Retail

Restaurants Warn Of Higher Prices To Offset Reduced Capacity

The Increased Costs Of Eating Out

While it’s become increasingly obvious that many of the restaurants that have closed during the COVID-19 pandemic might never come back, it may be surprising how many of what are seen as the world's best restaurants may end up making that gone-forever list. Fat Rice, a Chicago establishment with a James Beard-award-winning chef that was in the running for a Michelin Star or two, has already announced that it will never again reopen as a restaurant. Instead, it's converting into a new business called the Fat Rice Mart, selling Asian and Portuguese pantry items, wine and beer, and meal kits with ingredients and recipes so customers can make their own Fat Rice dishes at home. 

“The restaurant for the foreseeable future is dead,” Abe Conlon, Fat Rice chef-owner, told The New York Times. “We need to face the reality that we can’t exist in the future as it looks now. People are not going to feel comfortable being in close quarters or being in a cramped dining room.” 

Meanwhile, Eleven Madison Park, ranked as New York's best restaurant in 2017, has a very uncertain future, as its chef/owner Daniel Humm told Bloomberg that reopening simply might not be possible. He said it would cost in the millions of dollars to get up and running, between cleaning, bringing back staff and getting equipment ready to use. “I work with fancy equipment in a big space," Humm said. "I want to continue to cook with the most beautiful and precious ingredients in a creative way, but at the same time, it needs to make sense.”

That’s especially challenging given the slew of new requirements, limitations and restrictions restaurants are facing. New equipment like sneeze guards, disposable menus and single-serve condiments will drive up costs, while rules that eateries operate at 25 percent or 50 percent capacity to respect social distancing will sharply decrease revenues. 

Given the thin margins that even extremely expensive restaurants operate on, Humm is far from the only celebrity chef who believes the new guidelines are simply incompatible with today’s restaurants.

“This is getting scary now,” Beard-award-winning chef and New Orleans restaurateur Nina Compton, who owns two eateries, told The Washington Post. “If we reopen at 50 percent capacity, that’s 35 people we can have in each restaurant," she said. "At most, that’s 1.5 turns per table. Could we make it on that? Maybe.” 

Compton added that it's impossible to know what consumer demand will look like when limited reopenings begin. Will dining behind plexiglass sheets and being served by masked waiters in half-full venues depress business – particularly among customers under economic stress? Eleven Madison Park's Humm points out that restaurant prices are almost certain to rise at places that stay open, simply as a matter of math. If restaurants can only serve half of the customers they used to, while fixed costs like utilities, rent and food remain the same, raising prices is one of the few paths available for making up the shortfall.  

But Jennifer Petty, co-owner of Seattle’s Eden Hill, explained to Eater that simply raising prices won’t even help much. At 50 percent capacity, she noted, there is simply no sustainable way to reopen the business. 

“We may reopen Eden Hill Provisions during Phase Two (of government reopening plans), but can’t envision reopening Eden Hill Restaurant at 50 percent capacity," she said. "We rely so heavily on it being full on Fridays and Saturdays for at least one turn to be profitable; the remainder of the week is break even at best. Without compromising the experience or drastically changing the concept, we don’t see it working." 

And what it would take to make it work probably isn’t going to appear in the market anytime soon, Edouardo Jordan, chef and owner of the acclaimed Southern-influenced Ravenna restaurant in Seattle, noted in his conversation with Eater.

“I’ll only reopen [for dine-in service] if all my expenses are 75 percent off, 100 percent of rent is free and 100 percent of my staff is comfortable with coming back with the understanding that they would be at 50 percent the hours they were at before,” he said. “Simple math, right?” 

Unfortunately not – which means that for many restaurateurs, the mathematics will prove too complicated to ever reopen their doors, or at least to operate in quite the same way they were before. The question to explore is what comes next: Some, like Seattle’s Jennifer Petty and Chicago’s Abe Conlon, are pivoting away from restaurants and toward provision shops, where consumers can buy some of the items from their former eateries to use at home. Meal kits have also proven to be a popular pivot for restaurants whose offerings might not be an ideal fit for carryout.  

But much of the restaurant market is doing what Eleven Madison Park’s chef/owner Humm is doing – trying to figure out the next steps in a world where everyone still has to eat, but the way it's dished up has to change. 

“Restaurants will need to charge more money," Humm predicted. "It will be slow, and there won’t be jobs for everybody. But I am hopeful we will come back.”

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