A restaurateur who founded a business during the Great Recession discusses opportunities created by COVID-19.
From family-owned eateries with years of local history to fine-dining establishments run by celebrity chefs, a wave of restaurant closures is underway.
Recessions are hard enough on the dining industry. Going out to eat is often the first luxury cut from family budgets. Crowd-size restrictions, vanishing nightlife and a population less willing to go out to eat pose an even greater risk to the business.
Sit-down restaurants will be hardest hit by the COVID-19 pandemic. Casual dining was impacted more harshly by the Great Recession in 2008 than fast food and takeout. With added social distancing, more closures are sure to come.
But for entrepreneurs seeking to do things differently in the restaurant industry, now could be a good time to set up shop.
TJ Southard started Killer Burger, a fast-casual hamburger restaurant in 2010, near the height of the Great Recession. His restaurant put an emphasis on fresh ingredients and craft beer to differentiate itself from the more traditional fast-food experience.
What began in Portland’s Hollywood District, now has franchises across the state and in Vancouver.
Killer Buger's original location in Portland's Hollywood District. Photo: Killer Burger
“People think they need to ride the economic tide, but if you have an idea, now is the time to get into it. Imagine a world where 10 landlords are fighting over one tenant,” he says.
Originally Killer Burger was a “second-generation” restaurant, meaning it took over its space from another restaurant. Since many restaurant businesses close during recessions, second-generation spaces present an opportunity for restaurateurs.
Second-generation spaces mean restaurant hardware such as ovens, sinks and furniture are already in place. One notable cost behind turning a retail space into a restaurant is the water and sewer tap fee, which second-generation restaurants avoid. These spaces also conform to health codes.
Southard credits some of his success to the fact that he was able to lease space cheaply in the recession. The low cost of entry made his first years of business more manageable.
To adapt to the pandemic, Killer Burger has taken its mobile food truck around apartment complexes, bringing the food cart lunch experience to employees working from home.
Southard expects fast-casual restaurants to fare relatively well during the pandemic compared to sit-down restaurants.
Home delivery is one area where the restaurant industry has actually seen growth during the pandemic.
Southard says restaurants that already had car and curbside service before the pandemic have fared surprisingly well. As restaurants employ technology to keep guests at a safe distance, eateries of the future could resemble high-tech 1950s burger joints, with servers taking customers’ orders from the car.
Fast-casual restaurants like Chipotle that had already begun to rely on online ordering will also have an edge.
But aspiring restaurateurs should take note of the unique challenges posed by a pandemic economy. As a hamburger restaurant focused on delivering high-quality beef, Southard says meat product supply lines are experiencing issues. The lack of steady purchasing has made farmers and other meat producers unsure of how many animals to sell and slaughter.
Since meat products are highly perishable, overproduction could mean losses.
Another supply chain issue facing restaurant owners is a shortage of protective equipment.
“The world is out of lunch lady gloves right now,” says Southard. “Whole industries are picking up PPE like never before. I never thought lunch lady gloves would be considered personal protective gear, but here we are.”
There is no guarantee how much of the restaurant sector will return after the pandemic. It is likely COVID-19 has changed some consumer habits permanently.
As restaurants figure out ways to meet the changing demand, early adopters of technology trends could stand to benefit.
“The pendulum will swing back and demand will eventually return,” says Southard. “The opportunities to position yourself for that are happening right now.”
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