re not paying as much rent?”
Longstanding consumer habits that guided restaurant real estate decisions have already been broken, said Matthew Bradshaw, founder & managing partner, Durational Capital Management. His company owns the 800-unit restaurant chain Bojangles’. “Your dining room even at peak productivity is used 7 percent of the time,” Bradshaw said. “That’s really expensive real estate. You can deliver a better consumer experience by having smaller format stores.” Bojangles’ will open smaller units in the future with less space dedicated to dining, he said.
Full-service restaurants will likely shift to smaller spaces as fewer patrons congregate at bars to wait for the tables, Williamowsky added. Restaurants that one took 10,000-square-foot spaces could downsize to as small as 4,000 square feet, he said. “The number of dining seats in America is going to shrink tremendously over the next couple of years.” He said some fine-dining restaurants are already developing their own high-end delivery services with upscale touches such as fine china plates.
Even so, the dining room is not going completely away, said Kitchen United’s Lai. “They’ll be more focused on providing that experiential and inviting atmosphere that people look for when they go out.
The full ICSC Connect Virtual Series episode is available here.
By Brannon Boswell