June 24, 2020

Casual-dining CEOs talk lessons learned from COVID-19, look to the future

First Watch’s Tomasso said participating in PPP at first seemed like the answer to a lot of problems, but he soon realized it was not going to be the right solution for his company.

A group of CEOs from the casual-dining sector — Chris Tomasso of First Watch, Jack Gibbons of Front Burner Restaurants, Brad Kaemmer of Paul Martin’s American Grill, Kim Boerema of Iron Hill Brewery, and Jeffrey Goodman of Pitfire Artisan Pizza and Superba Bread, shared insights on how they’ve operated and are continuing to work through the challenges of the pandemic.

During a presentation from host ClearPath Solutions, they addressed participation in the Paycheck Protection Program, converting to takeout and delivery, and adding grocery stores to their business models. They also discussed real estate and supply-chain issues.

Dealing with PPP

First Watch’s Tomasso said participating in PPP at first seemed like the answer to a lot of problems, but he soon realized it was not going to be the right solution for his company. It was a learning experience, he said, something First Watch had never dealt with before. And even though it received a loan, the company ended up returning it instead.

“PPP seemed appealing, and most of us thought we’d checked all of the boxes regarding eligibility, believing we were among the many worthwhile businesses that could benefit from it,” he said. “But once we realized how quickly the funds were depleted, along with the fact that so many other concepts and businesses couldn’t get access to the capital, we ended up returning it.

“Every business has to do what’s right for them, and everyone was trying to do what they needed to do to take care of their employees.”

Ingenuity is the mother of invention

For Goodman, recognizing his customers’ needs for certain products, like flour, yeast, fully- and par-baked breads and even kids’ pizza-making kits, was an answer to declining in-store sales. Seeing that supermarkets were hard-pressed to deliver many items, the restaurant company stepped in to fill the void.

“I think we could all tell tales about items we’ve been selling in our restaurants that we never would have dreamed of before,” Goodman said. “We added fully-baked items, fully-cooked packaged meals, and par-baked items at our pizza restaurants, and even a kids’ pizza-making kit. We sold at least five to 10 of those a day at each restaurant. I share this only to tell you how we incrementally adjusted, and how we’re trying to figure out what we’re going to keep as we move forward.”

He also noted a big change at his upscale casual steakhouse, American Beauty. Reduced to selling takeout and delivery only, the full-service restaurant created an abbreviated menu that included chicken and steak salad bowls and fries. Each week the sales increased.

“The biggest takeaway for us is that our American Beauty restaurant concept did the most business and is now informing all the decisions we make for our other restaurants over the next 18 to 24 months.

Iron Hill’s Boerema stressed the importance of staying on top of real-estate issues. He started reaching out to landlords as soon as his restaurants were impacted by the pandemic. He thinks that because the company has had outstanding relationships with its landlords and was dealing with just 21 restaurants, it was able to develop a plan to get past the crisis.

“Most of the landlords were reasonable,” he said “Some said they would abate three or four months of rent during the shutdown. At the end of the day, no one wanted to put anyone in default, and no one wanted to go into bankruptcy. We’ve never missed a payment and we’ve always been on time, so everyone was willing to work with us.”

None of the CEOs said they had deep troubles with the supply chain, but they did experience some stops and starts, especially at the beginning of the crisis. There could be a few hiccups going forward, however.

Tomasso said some of his mainline distributors reduced routes, so it was sometimes difficult to get deliveries. He credited his supply chain team with doing great work to ensure the restaurants could continue operating. They made substitutions a couple of times, but can now get core products in.

Front Burner’s Gibbons said he’s anticipating a shortage on some beef products during the July Fourth holiday. “We’re hearing supply is adequate, stronger than it was, but we’re also being told that brisket will be a little tight, though hamburger meat availability is going to loosen up.”

Looking to the future

The CEOs said they anticipate a recovery and will use lessons learned to come back strong.

“People are using restaurants in a number of new and different ways,” Goodman said. “Off-premises delivery will continue to be popular. At Pitfire, 7% of our business had already moved to off-premises over the last three years. The pandemic obviously accelerated it.

“We’ve also reduced our menu items from 40+ to 25, and we’re continuing with our pizza-making meal kits for small parties — maybe four to six people. We’re also going to maintain mini-versions of the grocery markets we created. The fact that we’ve been able to experiment and trimmed our menus have really helped with our efficiency and quality.”

To open, or not to open …

With the upscale casual Paul Martin’s American Grill, Kaemmer said the company decided to take a somewhat cautious approach to reopening many of its restaurants, noting that just because you could doesn’t mean you should.

“You need to look at the table inventory and the area you're in,” he said. “Does it make sense to reopen or maybe kick the can down the road until 75% or 100% of your dining room seating can open? I think jumping in too early isn’t necessarily the right decision.”