Planning for a Restaurant Rebound

By September 30, 2021October 7th, 2021Articles

Five Questions with Alec Haesler

Director, Carl Marks Advisors
Q:
Mandating vaccines for customers is on the minds of restaurants right now. Is this a dangerous line to walk? Are there possible benefits?
A:

Like any other COVID restriction, vaccine mandates have been and will continue to be a controversial decision, with potentially visceral reactions. Overall, however, the benefits for restaurants outweigh the costs. Operational stability and consumer confidence are critical factors in the economic recovery of the industry, and this requires complying with federal, state, and local health ordinances while keeping staff safe and on the job. The restaurant industry has seen a dip in foot traffic and sales comps as consumers react to news of the Delta variant.

Anything the industry can do to reassure consumers about dining out will be a net positive in the long run.

Q:
If lockdowns return, how will that impact cash flow and operational plans?
A:

In any situation where a business is facing distress, cash is king. Having the necessary capital to both survive a downturn and invest in re-emergence is what will separate the successful operators from the rest.

The balance to strike is maintaining customer satisfaction while generating positive cash flow and preserving liquidity for future growth.

Based on what we learned in the early days of the pandemic, projections should be more conservative, and operators should model out several different scenarios with an action plan ready to go as the situation evolves. This also means knowing when to effectively leverage past experiences to shore up cash flow (negotiating with vendors, landlords, etc.).

Q:
What do operators and management teams need to be thinking with colder weather potentially requiring more shutdowns?
A:

We have advised clients to conduct a post-mortem assessment of the last 18 months. They need to look at what they know now that they wish they knew previously, what would they do the same, and what would they do differently. They can then translate these findings into an “Action Plan” for future lockdowns and reemergence scenarios, including steps to be taken in advance, steps they should take immediately after, and how they will react to a prolonged lockdown.

A real time example of this situational analysis today is restaurant operator decision making around in-room dining options, as consumer demand fluctuates and staffing challenges persist.

They need to look at what they know now that they wish they knew previously, what would they do the same, and what would they do differently.

Q:
Tied to the impact of COVID, three of the biggest challenges the restaurant industry has faced this year have been supply chains, inflation, and labor. How can restaurants benefit from “early pandemic” learnings in these areas to manage vendor/supplier relations, especially considering the emergence of the Delta variant?
A:

The last few months have seen a significant recovery in consumer demand, followed by a drop-off with the emergence of the Delta variant. If new restrictions are accompanied by a short-term dip in demand, it might actually be helpful. Suppliers would have time to ramp back up while restaurant operators get breathing room to hire, onboard and train new staff and prepare for the holiday season and colder weather months. Of course, a persistent downturn would essentially push things back to where we were in the second half of 2020 and restart the process anew.

In the event of future lockdowns or a prolonged COVID wave, the old playbook should still apply. To-go, delivery, outdoor tables and digital-only menus will continue to be important revenue streams, each requiring further investment.

Now is the time to take the lessons that have been learned and leverage them to create something sustainable in what remains an uncertain world.

Q:
If, as some predict, pandemics may be with us for years to come, how should restaurants retool their business models?
A:

The most important advice is to remain flexible. This can range from investment in to-go, digital, delivery, and ghost kitchens, to rethinking geographic positioning or unit layout, such as less in-room dining, more space for to-go options, or increased outdoor space.

Operators have done a great job innovating over the last 18 months—brainstorming and implementing strategies in record time. Now is the time to take the lessons that have been learned and leverage them to create something sustainable in what remains an uncertain world.

From national chains to independent operators, we have the experience and team to help restaurant groups navigate their challenges successfully.