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For restaurants, 2020 has been marked by government loan applications and business model overhauls, all strategies to weather the financially devastating COVID-19 storm. Now, six months into the pandemic, some operators are being forced to ask: when is it time to close for good?
In this week’s In it Together discussion, OpenTable CMO Jessica Jensen spoke with Lien Ta, co-owner of Los Angeles’ All Day Baby and the recently shuttered Here’s Looking at You, and Shehzad Roopani, CEO of Peli Peli South African Kitchen. In their conversation, the restaurateurs opened up about the tough calls they’ve made during the pandemic and what led them ultimately to decide to close a restaurant.
“You have to look at the data and accept the data, and take away the emotions,” said Roopani. “There are risks you can appreciate and understand, but if you can no longer manage that risk, you have to say no. Otherwise, all you’re going to do is disappoint a lot of people.”
Why some concepts flex, and others falter
A restaurant’s ability to survive the pandemic may come down to dollars and cents, but a host of factors influence income: location, concept, and longevity, to name a few. As Ta summed it up, “Nobody was coming to Here’s Looking at You, but some people were still coming to All Day Baby.”
Ta made the difficult decision to close Here’s Looking at You a day before its fourth birthday. The restaurant had made a name for itself as a sit-down, celebratory experience, with only 11 tables and a 15-seat bar. As one of the first boutique restaurants in Koreatown, the centralized location made it a perfect meeting place for groups coming from opposite sides of town. But “with shelter-in-place rules, people weren’t traveling all over the place for something in a to-go container,” Ta said.
All Day Baby was newer, having opened just last fall. “The allure and the joy was still being defined,” Ta explained. After being mandated to close, her team sold biscuit sandwiches out of a takeout window, allowing guests to select a pickup time and avoid lines. Guests who had never visited the restaurant before the pandemic came to the takeout window and embraced the experience, allowing All Day Baby to win over a new clientele.
Like Ta, Roopani operated both fine dining (Peli Peli) and fast casual (Peli Peli Kitchen) businesses, and knew with the onset of the pandemic that the former wouldn’t be sustainable. “We were [already] very vulnerable,” he said. “We’ve been playing defense for a long time.”
They laid off everyone but their executive staff, who took a variable compensation structure, and enough employees to conduct off-premise sales. The team shifted their focus to takeout and delivery and developed a more efficient menu of less expensive dishes.
For Roopani, refocusing the business also meant establishing more clarity around the brand. Though the South African influence hovered around Peli Peli since its 2009 launch, it was never central to the concept. Now, that’s changed: the new Peli Peli South African Kitchen focuses on culture as a pivotal part of the dining experience.
“Culture is the new technology,” Roopani said. “We see people over the next five years gravitating to ideals in the human component.”
Renegotiate – and reimagine – everything
In developing a new concept and trying to keep his business afloat, Roopani leveraged every possible tactic. In addition to prioritizing takeout and delivery, his team partnered with Kroger to sell prepared boxed meals in local stores. (“It was a business model we were excited about, but I’d be lying if I told you we made any money off of it.”) When they did finally decide to shift their business model, Roopani said, “we renegotiated everything.”
They shifted to a variable model, paying vendors based on sales. They restructured leases. They worked to set expectations with all business partners, removing some of the constant pressure of uncertainty. Now, Roopani is committed to eliminating any fixed costs that his company can’t manage.
“If I continue, I’m going to wake up in January with more liabilities,” he explained. “I’d be back in the same defense model that I was in prior to COVID. I’m not going to repeat history – my executive team and I are taking a hard, critical approach.”
Inflated food prices have also required significant adjustment. Pork supply is limited and expensive, leading Ta’s chef partner Jonathan Whitener to buy beef ribs instead. The cost of to-go containers, bags, and cookie sleeves has skyrocketed – all things she didn’t have to buy in abundance before. At Peli Peli, Roopani has shifted his guest communications to promote takeout over delivery in order to avoid the costs associated with the latter.
For Ta, shifting her business model has also meant looking for new ways to generate sales and keep her staff employed. She reached out to programs employing small restaurants to cook for front-line workers, but they were oversubscribed – so she decided to create her own.
Currently, her team is working with the social service nonprofit El Nido Family Centers, preparing meals for a housing community in Watts. “They are providing us with something to do and another means of keeping our lights on.”
Building a healthier industry
Ta and Roopani both agreed that despite all of the current challenges, this moment presents an opportunity to transform the industry for the future. “We can look at this as a really large reset of an industry that’s a little fragile and broken anyway,” said Ta.
Roopani wants to see more protections for small, independent restaurants. Since restaurants often work with larger vendors, they aren’t always able to defend themselves in the face of conflict – legal battles are too expensive and time-consuming. Without regulatory protections, any adversity puts their business in danger.
For Ta, the future is political. She appeared on video during the recent Democratic National Convention to tell her story as a small business owner during the pandemic, and she’s trying to raise awareness about voting. Also on her mind? Wage disparity and tipping.
“If we are to think about this in a large way, do we really need to be on this tipping model?” she asked. “Can we pay the creatives in the back the same way we pay creatives in the front? We’ve all seen what it’s like to lose our jobs. We all need to think more about how we can truly sustain the industry.”