by Zach Drucker
Nothing could have prepared San Francisco restaurant owners to handle the full brunt of COVID-19. Shelter-in-place orders and physical distancing guidelines have completely upended how restaurants do business. With their livelihoods on the line, restaurants have had to adapt on the fly or risk getting left behind.
Learn more about the impact of COVID-19 on San Francisco’s restaurant and food culture by listening to sf.citi’s conversation with Laurie Thomas, Executive Director of the Golden Gate Restaurant Association (GGRA).
WHAT’S AT STAKE FOR SAN FRANCISCO RESTAURANTS?
With or without a global pandemic, running a restaurant is not for the faint of heart. Even in the best of times, operating a restaurant is risky, labor-intensive, and expensive. In order to reach the break-even point, a restaurant must fill at least 80 to 85 percent of its available seats six nights a week—by no means an easy feat.
Adding to the challenges of the restaurant industry at large, restaurateurs in San Francisco face additional hurdles to running a successful business. In San Francisco, restaurateurs struggle to keep up with rising wages, a dwindling labor pool, sky-rocketing rent, and the bureaucratic maze that is the City’s permitting system. It begs the question, how do restaurants survive in San Francisco? The short answer is they do not. Using data from the San Francisco Department of Public Health in 2019, the San Francisco Business Times found that 384 restaurants opened, while 535 closed. With 40 percent more businesses closing than opening last year, the outlook for San Francisco’s restaurant scene was far from rosy even before COVID-19 struck.
Throwing a pandemic into the mix created an even starker reality for San Francisco’s beloved restaurant and food culture. A number of high-profile restaurants have already made the announcement to permanently shut down. Unfortunately, that number is likely to rise. Laurie Thomas, executive director of Golden Gate Restaurant Association (GGRA), estimates that half of San Francisco restaurants could close permanently by the end of 2020. In order to avoid this, a lot must change over the next few months, starting with safely reopening restaurants. As shelter-in-place restrictions begin to ease up, eating out and the way restaurants do business will transform before our eyes.
CREATING NEW REVENUE STREAMS
The COVID-19 pandemic immediately crippled restaurants. Restaurant owners were challenged to balance their budget and prepare for a significant loss in income. Throughout the country, the most common recourse for owners was cutting or furloughing staff. In San Francisco, a recent survey of restaurant owners administered by GGRA found that 47 percent of owners laid off all of their employees.
So when the Paycheck Protection Program (PPP) became available, restaurateurs jumped at the chance to apply for a federal loan. With financial relief, small businesses would be able to pay their employees, rent, and other bills for a few months. However, due to the rules for how the money could be used, restaurateurs found the program to be deeply flawed. That did not stop them from applying for the loan as they hoped the rules would eventually change—they did not.
Restaurateurs were left scrambling to figure out how to pivot their business in order to stay afloat. Fortunately, a time of crisis is also a time that breeds innovation.
Start catering. At the beginning of the pandemic, stories began circulating about restaurants feeding frontline workers. That soon became common practice. From the crisis, nonprofits sprouted up throughout the Bay Area and across the country to connect struggling restaurants with meal orders donated to first responders, low-income families, seniors, and people experiencing homelessness. It became a win-win situation that saw restaurants bring in much-needed revenue while feeding our heroes and addressing the COVID-19-induced rise in food insecurity.
Change the menu. As the relationship between customers and restaurants shifted, restaurateurs quickly realized that they needed to reinvent their menus. That meant moving away from fine dining to fast-casual and to-go options. Others began preparing for the return of customers in the age of COVID-19 by offering a simpler menu with small plates aimed at creating a more affordable, approachable, and efficient experience. Still, other restaurants started to market meal kits—similar to Blue Apron or HelloFresh—to give their patrons the opportunity to create their favorite restaurant meals from the safety of their home.
Sell surplus stock and pantry staples. It made sense for restaurants to pivot to selling groceries. With a decrease in orders, restaurateurs needed to get rid of supplies. Why not make money from it? Following the success restaurateurs had at the beginning of the pandemic selling surplus stock—the same time people were panic-buying and wiping grocery stores clean—restaurants began supplying market essentials. Even after grocery stores fixed their early supply chain issues, customers continued to seek out specialty items from local restaurants such as boxes of locally sourced produce and a $600 box of Wagyu meat.
Embrace takeout. For most restaurateurs, takeout became the go-to way to continue doing business. But the fees associated with delivery did not necessarily lead to profit for restaurants. In a survey of San Francisco restaurant owners conducted by GGRA, the results found that 73 percent of restaurants opened for takeout, but 60 percent of those businesses are losing money doing so.
After San Francisco imposed commission caps on third party deliveries, it became evident that surviving exclusively with a takeout and delivery operation would be almost impossible. Instead, restaurateurs turned to ghost kitchens to conduct their takeout business. These kitchens have no dining area and are meant only to prepare takeout orders. With low set-up fees and the delivery service model embedded right off the bat, it is no wonder that ghost kitchens have become increasingly popular.
With a lot of uncertainty ahead, it is unlikely that restaurant owners will ditch these ideas anytime soon. In fact, business models born during COVID-19 could signal permanent new revenue streams for restaurants.
BRINGING CUSTOMERS BACK (IN)TO RESTAURANTS
On May 12, California Governor Gavin Newsom announced the state’s guidelines for reopening sit-down dining. While he laid out mandatory rules that must be followed by restaurants throughout the state, he left the specific date to reopen dining rooms up to individual counties. For San Francisco, that meant a cautious approach.
When San Francisco restaurants reopen for outdoor seating on June 12, we will become one of the last counties in the state to do so. San Francisco will also be the only county in California to adopt a phased approach to reopening restaurants—indoor dining will not be allowed until July 13 (although this date could change). When asked about the phased approach, Mayor London Breed said, “The last thing we want to do is begin to reopen and get a surge of cases, and have to move back.” In the meantime, San Franciscans can take solace in the simple act of sitting down at a restaurant for the first time in three months.
Take every safety precaution. In the age of COVID-19, implementing safety measures became the number one, two, and three top priorities for restaurants. That clearly came across in the California guidelines to reopening dine-in restaurants. We’ve listed some of the state-mandated safety measures and noticeable changes coming to your favorite restaurants below.
- Train employees on key prevention practices in a restaurant setting. For example, how to carry food and drinks out in a way that minimizes contact.
- Supply employees with Personal Protection Equipment (PPE) (an added cost already placing a burden on restaurants).
- Only make seating available where customers can maintain six feet of distance from one another and employee work stations.
- Provide guests disposable menus and make menus available online. And if not possible, the menus must be properly disinfected after each use.
- Leave nothing on the table for customers. The practice of pre-setting the table should be discontinued.
- Use single-use table items such as condiments, salt, and pepper. And if not possible, condiments, shakers, etc. must be properly disinfected after each use.
- If restaurants use linen tablecloths, they must be removed after each customer use and transported away from the dining area in a sealed bag.
- Places that serve alcohol must remain closed if they do not offer food, but they can reopen if they contract with a vendor to serve food with their alcohol.
- Post signage in highly-visible locations to remind the public that they should practice physical distancing and use face coverings while waiting for take-out and service.
These guidelines are the baseline for restaurants throughout California. While the guidelines override looser decisions made at the county level, they will not supersede stricter local regulations. These include orders made by Mayor Breed to encourage diners to wear face coverings outside until seated, limit patrons to short stints inside for things like ordering at the counter or using the restroom, and cap tables outside to six people or less—unless everyone lives in the same household. While not what people are used to, restaurateurs and city officials cannot take any risks as we start to reopen.
Utilize outside space. Restaurant owners knew that seating capacity would be significantly reduced when restaurants reopened. In looking for an interim solution to create more space, many in the restaurant industry, including GGRA, pushed the idea to capitalize on the space—sidewalks, parking spaces, parklets, and patios—adjacent to restaurants. The idea was a hit and quickly gained steam throughout San Francisco and in other cities across the state. Further support came from studies suggesting COVID-19 is harder to contract outdoors, especially if physical distancing guidelines are followed.
On May 26, Mayor Breed announced the creation of the Shared Spaces program. Through the program, businesses can apply for a free, expedited permit to legally operate and seat patrons in adjacent public spaces. The program cut through what usually amounts to months, if not years, of red tape in hopes of pumping life into the City’s restaurants. The program even included the potential for broader repurposing of entire streets and travel lanes. Since these considerations will impact the function of departments such as Muni, the broader repurposing will be considered on a case-by-case basis.
The decision to expand outside seating will certainly help restaurants stay afloat during these tenuous times. More foot traffic around commercial corridors has the added bonus of encouraging greater spending and attracting customers. All in all, it’s a win-win for the entire block next to restaurants participating in the Shared Spaces program.
Get creative. With their very existence on the line, restaurants might feel the need to go overboard on safety measures or get creative on how they enforce those measures. As San Francisco waits to fully reopen, businesses can look to other parts of the country and world for ideas on how to enforce physical distancing. On the east coast, across Europe, and even in Australia, restaurants have strategically placed mannequins, cardboard cutouts, and blow-up dolls around table seating. On the slightly less creepy side, restaurants in Thailand and Japan have strategically placed non-human shaped objects—including adorable stuffed animals—around the restaurant. In Maryland, a waterfront bar and restaurant gave customers an inner tube to wear. Unsurprisingly, the most common practice employed by restaurants to encourage physical distancing appears to be literal barriers including plexiglass, sheets of plastic, and individual greenhouses.
However, none of the steps restaurants take matters if customers do not feel safe. Regaining the public’s confidence becomes essential to getting people to dine-out again.
MOVING RESTAURANTS FULLY INTO THE 21ST CENTURY
As a collective group, restaurateurs have been slow to embrace and maximize the benefits of technology, which is not surprising for an industry whose business model has not changed for some time. Even with the technology readily available, restaurateurs have not had their hands forced on the matter. Until Now.
Get started with basic improvements. The first step goes without saying: update the restaurant website to reflect accurate details about the business and the menu items. Having an aesthetically pleasing and easy-to-navigate website goes a long way. Restaurants should also take the low barrier step of establishing contactless pay. Implementing safer measures, no matter how small, can only be a benefit during these times.
Invest in digital and social media marketing. Restaurateurs used digital and social media marketing methods before the pandemic, but now these methods have become essential. As the pandemic upended traditional means of getting customers to come into the store, restaurateurs have had to figure out how to remind customers that they were open. Step in social media and targeted ads.
Digital and social media marketing became one of the most powerful tools available to restaurants during this time. With people stuck at home due to the shelter-in-place, screen time trends skyrocketed, creating a perfect storm for restaurants, social media companies, and consumers alike.
Social media has made it easier for restaurateurs to notify their customers of changes or new promotions, as well as connecting with their audience. Restaurants have always been known to foster community. Now with social media, restaurateurs can gauge the needs of their customers better than ever before. They can even provide a behind-the-scenes look at new recipes being made or offer cooking classes via Instagram TV. Soon enough, restaurateurs will be as skilled on social media as they are in the kitchen.
Digitalize the menu. Maintaining a safe environment centers around reducing interaction time with servers and not reusing supplies. While personal kiosks or tablets reduce the interaction time with servers, they still put the customer at risk if they are not properly sanitized after each use. And while single-use menus work fine, they waste a lot of paper. One of the best solutions might be digital menus, either online or through QR codes placed around the restaurant. This enables customers to look at the menu on their own electronic device, even before they sit down to eat.
Technology helps make the overall process of operating a restaurant more efficient, effective, and scalable. As restaurateurs look to take their business to the next level, they need to make tech their best friend.
WE WILL EAT AT RESTAURANTS SOON ENOUGH…HOPEFULLY
In striving to regain pre-COVID-19 normalcy, the restaurant industry has a long, uncertain road ahead. We did not even get to many other challenges facing the industry, including potential lawsuits around customers contracting COVID-19 after eating at restaurants or evictions from missed rent payments. Hopefully, we can come together to keep our restaurants alive. After all, restaurants represent much more than food. In many ways, they are the pillars of our community and culture.