Innovation Or Annihilation: The Choice Restaurants Face As Recovery Revs Up

After nearly three months of closures in most places, the U.S. restaurant industry is preparing for its grand reopening with extensive safety guidelines in place.

Depending on state and local rules and individual eateries’ voluntary actions, wait staff will generally wear masks, tables must be spaced several feet apart, and customers’ temperatures will be taken at the door. In fact, many states are only allowing restaurants to offer sit-down service outdoors.

In their latest discussion with Karen Webster, Ingo Money CEO Drew Edwards and Planters First Bancorp CEO Dan Speight said that in Georgia, where both make their homes, consumers are rediscovering an appetite for dining out again.

“… restaurants are beginning to open, people are going about their business” and dining out again, Speight said.

Edwards, who is based in Atlanta, said restaurants there are reopening with masked wait staff and a lot of customer preference for outdoor dining. And he said that further south, “my wife just came back from the beach in Florida, and she said everything is packed. Nobody in the restaurants have masks on — none of the waiters have masks on. There is just a rash of irrational exuberance down there.”

But that’s not happening nationwide, according to Brian Hassan, co-founder and co-CEO of Kickfin, which works with restaurants on payment solutions, and Stephen DeSousa, CEO at Broadway Hospitality Group, which represents 14 Massachusetts and Rhode Island eateries. They joined the discussion and said that restaurant reopenings in the pandemic-hit Northeast and West Coast are progressing more slowly.

However, panelists agreed that eateries across the country are facing an incredible period of change — with a call toward innovation that roared to life 12 weeks ago and has not yet settled back.

The experts agreed that loans from the U.S. government’s Paycheck Protection Program (PPP) relieved some pain — but not nearly enough, particularly for restaurants that have worked hard to use money the way authorities told them to.

And while all agreed that the industry will recover and even improve, some eateries will be left behind.

“The innovators are the ones that are going to survive,” said Ingo Money’s Edwards, adding that those stuck in the past might not.

What The PPP Made Possible (And What It Didn’t)

The big news for the PPP is that Congress approved changes to the forgiveness-loan program, extending how long businesses have to use the funds from eight weeks to 24 and reducing the share that firms must dedicate to payroll.

But Planters First Bancorp’s Speight said he doesn’t believe the moves will reignite big interest in the loans. He suspects everyone who really wanted or needed one has already applied or made an alternative plan.

“I do think if banks did come back out and push the information that the requirements are not as tough as they were and there’s still money out there, there would be some increased interest,” Speight said. “Unless that happens, I’m not sure we will see much of a change [in demand].”

Broadway Hospitality Group’s DeSousa added that while he believes the PPP was well-intentioned, the government had lots of design problems in how it originally set up the loans’ rules.

DeSousa’s company got a PPP forgiveness loan but held onto the money instead of quickly spending it as the original rules required. He said it made no sense to bring staff back to a restaurant that wasn’t open. The restaurateur figured it was better to let them stay home and collect enhanced unemployment benefits.

But now that the rules have changed and he has 24 weeks to spend the money instead of eight, DeSousa said he plans to use the funds to bring staff back and reopen his restaurants with enhanced safety features.

“Those who did actually follow the guidelines and used up that money during the last three months with closed restaurants now have no chance to use [the funds] to get up and running,” he said. “They paid people who were sitting at home, and now they don’t have a shot. … I think that they were somewhat cheated in the fact that they got that money and used it — and yeah, it’s forgiven, but it didn’t help them whatsoever.”

After all, reopening a restaurant will be an expensive proposition. DeSousa and his leadership team drafted a 24-page reopening rulebook filled with innovations to create a safer dining experience for customers. It entails things like installing plexiglass barriers between dining booths to create an extra feeling of safety.

DeSousa said putting together the funds to make those kinds of changes could take some restaurateurs a long time, which could great delay some reopenings — and prevent others entirely.

The Next Phase Of Dining Out

Panelists agreed that there’s fairly large pent-up demand to dine in restaurants again, and that people will come when restaurants open — but will do so in stages.

DeSousa said the first wave of people who are crowding into some restaurants now are those least worried about coronavirus and most likely to dip back into restaurants again.

“They’re going to go out no matter what,” he said.

The second wave will be more cautious, and DeSousa said the final wave is “a little scared [and] nervous. They’re going to look [for] the place that’s … going over the top” in terms of safety precautions.

Panelists said that going over the top on safety will have to be part of every restaurant’s playbook going forward. Kickfin’s Hassan said his company is already seeing that with its restaurant customers.

“What we are hearing from them is: ‘At the end of the day, what we need to do is have diners in-house here,’” he said. “‘We need to make the upfront fixed cost of investment to maximize the amount of diners that we can legally have inside of our establishment. Let’s use the plexiglass. Let’s measure the tables and add contactless payments and so forth.’ For them, it’s all about maximizing and leveraging whatever they can to stay in business and get through the next few months and hope that normalcy comes very soon.”

Unfortunately, panelists said they believe some restaurants might not have a path to survival. For instance, Ingo Money’s Edwards said small urban bistros that normally have tables a few inches apart might not manage to survive an era where people must sit six feet apart for social distancing reasons.

He said that in his home of Atlanta, “there’s still a lot of hard work for restaurant owners and other businesses that are struggling with small spaces.”

But DeSousa said he believes most restaurants will find a way to overcome — not all of them, but many more than the 75 percent that some predict will fail because of the crisis. He said he thinks some might even learn to serve up something better as a result of all the changes going into place now.

“I know a lot of these people, and I think that they’re going to reinvent themselves for what’s next,” DeSousa said. “And we’re looking forward to that.”