Chain Restaurant Bankruptcies On The Rise
In 2020, ninety-eight bankruptcies were filed by companies with at least $50 million in liabilities year-to-date, the highest bankruptcy rate since 2009. The U.S. arm of Le Pain Quotidien bakery-cafes filed for bankruptcy in Delaware, intending to sell itself for $3 million. The Chapter 11 petition lets Le Pain Quotidien rework debts and execute a sale, with court approval, to Aurify Brands LLC. In late March, the chain closed all of its U.S. locations, and according to chief restructuring officer Steven Flemin, if it wasn’t for the sale, Le Pain Quotidien would have to liquidate its 98 U.S. stores.
Another corporation, FoodFirst Global Restaurants, parent company of the Brio Italian Mediterranean and Bravo Fresh Italian restaurant chains, filed for Chapter 11 bankruptcy in April. According to the company, 71 of its 92 restaurants temporarily closed during the coronavirus pandemic.
Ruby Tuesday, while not filing for bankruptcy, has also reportedly shuttered nearly 150 restaurants since January 2020. As states encourage restaurants to reopen, the pace and volume of sales will determine if those locations remain closed permanently. TGI Fridays has also announced that it will permanently close many of its locations, as the chain suffers its own sales declines related to COVID-19. Toward the start of the crisis, TGI Fridays sales fell quickly, by roughly 80 percent, according to CEO Ray Blanchette. Revenue somewhat recovered after the transition to pickup and delivery. However, revenue is still down about 50%. Most likely, up to 20% of TFI Fridays 386 U.S. locations will be forced to permanently close, according to Blanchette. .
Cities Close Streets To Help Restaurants Recover With Outdoor Seating
Social distancing requirements have prompted many cities to close public roads and allow both residents and restaurants to use the streets for business and recreation. In Washington D.C., Mayor Muriel E. Bowser announced last week that the city will permit restaurants to set up tables in public streets and parking spaces and on sidewalks after filling out a simple application. The city also plans to close some streets to ease pedestrian travel.
Authorities in Oakland, California, have also been closing some streets to through-traffic. “The streets are 25 to 30 percent of any city’s land,” said Ryan Russo, Oakland’s director of transportation. “We need to manage the public realm in a way that meets people’s needs in this moment and in the future.” Similarly, in Tampa, Florida, Mayor Jane Castor has advocated for a “Lift Up Local” campaign that would permit restaurants to set up tables in certain public streets.
This Globetrotting Chef Thinks U.S. Restaurants Will Rebound
Chef Akira Back has high hopes for U.S. restaurants staying busy once reopened, even with social distancing practices in place. Back owns fine-dining restaurants all over the world, including spots in Las Vegas, Los Angeles, Singapore, Jakarta, Bangkok, and Dubai, and he wants American chefs to know things will get better soon. The chef’s restaurants in Vietnam and South Korea recently reopened and are busier than ever with steady streams of customers eager to get back to dining out.
“Everybody asks me what I think about the industry,” Back said. “I honestly think it’s not going to be as bad as everyone is saying it will be. It’s bad for sure. A lot of restaurants will close. But I really think people are going to come out to restaurants,” he said. The chef’s industry friends in South Korea keep telling him that their restaurants are busy and customers are getting comfortable with social distancing in the dining room. “We’re human,” says Back. “We’re going to go out and eat.”
More Restaurants Enter The Grocery Business
Without a playbook, restaurants are taking several approaches to safe and profitable reopening. Most restaurants are considering thermal cameras and plexiglass as part of the plan, and many are stepping up their takeout game by selling groceries. New York restaurant Il Buco Alimentari e Vineria already has a built-in grocery store that’s becoming a model for other restaurants struggling to make it financially viable to reopen at reduced capacity. Fort Defiance bar and café in Red Hook, Brooklyn, recently remade itself into Fort Defiance General Store, and owner St. John Frizell has reduced the 42-seat dining room to just one or two tables inside as well as expanded outdoor seating.
Chef-owner Greg Baxtrom of Brooklyn’s Olmsted repurposed his private dining room into the Olmsted Trading Post, which now stocks around 120 grocery items. Many were served at Baxtrom’s restaurant and some are new products such as mushroom-growing kits. Café Cancale is another example in Chicago, where the dining room has become a new French market called Café Cancale Marche. The market features fresh seafood like shrimp and halibut as well as oyster-shucking kits and high-end pantry items rose vinegar and truffled Dijon mustard. Café Cancale Marche also sells martini kits from its neighboring bar, the Violet Hour.
Peet’s Coffee Owner Planning $2.2 Billion IPO
JAB Holding, the investment firm behind Peet’s Coffee, Panera Bread, and Pret A Manger, is pursuing an initial public offering of its coffee business in an attempt to raise as much as $2.2 billion. According to Dealogic, it is the largest European IPO of 2020 and among the top three globally. JDE Peet’s owns Peet’s Coffee, Jacobs Coffee, Douwe Egberts, Senseo and Tassimo, all of which sell coffee at cafes and grocery stores. Around 80% of JDE Peet’s coffee is sold for at-home consumption, a market that investors are betting will be last for many months due to the coronavirus pandemic. According to research firm Nielsen, single-serve coffee sales at grocery stores increased 16% during the four weeks prior to May 2, while ground coffee sales increased 11%. To capitalize on the growing demand for at-home coffee, Pret A Manger recently launched a range of ground and whole-bean coffees to sell in stores and online.
Cafe chains, on the other hand, have taken a hit due to lockdowns. Starbucks Corp. announced that global same-store sales fell 10% in its second quarter. The company has begun reopening numerous U.S. stores exclusively for drive-through, delivery, and pickup sales. Peet’s has also started reopening stores for pick-up at the door.
Uber In Talks to Buy GrubHub As Meal Delivery Soars
The top three U.S. restaurant food delivery services are DoorDash, GrubHub, and UberEats. Together, they dominate about 80 percent of the market, while Postmates, Caviar, and smaller third-party delivery companies make up the rest. While DoorDash is currently the market leader, #3 Uber has made an offer to buy #2 GrubHub, a merger that would dominate 55 percent of the market, leaving DoorDash with only about 35 percent of the market, according to research firm Wedbush Securities.
Shortly after the news of a possible merger broke, GrubHub stock soared 35 percent. Negotiations between the two companies may have been accelerated as a result of Uber’s ride-sharing business choking up due to decreased travel amid the coronavirus. Currently, UberEats is the company’s only service experiencing higher sales year-over-year with a 53 percent increase in the first quarter of 2020. Get the full story at The Wall Street Journal here (subscription required) or at CNN here.
Four Top Chefs Dish On The Future Of Restaurants
Four world-famous chefs, René Redzepi of Noma in Copenhagen, Dan Barber of Blue Hill at Stone Barns in New York, Kwame Onwuachi of Kith/Kin in Washington D.C., and Jessica Koslow of Sqirl in Los Angeles, all sat down with Howie Kahn from the Wall Street Journal Magazine to discuss the future of restaurants in the wake of the coronavirus pandemic.
All agreed that widespread shutdowns have exposed deep-seated vulnerabilities in the independent restaurant business. The pandemic has also put the spotlight on restaurants as cornerstones of local food systems, economies, and communities. Barber imagined a future where those food systems evolved beyond the current farm-to-table relationship. Despite supplier challenges, Redzepi explained that his main focus is on re-connecting with the local community in whatever way is possible. Koslow asked, “how do we create community outside of our restaurant?” and Onwuachi speculated that takeout would eventually become a more accepted way of experiencing a restaurant at home, despite the challenges and limitations of a take-home box.
Architects Reconfigure Boston Dining Rooms, Release Design Plans
Acclaimed Boston restaurateurs Jody Adams, Jamie Bissonnette, and Ken Oringer participated in a case study with the MASS Design Group, an architecture firm that has previously designed socially distant dining rooms in Haiti and Liberia. MASS released a set of open source design plans that show restaurateurs how to reconfigure their dining rooms to comply with social distancing requirements. The diagrams depict the flow of staff, guests, food, and air, incorporating design ideas for key “exchange zones” such as delivery, storage, cooking, customer hand-off, and disposal. According to executive director, Michael Murphy, the goal of reconfiguration is to show how “restaurants can reclaim their role in the public realm.”
McDonald’s Distributes Reopening Requirements To Franchisees
Prior to reopening its restaurant, McDonald’s Corp. sent hundreds of its U.S. franchisees requirements for enforcing cleaning and social distancing rules. Changes to current procedures include mandates to clean digital kiosks after every order, clean bathrooms every half-hour, and either close public soda fountains or have a staff member monitor them. The company’s 59-page dine-in reopening guide also includes new equipment recommendations, such as a $310 automatic towel dispenser and a $718 touchless sink. The guide even mentions foot-pulls that let customers open bathroom doors without using their hands.
McDonald’s employees are required to wear masks and gloves, and according to the guide, face shields in any jurisdiction that requires them. According to hundreds of U.S. owners, the new expenses could create logistical problems, but McDonald’s management stated that it will wait for franchisees to be ready before reopening all 14,000 of its U.S. locations. Reopening will happen slowly in collaboration with local authorities, and so far only some U.S. locations have resumed dine-in service.
New Bills Could Help Some Independent Restaurants
When it comes to the long-lasting financial effects of the coronavirus, independent restaurants are in a uniquely vulnerable position. Safety restrictions such as social distancing of six feet, limited-size gatherings, and wearing masks cut to heart of the dining business model as they restrict sales volume and compromise the enjoyment of eating out. Although Congress passed the $670 billion Paycheck Protection Program (PPP), it contains mandates that could hurt, rather than help, independent restaurants, which make up 70% of all U.S. restaurants and are defined as those that operate 20 or fewer locations under one name.
For relief, two restaurant lobby groups, the National Restaurant Association and the Independent Restaurant Coalition, have lobbied Congress for weeks. Their efforts have resulted in two new bills in the House, which could be voted on next week. One is the Paycheck Protection Flexibility Act, which extends the period businesses can use their funds past the eight-week restriction the PPP demands and also eases restrictions on non-payroll use. The other bill, called Real Economic Support That Acknowledges Unique Restaurant Assistance Needed (the Restaurant Act), offers $120 million and targets small restaurants.
These bills offer a lifeline to owners of popular restaurants like Naomi Pomeroy, James Beard–Award winning chef at Beast in Portland, Oregon. The extra money and flexibility in using it, says Pomeroy, will allow her to re-invent her fine-dining bistro and allow her to weather the downturn until she “can start to really figure out a game plan that’s going to make sense and push us forward.”
