What should restaurants learn from the Great COVID Lockdown?

Celebrity chefs like Mark Hix and Gordon Ramsey have had to close some or all of their restaurants due to the Covid-19 pandemic. Other celeb chefs like David Chang say they are unsure if they can reopen after this is all over and predict a bleak future for the sector.

If these guys can’t survive then what hope is there for the rest of us?  

Here in Belfast and on the rest of the island of Ireland, we are also seeing a lot of restaurants starting to do takeaway and collection services in a bid to help their businesses survive –  even Michelin starred joints. Many are saying this is to help pay staff and so on, but they are serving food out at a discounted price —  much, much lower than if you were sitting in the restaurant. 

So the question is, what is going on and what is the right move to make?

Paying your staff is not the issue. at least in the UK the government has committed to paying furloughed staff 80% of their salary and there has been a small grant and access to loans. But this does not appear to be enough to save most of the restaurant industry. Most restaurants work on razor thin margins, this is something everyone has come to know and accept.  

Customers want cheap so restaurants are in a continuous race to the bottom, not employing extra staff when required, buying cheaper products and cutting corners in order to meet the price demands of the customer. This is the main reason many restaurants will not survive as they simply don’t have the cash to maintain their fixed costs or pay their staff whilst waiting for the government payment systems to come online.

Restaurants who have set up takeaways have gone into this section of the market and made deep cuts to their operating margins to compete with existing takeaways, this is a short term game where everyone loses. You are already on your knees, so why cut deeper just to speed up your demise? Surely your food doesn’t automatically become cheaper just because you’re doing takeaway. I mean you are replacing table service with paper bags and takeaway packaging which, let’s be honest is not free and can cost up fifty pence per food item. 

Let’s look at it like this. You hire a waiter at X pounds per hour and buy plates etc at Y; you serve 100 meals an hour, so with every meal served the XY price reduces (X+Y divided by meals served equals additional cost per meal) with takeaway your X cost works the same as a restaurant the more meals served the less the cost per serve but the packaging which replaces the plates etc (Y) does not diminish it stays constant and that adds up real fast and not factoring this in can really screw your pricing model, it was a mistake I made starting Bia Rebel but we adjusted and reset pricing to incorporate the true cost of production.  

Not to mention the logistical problem of delivery. Be very careful when signing on to the big delivery services like Deliveroo — they take 30 percent of you bill plus VAT, so 30p of every pound is taken. It’s possible to end up in a situation where you actually end up losing money on each order, and you are working for the delivery service, not the other way around. And doing your own delivery is, as several sit-in businesses are finding, quite tricky.

From what I can see some restaurant owners look at takeaways and see `’cheap.” So they are changing their business model to takeaway and think takeaway is cheap so we have to be cheap. But that amounts to saying: “Great let’s go, AND MAKE EVEN LESS MONEY THAN BEFORE.”

Wow, wow, wow this is not good business! It’s a symptom of the price war that’s been going on for ages but never discussed in the food industry. We all know you can not buy the very best ingredients and have them cooked and served by the very best professionals and be the cheapest in the market or price match against the cheap caf down the road. 

It is clear that even though eating out is not an essential service there is huge demand for it.  Seeing this demand should redirect the food entrepreneur and give them the courage to charge a price that reflects a fair exchange of value: offering cheap takeaway is not going to be your salvation unless you started out as a cheap takeaway. We all need to set better margins and deliver products that live up to those better margins.

There is an opportunity here if only we can start to understand what that opportunity is. I don’t think the answer is to rush to reopen and in the process cut our own throats. 

There are several huge unknowns that make it impossible to make concrete plans for post-COVID food service. (Will we be in a Great Depression, for example?) But what does seem certain is that restaurants need to have a more multifaceted offer that is not purely reliant on customers walking through your door. So yes, that would include takeaway but not by offering customers desserts at £2.50, like one well established restaurant here in Northern Ireland promoted recently.

To quote Peter Theil, founder of Paypal: “The tremendous price (of competition) is that you stop asking some bigger questions,,,don’t always go through the tiny little doors that everyone tries to rush through,  maybe go around the corner, go through the vast gate no one is taking.” 

By Brian Donnelly, chef owner at Bia Rebel Ramen in Belfast

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