By Tim Hunt
The takeout math just doesn't work for restaurantsUploaded: Mar 26, 2020
The county health departments’ shelter in place orders on March 9 caught many, many people by surprise.
With the hospitality and transportation industries already rocked, this order could devastate the restaurant and bar business if it continues very long. The same goes for personal services such as barber shops, nail salons and hairdressers. Most are either sole proprietors or independent contractors.
Speaking with Ray Bartolomucci, the owner of the three Strizzi’s restaurants and three Rigatoni’s, his revenues have cratered by more than 80 percent. He employs 122 people across his six locations and he’d already built a strong takeout and delivery business. Strizzi’s celebrated its 30th year on Main Street in Pleasanton in October.
Before the shutdown, he had shared there were times that the restaurants were slow, but the kitchens were hopping as chefs prepared takeout/delivery meals. In good times, that’s a nice extra revenue stream, but now it’s the only option.
The math is simple. When someone dines in the restaurant the average tab is $30-35 as people buy something to drink or add dessert. By contrast, the takeout is $11-12. And, for the servers (many of whom have been with him for a decade or more), more than half of their income is tips and they’re not working.
Ray and his team are aggressively marketing specials through social media and their email lists—they welcome the change in the law so they can now sell bottles of wine to go (a 50% off special with a takeout order at Rigatoni’s). The inventory of wine and/or spirits is a substantial sunken cost for all restaurants and bars that are closed today.
It should be noted that Strizzi’s is better equipped to ride this time out—because of its established takeout business—than other restaurants downtown that were entirely based on the dinner crowd. Those folks are simply sitting it out or scrambling to try and do a takeout business from scratch—a daunting task.
Ray also was reaching out to his landlords seeking rent relief because there simply will not be cash available and he’s prioritizing his staff. He’s had to close his Rigatoni’s Red Smoke Grill in Hacienda Business Park because—other than medical care—the business park is closed up tight.
That likely will be the case for restaurant operators everywhere. Mark Calvey reported in the San Francisco Business Times digital news that Greg Flynn, CEO of the Flynn Restaurant Group, told Reuters that none of his franchisees expected to be able to pay rent. The group operates popular restaurants such as Applebee’s, Taco Bell, Panera and Arby’s across 33 states.
The Business Times rank the company No. 7 on its list of private firms with 2018 revenue of $2.34 billion. It has 47,000 employees, according to the paper. Just how big that hit will be will show up in the new unemployment insurance filings this week.