As restaurants across the U.S. begin to reopen, restaurateurs are switching business models to stay alive as restrictions such as capacity limitations impact profitability. In Washington, D.C., Christianne Ricchi of Ristorante i Ricchi launched the I Ricchi Food Club with a four-course Tuscan dinner to be ordered ahead and picked up at the restaurant. Customers who sign up for a four week subscription get a 20% discount, and Ricchi includes a candle, optional wine pairing, and tasting notes to help recreate the restaurant experience at home.
Greg Baxtrom decided to close his Brooklyn restaurant Olmsted until there is a coronavirus vaccine, turning the main dining room into a food bank and the private dining room into the Olmsted Trading Post. “We sell about 200 items,” says Baxtrom, “many of which people can’t get at their regular grocery store, plus prepared foods from our menu.” The chef is adding delivery and expanding the grocery operation to keep it going after Olmsted reopens. Baltimore’s Alma Cocina Latina also went through a permanent transformation. After partnering with Mera Kitchen Collective and Jose Andres’ World Central Kitchen, chef-owner Irena Stein converted the Venezuelan restaurant into a relief kitchen. Stein serves 3,000 meals a week, and “I am going to continue the relief kitchen going forward,” she says, “operating it during the day to feed communities in need, and opening as Alma Cocina Latina only in the evening.”
In San Francisco, Peter Hemsley decided to completely remodel his art gallery restaurant Palette, separating the bar from the dining room and eliminating a retail space in favor of online sales. “Going forward, I see the gallery gaining a reputation as a place to hang out with a drink and bar food,” says Hemsley.
As delivery becomes critical to the struggling restaurant industry, restaurateurs and regulators are scrutinizing high delivery fees. Major cities like New York, Chicago, Los Angeles, San Francisco, and Seattle put a cap on delivery app fees until lockdowns were lifted. Now that states are reopening but restaurants are still operating at reduced capacity, delivery fees are taking a big chunk of their bottom line. In Columbus Ohio, Pierogi Mountain’s owner Matt Majesky primarily used Grubhub until he calculated that Grubhub was collecting more than 40 percent of his average order. Grubhub spokesman Peter Land said Mr. Majesky’s fees were higher than usual because Majesky agreed to take part in marketing programs that increased the restaurant’s visibility on the app. In Denver, owner of Freshcraft restaurant Erik Riggs sued Grubhub for creating a website for his restaurant without consent and labeling the restaurant as closed on the site or “not taking online orders” when this was not true.
Grubhub has since removed the language about similar restaurants “not taking online orders,” but these deceptive practices sting at a time when analysts predict that 85% of independent restaurants will ultimately close as a result of pandemic lockdowns. At the end of May, restaurant spending fell by about 35% from a year earlier, while delivery service revenue rose by nearly 140%, according to data from M Science. For most restaurants, the fixed costs of labor, food, and rent swallow about 90% of total revenues. With that business model, many restaurateurs say that delivery service fees of 20 to 30% on each order are simply unsustainable. Even with fee caps, a recent survey of San Francisco restaurateurs found that 62% percent were losing money on delivery and takeout.
Just Eat Takeaway.com and Grubhub are combining to create the largest restaurant delivery company outside of China. The $7.3 billion deal meant that Amsterdam-based Just Eat Takeaway.com snatched Grubhub away from Uber after talks of teaming Uber Eats with Grubhub. The companies expect to close the deal in the first quarter of 2021 with the new company headquartered in Amsterdam in addition to U.S. headquarters in Chicago. In 2019, Just Eat Takeaway.com and Grubhub processed 593 million restaurant orders, gathering about 70 million users worldwide.
Just Eat Takeaway.com stated they will get 100% of Grubhub’s shares at an implied value of $75.15 per share. Last Wednesday, Grubhub shares closed at $59.05. If Uber had bought Grubhub, the companies would have had control over most of the U.S. food delivery business, causing regulatory issues, whereas Just Eat Takeaway.com does not operate in the U.S., easing restrictions.
Hundreds of Russian restaurant owners and chefs have stripped down for social media photos protesting restaurant closures as other businesses open back up. “We are naked because we are left with nothing,” said Arthur Galaychyuk, owner of the Relab Family bar chain in Kazan, whose 20 employees took part in the campaign. Russia is still in the process of reopening and so far hair salons, shopping malls, book stores, food stores and pharmacies have been permitted to operate. But restaurants have been left waiting for approval.
Over the next 18 months, Starbucks plans to close 400 locations and ramp up its contactless services, including curbside pickup, drive-thru, and mobile ordering. The move comes as COVID-19 influences consumer behavior and buying decisions. “As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers,” said Starbucks CEO Kevin Johnson. .
Juneteenth commemorates the date of June 19, 1865 when enslaved Africans in Galveston, Texas, learned from Union General Gordon Granger that they were finally free, two years after Abraham Lincoln signed the Emancipation Proclamation. Often considered African-Americans’ independence day, this year’s Juneteenth comes amid the coronavirus pandemic and a resurgence of the Black Lives Matter movement fueled by police brutality. While social distancing may alter the holiday, black chefs around the country look forward to reaffirming the importance of this historic day.
Eduardo Jordan, the James Beard award-winning chef-owner of JuneBaby, Lucinda and Salare restaurants in Seattle, says that JuneBaby’s mission has always been to educate diners about the foodways of the African diaspora. Since the pandemic began, Jordan has been feeding essential workers from his restaurants, and he’ll continue that mission well past the June 19 holiday.
Danielle Bell operates the L.A. catering company and dinner series called de Porres, and she is making her annual Juneteenth celebration different this year by sending out a newsletter menu from which customers can place orders for barbecue and other traditional foods. Barbecues are central to Juneteenth celebrations, and those traditions live on regardless of social distancing. “It’s different from any other cookout,” said Jonny Rhodes, the owner of Houston’s Indigo restaurant in Trinity Gardens, a mostly black and Latino neighborhood. “It’s a time of collective freedom.” Indigo transformed into a grocery store to stay afloat during the pandemic, and this Juneteenth, Rhodes remains focused on the importance of his primary business goal: ownership of the 800-square-foot building that houses his business, as well as six acres outside of the city.
To help restaurants recovering from the pandemic, New York City announced a new program that will give $3 million to 100 small restaurants in 27 neighborhoods, including Bed-Stuy, East Harlem, Mott Haven, Jamaica, and Stapleton on Staten Island. Eligible restaurants can get up to $30,000 specifically for helping with payroll costs. Restaurants that take advantage of the funds are required to pay workers a minimum of $20 per hour before tips until the end the program. Restaurants must also provide workers with longterm financial support and offer free meals to members of the community suffering disproportionately from COVID-19 such as high-risk seniors and low-wage essential workers.
Eligible restaurants will not have immediate access to the funds, as restaurants must pay employee wages up front then file documentation of wage payments for reimbursement. NYC’s Human Resources Administration is overseeing the program and will provide up to 25% of the total funds awarded up front to eligible restaurants. The program will favor restaurants that can “commit to ‘high-road’ employer practices” after the program ends, including race and gender equity initiatives at every level of employment and paying every employee the minimum wage of $15 an hour before tips within five years of the restaurant’s reopening.
French celebrity chef Alain Ducasse revealed a new air ventilation system at his restaurant Allard in the chic Left Bank of Paris. Without it, the small restaurant would not be able to reopen while meeting social distancing requirements. The $50,000 ventilation system uses the same high-tech air filtration devices employed in hospitals, which both slow down and eliminate air particles from each diner’s table before they reach nearby tables. “If you’re a virus carrier, the people just beside you will be safe,” said Arnaud Delloye, one of the air filtration designers. France’s state health agency INRS validated the system, saying it “allows a significant reduction in the risk of virus transmission in a restaurant.” The new system will allow Ducasse to reopen Allard at 80% capacity, making it economically viable. If the ventilation system works well, Ducasse plans to roll it out at his other 40 restaurants worldwide.
A new report from consulting company Compass Lexecon and commissioned by the Independent Restaurant Coalition (IRC) found that 85% of independent restaurants may go out of business by the end of 2020. Independent restaurants are defined as those not part of a national chain and having less than 20 locations. Independents comprise 70% of all U.S. restaurants, employ 11 million Americans, and account for 4% of the nation’s Gross Domestic Product with at least $600 billion in annual sales.
As small businesses, independent restaurants operate on very slim margins and most spend 90% of total revenues on labor, food, and rent, according to the report. The pandemic lockdown and closure of restaurants nationwide has cratered sales for months. Delivery has helped some restaurants survive, but even in cities that have capped delivery fees at 15% until lockdown restrictions are lifted, most restaurant owners say that high delivery fees may force them into bankruptcy. A recent Eater survey of San Francisco restaurant owners found that 87% would not be able to continue operating on delivery and takeout alone with 60% reporting that by staying open they are losing money.
As restaurants slowly reopen around the country, reduced capacity limits are likely to remain in place until a vaccine is developed, which analysts predict will be in the first few months of 2021 at the earliest. These dine-in restrictions and high costs of doing business will force 85% of independent restaurants to close, according to the IRC’s 51,000 members. Restaurant closures will also devastate local food supply chains and communities. To help prevent widespread closures, the IRC report has been sent to members of Congress, urging them to support restaurant-specific pandemic funding in addition to the Paycheck Protection Program. Oregon Representative Earl Blumenauer has proposed the RESTAURANTS Act (Real Economic Support That Acknowledges Unique Restaurant Assistance Needed To Survive Act) to provide $120 billion in grants to help save independent restaurants.
Apichart Bowornbancharak and Prapassorn Bowornbancha, two executives at Laemgate Seafood restaurant in Thailand, were accused last year of selling low-price tickets for seafood buffets. About 20,000 customers ordered and paid online, but the orders were canceled without refunds when the owners claimed they didn’t have enough food to fulfill the orders. About 350 people filed complaints with the police, asking for refunds totaling $64,300.
Apichart and Prapassorn were found guilty on 723 counts. Each executive was sentenced to 1,446 years in prison, but since they confessed, the sentences were reduced to 723 years. They were also required to pay a fine equivalent to about $116,300. While the restaurateurs were sentenced to 723 years, Thai law limits jail terms to 20 years. Each defendant has one month to appeal the judgment.