The managers of Brazilian grill chain Fogo de Chão thought they had seen the worst.
Earlier this year, as seemingly every hour brought news of another city or state that was suddenly shutting down due to the pandemic, executives switched from email to the WhatsApp messaging system to communicate in real time with the general managers of their 43 scattered American restaurants. around the country.
“The first time we heard a state issue a stay at home order, we thought, ‘What does that mean? What are they talking about? Said Barry McGowan, Managing Director of Fogo de Chão. “Then it was like dominoes falling. Boom. Boom. Boom.”
Communication with suppliers was uncertain. Trucks full of food arrived at restaurants that had been closed.
The restaurant chain created a take out menu in just three days. He contacted the landlords to negotiate breaks on his leases. And since the order to stay closed was lifted, he spent around $ 1 million renting tents and other equipment to set up outdoor dining at several of his restaurants where indoor dining. were still limited.
For a while it worked. Diners flocked to the restaurants and spent lavishly. Before the pandemic, Fogo de Chão sold around 500 top-quality steaks, like Wagyu and Tomahawk rib eye, per week. This climbed to 1,300 per week in July.
But with the upsurge in cases of the virus across the country, new restrictions have been placed on indoor and outdoor dining, although they are far from uniform (no dining inside and out). Philadelphia, Chicago and New York, curfew inside New Jersey and Massachusetts, no dining restaurant at all in much of California). For large restaurant chains like Fogo de Chão, the constantly evolving patchwork of rules poses a particular logistical challenge: How do you offer a company-wide approach when different locations manage their own specific regulations?
“What you have is a huge deviation from the norm in how a chain operates restaurants in different states, which then takes a whole bunch of processes and management to make sure you you comply with the regulations, ”said Sean Ryan, a partner at Kearney, a consulting firm. “It’s expensive and takes time.”
Restaurants should work with local health departments who give specific advice on what to do to prevent the spread of the virus. Some require tents or outdoor dining structures that have no more than two walls to provide adequate ventilation. Others want all three sides of the tents to remain open.
And just as they did at the start of the pandemic, restaurants are adapting quickly again, moving deliveries of food, alcohol, linens and other goods from temporarily closed places to those that do. remain open. Some do the same with the staff.
“Restaurant owners are in a state of desperation,” said Phil Kafarakis, industry analyst and former director of innovation for the National Restaurant Association. “People are in total panic right now and are starting to take drastic measures to continue to survive.”
The restaurant industry has been hit by the coronavirus pandemic this year. According to some estimates, almost 110,000 restaurants closed permanently and 2.1 million employees remained unemployed in October. Several large, upscale, casual dining chains like Chuck E. Cheese, California Pizza Kitchen, and some Il Mulino restaurants have gone bankrupt.
The new restrictions come at a difficult time, as the holiday season is typically the busiest time in the industry.
Maggiano’s Little Italy chain, which operates more than 50 restaurants in the United States, is said to be typically packed with corporate and family celebrations this time of year.
Business and Economy
But due to various dining restrictions, 2020 would be different, Wall Street analysts warned in September, executives at Brinker International, which owns Maggiano’s and Chili’s Grill and Bar. “We currently anticipate that we won’t see the same similar environment play out,” said Joe Taylor, Brinker’s chief financial officer. This week, Brinker withdrew its forecast for the quarter as several of its sites were once again closed.
Yet, in many ways, the big restaurant chains are better positioned for the new restrictions than they were in the spring.
“There were so many unknown variables in the spring,” said RJ Hottovy, analyst at consulting firm Aaron Allen & Associates. “This time, the restaurateurs had put in place a specific game plan.”
Left with empty dining rooms, casual, upscale restaurant chains quickly took hold to either reinforce themselves or offer take-out options the first time around. They’ve started curbside pickup and signed up with food delivery partners like DoorDash and Grubhub. Some states have relaxed alcohol laws, allowing chains to offer take-out alcoholic beverages. And when restaurants were allowed to serve dinners again, with restrictions, many tents rented out or opened patios to create outdoor seating.
But chains have seen patchy performance among their restaurants.
By the end of the summer, Olive Garden restaurants were averaging $ 70,000 in sales per week. But sales at the chain’s superstar restaurant in Times Square in New York City, which only offered take-out during the summer, fell to $ 17,500 per week, from around $ 288,000 per week, executives at Darden Restaurants, said. which owns Olive Garden, LongHorn Steakhouse and The Capital Grille, told Wall Street analysts in September.
Darden’s stock, along with that of many catering companies, has rebounded this fall and winter, in part thanks to the success many have had in offering take-out or alfresco dining, as well as the hope that customers will return en masse to the restaurant once vaccinated. are becoming widely available in the United States.
“Restaurant chains, like humans, are incredibly adaptable entities,” said Ryan of Kearney.
Indeed, just a few weeks ago, caipirinhas were flowing freely and $ 135 Wagyu rib eye steaks sizzling as they were delivered to diners in a tent in Beverly Hills, Fogo de Chão. The location was the chain’s busiest, but many of its other restaurants also rebounded strongly.
At the start of November, the chain, which was based in Plano, Texas, and which was acquired in 2018 by investment firm Rhone Capital, was making 93% of the income it had made at the same time last year and had rehired about 90%. employees who had been laid off earlier in the year. Sixteen of its restaurants, largely located in states with fewer dining restrictions, had higher sales than last year.
But as states put new restrictions in place, Fogo de Chão returned to his previous playbook. He’s hauling food and a few weeks ago he contacted the owners again to negotiate the rental payments.
The once bustling Beverly Hills tent is empty after health officials shut down outdoor restaurants in Los Angeles County for three weeks. About 2,300 miles away, in a Detroit suburb, another tent is empty. Fogo de Chão had to remove three sides of the tent, per local health regulations, and now must find a way to add barriers to block the freezing winds.
But inside a cozy “Winter Wonderland” themed tent in Rosemont, Ill., A Chicago suburb where restaurants only need two open side panels, patrons can enjoy cocktails from shrimp and sip bottles of South American wine every night. they sit around heaters and under twinkling lights with Christmas music streaming through the speakers.
In an effort to keep as many workers employed as possible, Fogo de Chão is proposing to move some employees from temporarily closed locations to booming ones, including those in Las Vegas, Orlando, Dallas and Rosemont.
“Our goal is to keep our employees employed while on vacation,” said Mr. McGowan. “We hope that in January we will be able to open our patios and our tents in the parking lots again. And then the vaccine will come and hopefully by March or April we will be back to sort of normal.