Quick service restaurant transactions are down 43% in the week ending April 12 compared to year ago, according to NPD Group. Midscale/family dining restaurant transactions have declined 81%. More than 8 million restaurant employees in the U.S. have been laid off or furloughed since the beginning of the outbreak. By the end of the year, restaurant COVID-19 losses could exceed $240 billion. What can restaurant owners do but manage their costs intelligently, be patient, practice generosity and compassion, and focus on creative problem-solving.
For example, coronavirus has caused a spike in demand for takeout and delivery services. Right now, restaurant owners can seize the moment to focus on their online presence and enhance digital communication with customers. Restaurant Engine has covered the restaurant website and online ordering industry since 2015, and these digital tools have never been more important than today.
Traditionally the purview of fast food restaurants, takeout has gained mass adoption. Sit-down restaurants are building new avenues to connect with customers. Michelin-starred restaurants now offer takeout. Restaurants across the country have added groceries and D.I.Y. meal kits, in addition to cooked meals. Owners of all restaurants are preparing their forgivable loan applications to the Paycheck Protection Program (PPP) which is expected to be replenished with over $300 billion as early as this week.
In many cities, sit-down dining rooms are closed by law. In this environment, only restaurants which offer takeout and delivery options can succeed. Innovative restaurants are reaping the rewards, while traditional competitors struggle.
Food delivery apps have been a surprising beneficiary of coronavirus. Restaurants use third-party delivery services apps like DoorDash, GrubHub, UberEats or Postmates to get food out to customers. These apps are seeing increased business in COVID-19 afflicted areas. Recently, GrubHub got an upgrade from analysts Oppenheimer after announcing it needed to hire 10,000 new workers to keep up with demand. Yesterday, Postmates announced cash stipends for its couriers in California and New York to assist with childcare and health expenses.
Consider Uno Punto Cinco, a restaurant startup serving Miami, San Francisco, and Mexico City. Its founder Daniel explained to Gimlet Media that due to insatiable demand for delivery drivers in these cities, his company has abandoned all dining room-focused business entirely and has pivoted entirely. Uno Punto Cinco now assists former waiters become to become licensed delivery drivers. Daniel explained how he pivoted from a software company to a staffing agency: “We realized that the delivery platforms are struggling because they increased their demands right now. The demand increased, but not the staff. So, we have more than 4,000 waiters in our database that we know that they have every single document that these delivery platforms need in order for hire them.”
Despite offering flexibility, not all restaurants are happy with food delivery apps. Charging fees as high as 40% of an order, apps are putting pressure on restaurants’ margins. Restaurant owners are pressuring NYC politicians to cap delivery fees in line with San Francisco’s 10% cap. For NYC delivery leader GrubHub, which owns Seamless, these legal battles could become problematic. Despite the increased business, many apps are still losing money. A lower priced delivery model may be the only way to stay open.
Scrappy restaurant owners have found alternatives to the high fees of traditional delivery apps. Some have built their own online ordering system to salvage their profit margin. Other restaurants have been telling their customers about No App Needed which is free for both consumers and restaurants; the company does not require an app nor charge fees through September 2020.
Recently, Toronto-based restaurant Miss Thing branched out into online ordering. Rather than go with delivery apps, its owners decided to build their own online ordering system altogether. In addition to third party payment processing systems, they had developers build a website from scratch. Describing the system as “Shopify for restaurants,” reporting that they charge no fees on takeout orders. The system was successful enough in Toronto that Miss Thing decided to help other restaurants in the area. In an Instagram post, Miss Thing detailed the process it used to set up the platform, and how other restaurant owners could emulate it for free. The post received wide recognition, with thousands of likes and coverage in local media.
For restaurants, staying open in the COVID-19 era has become essential during the waiting game. Stuck between closing down and losing money on app-based deliveries, restaurant owners seemingly have few options. Given the realities of the situation, many are patiently hoping for the end of lockdowns and the return to business as usual. “The restaurant industry epitomizes the American dream, but it is uniquely vulnerable to both the current circumstances and the future uncertainty of dining in an era of social distancing,” said Sean Kennedy of the National Restaurant Association.
For restaurant owners, developing an in-house ordering system may seem complex. Yet the web is awash with payment services that charge little to no fees. All it takes is a simple website and a link to get online ordering set up. A point of sale system that supports online orders can help integrate online purchasing with in-store order queueing.