Reopen now, later, ever? Whatever the decision, it won’t be back to restaurant-as-usual. COVID-19’s capacity restrictions and other required safety measures, along with supply chain issues, and hiring and rehiring challenges will all feed into the answer to what comes next. The answer can be found in a step-by-step exploration of major considerations.
An overview of top concerns
- Cash flow, liquidity and working capital
- Lease/rent issues
- Restriction to 50% diner capacity
- Capability to implement effective safety measures
- Availability and cost of masks and other safety materials
- Supply chain speed for receiving but not stockpiling inventory
- Hiring, rehiring, onboarding and training
- Potential increase in insurance coverage/premiums
The dine-in model was seriously questioned even before COVID-19 (see “To be or not to be a virtual restaurant
”). Crisis-imposed restrictions and requirements now add to the uncertainty.
As for hiring and rehiring, as of early June, national unemployment was at its worst since records have been kept, but management still faces challenges in enticing workers in the necessary numbers. Until the $600/week in federal unemployment payments, an addition to state payments, expire in July, it could be a hard sell to bring back furloughed and laid-off staff and to bring in new candidates. Another limiting factor is that many potential employees have child care and other obligations with few options because of COVID-19 social distancing rules. And because of changes wrought by COVID-19, significant time must be committed to onboarding new staff and re-onboarding original staff, as well as to training in new safety measures.
Explore deciding factors
Management’s approach must be based on a new vision for the business. A refreshed model might include beginning or concentrating on carryout and/or delivery service. Restructuring or merging could support sustainability and strengthen market position.
Job candidates have new concerns related to COVID-19, and consumers have new demands for transparency into safety measures, employee practices and food handling. Addressing candidates’ concerns will go a long way in addressing consumer expectations. To attract the right level of talent, assess compensation and benefits for application in COVID-19. This might be the time to offer or increase job-sharing options and to consider allowances for tests, expanded sick pay and child care.
Accurate forecasting and break-even analysis are imperative so prices and staffing can be set appropriately to determine sales needed at a reduced capacity. In addition, the essential factor of liquidity requires discussions with the bank about borrowing and terms, and it may be necessary to look into revised covenants.
All things considered, the decision to reopen rests on your ability to ensure a safe and accommodating work environment for staff and a safe and inviting experience for diners.
Support for restoration activities
Our Restaurant practice professionals can help you with challenges during and following the COVID-19 crisis:
- Business modeling
- M&A and restructuring: Valuations, financial due diligence, asset impairment
- Liquidity and cash forecasting
- Negotiations: Leasing, banks, bankruptcy court, distressed debt
- Construction and real estate
- Tax, audit and accounting considerations
Partner; Leader, Restaurant Sector
+1 303 813 3944
National Managing Partner,
Construction, Real Estate, Hospitality and Restaurants
+1 704 632 6817
Principal, Strategic Solutions
+1 212 542 9988
Senior Manager, Tax Services
+1 312 602 8297