Photo by Pablo Merchán Montes on Unsplash
Restaurants around the world are in real trouble. The COVID-19 pandemic has either significantly cut revenue or completely shut down most restaurants.
There has been a huge community movement to try and save restaurants and workers through grants and fundraising campaigns like the Restaurant Employee Relief Fund, Another Round Another Rally, and as well as hundreds of local community grants.
The government has also attempted to help restaurants with a loan forgiveness program. When restaurants follow specific rules, these government loans are forgivable so restaurants won’t have to pay them back. Even if restaurants do have to eventually pay back the loan, like most government loans the interest will be relatively low.
But there is a question of how can we let restaurants save themselves?
In the long run, loans and grants will not save the restaurant industry. The only way to create meaningful sustainability is through programs that pave the way through the pandemic and even recovery after.
Customer Confidence
The first and most enduring issue restaurants must tackle is customer confidence. Even if a vaccine for COVID-19 were to be discovered tomorrow surveys have shown that most consumers are still wary of being vulnerable in public spaces.
There are multiple reports where restaurants are vectors of the virus and have caused super spreader events that may have contributed to the massive surge in new COVID-19 cases across the US. The CDC has also classified indoor dining at restaurants as one of the highest risk activities consumers can do during a pandemic.
Multiple surveys from OpenTable and Eater indicate that over 70% of diners are not ready to eat out even if the lockdown ends. Roughly 30% of people surveyed will not eat out until the pandemic is over and a small portion of people, roughly 8%-12% depending on the survey, will wait long after the pandemic ends to eat out again out of precaution.
The only way to inspire confidence in the public is by making restaurants as safe as possible through enforcing strict health and safety guidelines preventing restaurant-related outbreaks. That may mean restaurants have to do their own research to find out what is the best practice for their own establishment and not rely too much on overly generalized guidelines from the local and federal government.
Restaurants will have to go above and beyond the minimum recommended guidelines to make customers feel safe and confident enough to go back to dine-in. But just as important, customers must see you make the effort and have safety measures clearly communicated.
PHOTO: OpenTable
Government Initiatives
As important as it is that restaurants be proactive about the health and safety of diners there is only so much they can do without government help.
One way governments can help is by subsidizing meals. The UK Chancellor Rishi Sunak announced that diners will receive a 50% discount off their restaurant bill during August as a way to get customers back into restaurants, cafes and pubs and protecting the 1.8 million people who work in them.
His announcement was highlighted by the fact that the UK was facing a unique moment because of Covid-19, adding: We need to be creative.
The discount will not apply to alcohol but may be used unlimited times on food and drink for participating restaurants, cafés, and pubs across the UK.
To clarify how restaurants will recoup the discount, Chancellor Sunak said, Each week in August, businesses can then claim the money back, with the funds in their bank account within five working days.
New cases of COVID-19 have been on the decline for the last two months in the UK, a stark contrast to the US which is at an all-time high for new COVID-19 cases. The US will likely not be able to implement such an idea until the new cases are under control but the government can certainly come up with new initiatives to reinvigorate the restaurant industry.
Private Companies; Delivery Apps
As new cases rise, states are reversing re-opening the economy restaurants are forced to turn to third-party delivery platforms like Uber Eats, Grubhub, Postmates, and DoorDash to keep their businesses afloat through delivery. On the surface, it appears these companies are providing a necessary service, letting restaurants use their enormous platforms to reach hungry diners stuck at home. But theyve has a history of anti-consumer and anti-restaurant policies.
Not only do third-party delivery platforms often have hidden fees for hungry diners but they also charge ridiculously high commission fees for restaurants. Most commissions average around 20%-30% per order but can go as high as 40% per order.
Restaurants usually have about 90% of their costs as fixed costs tied to rent, labor, and food. The current commission fees are essentially a death sentence for many smaller community restaurants.
Private companies that rely on restaurants must take measures to protect their livelihood which in turn fosters goodwill and a shared cooperative future.
Due to backlash, companies have announced they would take steps to work with restaurants and reduce fees and commissions. So far, mostly large chain restaurants have negotiated/received lower commissions due to the volume of orders they can bring in.
Grubhub announced in March that they would suspend collecting commissions from independent restaurants up to $100 million. Multiple independent restaurants have confirmed that the suspension of commission fees is simply deferred to a later date. Restaurants will have to pay back the deferred fees.
The situation has become so grim local governments were forced to step in. Cities like Los Angeles, New York City, Chicago, and others passed legislation that caps how much third-party delivery apps can collect in commissions from restaurants. In most cases, the cap has been lowered to a manageable 10% in commission. But local restaurants in areas with capped commissions report that delivery companies are giving them the runaround. Despite legislation passed weeks or even months ago, companies like Grubhub and Postmates still havent complied.
When asked why they havent complied, delivery platforms have feigned ignorance or blamed legal holdups.
A restaurant owner in Los Angeles received this message from Grubhub, We are waiting to hear back from our legal team on how we will proceed. Once the fee cap is applied you will receive a refund for the commission difference.
Some restaurants were able to receive the correct commission percentage after extensive communication, but many restaurants are still stuck with the high commission.
Uber Eats combats the lower commission cap by charging an extra $3 fee to the customer and reducing the delivery distance to restaurants.
It is imperative to let restaurants keep as much of their diminishing revenue as possible to survive. Private companies that depend on the vibrant community-oriented restaurant industry need to cooperate for the future.
