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Does Your Restaurant Model Still Work? Candid Discussions with Bret Thorn
1. Adaptability is the name of the game for restaurants. Whether it was smoking bans, getting rid of trans fats, and increasing minimum wage laws, operators have adapted and will continue to do so. The response to the pandemic has been breathtaking, although some of the changes were already underway.
2. Becoming resilient and adaptable begins by understanding the true needs of your customer, so listen to them.
3. Resiliency also means trying new things all the time. Just because an idea didn't work for one restaurant, it doesn't mean it won't work for you.
4. Restaurants have been forced to use technology and those changes are here to stay. Embrace and leverage the tools to help you reach more customers.
Bret Thorn: The pandemic has forced changes that restaurants should have been making anyway.
Matt Levin: Inspirational stories, actionable business tips, and real-world strategies. Join us as today's guest shares how you can build a resilient restaurant fit for an unpredictable world.
Hi everyone. I'm Matt Levin and you're listening to the Resilient Restaurant Podcast. In this episode, we're joined by Bret Thorn, a writer and restaurant industry expert who spent decades covering restaurant openings and chefs' career moves across the globe. Currently, Bret is Senior Food and Beverage Editor for Nation's Restaurant News and Host of the podcast 'In the Kitchen with Bret Thorn'.
We're going to take a look at the current restaurant market with an interesting perspective and some tough love. We'll discuss industry adaptations and changes restaurant operators have faced this past year and what we can all learn from them moving forward.
About Bret Thorn
Matt Levin: First of all Bret, thank you for joining us today. I'm really excited to talk to you and get all sorts of insights from your many years covering the restaurant industry. I'd love to just to get a quick overview of your background. It's not your first year covering the restaurant industry, right?
Bret Thorn: No. I spent my junior year of college in China and then graduated from college during the recession of 1990, which is huge compared to the past three or four recessions we've had since then, but it meant it was hard for me to find an interesting job. So I've found a boring one and eventually put a resume in my backpack, headed back to Asia, and found a job in Bangkok, Thailand, where I lived for five years working for an English language business magazine.
Since I was the only one on staff who had been to culinary school in France, apart from writing business stories, I reviewed restaurants.
Ended up moving to New York because a friend of mine was leaving New York and had five months left on his lease. So, I started at Nation's Restaurant News a month to the day after I arrived in New York as Assistant Food Editor. And now I'm Senior Food Editor 22 years later.
Initial Reactions to Pandemic
Matt Levin: When we look on this last year and for someone who's like yourself who's been in this industry for so long, what were your first thoughts when the pandemic became real? And the kind of the world shut down right about this time last year.
Bret Thorn: I think my brain short-circuited a little. I really wanted reality not to be what it was. And I think that was true with a lot of people. I'm in New York City, so it was got very bad, very quickly.
And just started reporting on everything that was happening within the restaurant industry. My first story might've been Tom Douglas in Seattle closing all of his restaurants and then Danny Meyer closed all of his restaurants. Things started to happen so quickly and everything changed so fast that at that point I didn't have a lot of time to think about things.
It just became rushed reporting in everything that was going on. And almost instantly restaurants started thinking about how to change their business model. Even before the national lockdown, I think, Canlis a fine dining restaurant in Seattle, had already shifted their entire business model instead of being a fine dining restaurant.
They're like, okay, we sell burgers for take out now. And that was the first, in every restaurant, finding ways to adapt to the radically new realities.
Starting with feeding people in need, and then figuring out how to take care of their workers, and then how to form a business model that would at least allow them to keep the lights on in the restaurants. It's been a long year.
How Restaurants Have Adapted in 2020
Matt Levin: Were you surprised by this level of adaptation or how quickly restaurateurs jumped into gear? I don't think anyone would have thought pre-pandemic that fine dining restaurants would pivot business models, and there would be this wholesale technological shift to delivery and all of these kinds of adaptations and some other ones I'd love to get into.
Were you surprised by this? Was this just like, of course these restaurateurs are going to be able to adapt?
Bret Thorn: I was completely blown away by the speed with which restaurants adapted. But of course, that is what restaurant operators do.
I've seen them adapt to many things over the years, starting around the turn of the century when smoking bands started to sweep the nation. "There's no way we can operate without letting our customers smoke. No one will go to bars. What all we do?" And then they had to get rid of trans fats, and then they had to adjust to a variety of different government regulations, increasing minimum wages, all sorts of things. So I was certainly used to operators adapting, but the speed with which they did, it was really breathtaking. Although some of the changes were already underway. We already had virtual restaurants and ghost kitchens opening. Restaurants were already adapting to different delivery models because customers were increasingly interested in getting their food delivered to them.
And then with the pandemic, a lot of those trends just accelerated.
Matt Levin: You said you were not surprised at the resiliency, but maybe surprised at the speed. If you had to give the restaurant industry a grade, scale of one to 10 in terms of ability or level of adaptation, what would you grade the industry at?
Bret Thorn: 45. The way they just shifted everything they did, and responded to what consumers needed. By late March they were like, okay, we sell groceries now. Because the shipments to supermarkets had been disrupted because demand had shifted so radically. Whatever their customers wanted, they did it. A lot of them had already been doing cooking classes, but Zoom cooking classes or food and beverage pairings became a completely new revenue stream.
One that was really remarkable was Commander's Palace in New Orleans, which just started to have these Wednesday night wine and cheese pairings. They would send wine and cheese, the customers would pay for them of course, to New Orleans and the surrounding parishes, and they just have a Zoom conversation on Wednesdays about it, and people started wearing costumes making a night of it cause they couldn't really go out.
Toward the end of the summer, they made it national once a month. If anybody in the audience has ever tried to ship wine from one state to another, they will understand the monumental feat of shipping wine. I think they got to 47 or 48 different states and would have these national Zoom wine pairings. And they would have the cheese and charcuterie makers in on the Zoom chat, the wine makers.
And they might be in France or Italy, but that's okay because it's all remote and that's something that it wouldn't even occur to people before. You know, you would have had to fly in the wine maker and have, uh, incur a huge expense to do that. And now instead, you know, they realize that we can, we can all do it remotely.
And that's just one example of the things that restaurants figured out how to do. And they became quite profitable new revenue streams.
Are New Adaptations Here to Stay?
Matt Levin: There's these adaptations that are very new behaviors and not typically part of the core restaurant experience, particularly the ones like shipping wine all over the country and posting digital events on Zoom. Based on your conversations with operators, do you think a lot of these offerings are here to stay?
Bret Thorn: You know, as long as there's demand, they're not going to stop. And we were already moving to doing more things at home, having our food delivered to us more. Now I work from home I'm pretty sure I'm never going to have to do a rush hour commute again.
Everybody is adjusting their lifestyles, but eventually the constant need to video conference is going to go away because there are new ways of doing things. There will be of course, face to face meetings and face-to-face meetings can be good, which means there will be less of an exhaustion and you can have fun with things like virtual cooking classes and wine and cheese pairings. So I think it won't be sort of the huge boon that it was say last summer, but it will continue to be a revenue stream. As long as I think customers will continue to be interested in a lot of it.
Ways the Restaurant Model Is Changing
Matt Levin: Does that mean that the playbook for existing operators and particularly for new operators has changed? That they've got to start thinking about different communication channels and different ways to build a community and engage an audience, do all these other things outside of putting food on a table? And they've got to do this at an earlier stage and meet a higher quality bar?
Bret Thorn: Absolutely, but they should have been doing that anyway. In 2017, there was already an understanding that the full-service restaurant model was not working anymore, that the margins were so narrow, the only people making money were servers. And the restaurateurs' profits were just being squeezed by added overhead and third-party delivery companies and so on.
The pandemic has forced changes that restaurants should have been making anyway. For example, the Momofuku group in 2019, was working out plans to have consumer packaged goods, like their seasoned salts and their chili crunch. They were going to roll that out eventually, but they rolled it out in 2020 because they needed to find different ways of making money. But that had always been in the works and it should be in the works for every restaurant. They should figure out what kind of retail they can do, what kind of mail order they can do, which is retail.
Are there other things they can be doing with their kitchen space? Maybe they want to operate a virtual brand as well as their regular restaurant so that while people are eating in the dining rooms, you also have sandwiches or dumplings or chicken wings going out the back door. Why not? A lot of restaurants are doing that.
Matt Levin: One of the early theories that was floated quite often when the pandemic first hit that post COVID a net effect would be that a lot of smaller operators would just not survive.
We'd effectively see a mass extinction event of Mom-and-Pops, and then later a Cambrian explosion of chains where Chipotle and Panera would be on every street corner and every large city and small town in America. Do you think that fear is being realized?
Bret Thorn: That's an interesting analogy sort of a mass extinction event causing a bunch of restaurants to go under. I mean, the chain restaurants have talked about the opportunity of the pandemic, which can come across as ghoulish, but their job is to run the restaurant.
There already are prime real estate that chain restaurants that have the capital can move into. I've also spoken to chain restaurant chefs who are figuring out ways to market to customers whose favorite restaurants have closed and saying my casual dining chain is still here and offers many of the things that you like. That might mean that chains will start maybe doing more upscale menu items. And certainly expanding their alcohol programs, which a lot of restaurants have done anyway because alcohol delivery laws have been relaxed in many, possibly most jurisdictions.
But certainly the big boys with money will absolutely move in and independent restaurants are going to have to really figure out what they do that is unique and special so that they can remain a draw for customers and also make ends meet. And that means that they're going to have to probably get better at the digital world, whether that's social media or having really great delivery apps or they can, they can, uh, join large or small third party delivery companies. But they're going to have to have localized merchandise, t-shirts and baseball caps or whatever it is, or possibly sauces or seasonings. But they're going to have to be nimble to figure out where they fit within their marketplace. It's going to be tricky.
Shifting Operating Mindsets and Market Dynamics
Matt Levin: What's the best case scenario for you in terms of the shift and operating mindset and market dynamic? If you could wave a magic wand and say, hey, here's what the future of the industry should look like post-pandemic, what would it be?
Bret Thorn: Ideally you have a restaurant where everyone who works there works a reasonable number of hours and has enough money that they can pay rent and eat the way they want to eat within reason, and travel, and get medical care. And for that, I think we need a societal governmental shift in the way that we get our medical care. Beyond that, restaurants have figured out how to do more with less, including having fewer people working in the kitchen, having fewer servers and figuring out how to make do with what they have, which means they are leaner and smarter. And they figured out not to have extraneous menu items that don't really pull their weight and they're figuring out different types of automation that are going to make their lives easier, and make their labor costs more manageable.
And this is again, is something that was happening before the pandemic. We're going to have restaurants with smaller staff, but staff that is better taken care of. Ideally, customers who understand the value of what they're paying for. That's going to be a big challenge because customers have been eating off of the backs of underpaid workers for so long that they're going to have to pony up, which means that they need to have more money. We have a lot of work to do in this country.
Matt Levin: I think we're in awe as well at what operators have to deal with on a daily basis and what they're able to accomplish. Based on your conversations, do you feel like there's been any sort of change in how people are operating the restaurants in terms of staff relations, considering that they're all under enormous amount of additional stress with potential risks to their personal safety?
Bret Thorn: The stories I've heard have mostly been operators just trying to look out for their staff as well as they can. Apart from the sort of me too style reports of chefs working in toxic environments or creating toxic environments.
I don't think that's accelerated. I think that's something that's been going on for a long time and that continues in some restaurants. Not necessarily because of the pandemic, but because of a general, broader awareness of how people often are treated and how they should be treated, that there's more of a spotlight that's shined on bad behaviors.
I am hearing stories of customers who were just being terrible jerks and there have always been jerky customers, but the amount of incidents of hostility toward the idea of wearing a mask, which is an extremely benign, extremely helpful thing to do as an occupant of this planet.
There's been a lot of behavior around mask wearing, around tipping badly, around cancelling reservations, just a general uh, lack of respect toward restaurant workers that is really appalling. And I think, to your point, it does have to do with the fact that we all are suffering from, I can't even call it post-traumatic stress because the trauma is still going on. So we have this trauma induced stress and this emotional dysfunction that comes from the fact that our society broke.
I think that's something we're going to have to reckon with for a long time. That's true as a whole society, but certainly restaurants are a gathering place for communities. I think it's where a lot of bad behaviors probably going to be acted out. Maybe they'll find new strategies for coping. It's going to be a gloomy next few years in that regard, there's going to be a lot of PTSD.
Matt Levin: Do you believe that there's going to be a generation of restaurant operators who are going to say, I'm going to think about how I build and run my business and manage risk differently going forward? Or do you think people will write this year off as a once in a generation anomaly and just go back to the old ways of operating?
Bret Thorn: I think they're definitely going to change the way they're doing business and part of it was just the trauma in late March and early April of their restaurants closing either permanently or temporarily and, they started to think, why have I been working 80 hours a week to make an okay income and still not having the resources to stay open if business is lost for a month. That's ridiculous.
This model is not how human beings should be living. Why have we been doing it this way? This is a reckoning that a lot of restaurant operators are facing and trying to find a way to rework their business model because they're going to have to pay workers more money; minimum wages are going up everywhere. Even if they're not in this particular aid package from Congress, minimum wages are going to go up. They're already going up in a lot of jurisdictions anyway. And there's somewhat of a demand by customers to treat workers better.
I say somewhat of a demand because there's a lot of talk about workers being treated fairly, but there's also a lot of resistance to menu prices going up. Customers did get more accustomed to paying more for delivery and maybe they will be more sympathetic to the plight of restaurants, as things start to return to normal. Although we haven't seen that yet. But maybe, maybe once they get vaccinated and can calm down a little they'll be a little more bit more, more generous and understanding as they go out.
The Enablers of Change
Matt Levin: You talked about learning how to do more with less than at the same time operators saying, Hey, we've been killing ourselves, working 80 hours a week for years to make this work. So there's a best-case optimistic scenario where things are less crazy and people have learned how to do more with less, if that were to come true, what do you think the enablers of that change would be? How much of it is enabled by changes in business practice versus technology changes or investments versus cultural shifts?
Bret Thorn: Certainly technology has a great role to play in terms of streamlining operations, improving efficiency, whether that's through making inventory and ordering more efficient, measuring waste and managing it. Cause if you don't measure it, you can't do anything about it. So there will be more understanding of really dialing in exactly how much, for example, of an ingredient they need as well as better AI for figuring out exactly how to staff appropriately. And again, all of this stuff was going on before and something that the industry was getting marginally better at. So technology plays a role.
Society plays a role because one restaurant can't just say, okay, I'm going to charge twice as much for everything and all of my employees get $35 an hour in medical insurance. That's something that you need either state or federal governments to say, this is how everyone has to be treated. You need a level playing field for everybody so that restaurant operators understand the rules and can comply. Here in New York, occupancy for restaurants during the pandemic was raised to 35% capacity, which seems like an arbitrary and bizarre capacity, but that's because across the river in New Jersey, the occupancy was 35%. You need to have that level playing field so that competent operators are allowed to be successful by not being hamstrung by regulatory inequalities.
Also saying, this is how people have to be treated. And then operators are smart enough that they will figure out how to get the economics to work. I get so many emails from mostly trade organizations and associations or people with vested interests who want to scream that, if you get rid of the tip credit restaurants will all close. They often complain that if you get rid of the tip credit restaurants or go out of business. California doesn't have a tip credit, Washington doesn't have a tip credit, and they still have restaurants. You figure out what the economics is around you, and then you have to work out the model to make it work.
Which is not easy, but operators do it.
How Restaurants Like Addo and Wow Bao Have Adapted During the Pandemic
Matt Levin: You mentioned examples of forward thinking operators like Commander's Palace who showed early ingenuity in the pandemic. Are there other stories that you think are insightful for operators, say other types of adaptations or changes that folks have made, particularly ones that might be a little bit more out there or other untold stories we're sharing?
Bret Thorn: Well you have Eric Rivera, who is a chef in Seattle who has a restaurant called Addo -that's A-D-D-O. Which was an avant-garde, 'you come into the restaurant and I'm just going to do a tasting menu for you and you're going to pay me $150- $200 and that's it'. Instead, when the pandemic hit, apart from selling groceries, he also started doing all sorts of virtual adventures. When sports were gone, he was delivering popcorn to people's homes and other snacks and then via Zoom, they would watch vintage Seattle Mariners games. He then started developing meal kits that were actual tasting menus, where he would set up the whole mise en place and provide all ingredients for home cooks to do these elaborate multi-course meals. He would help them out over live video conferencing.
Then you have something maybe a little more mundane, but still quite interesting. Wow Bao, which is a dumpling chain in Chicago, started selling their frozen dumplings to restaurants, so they could set up virtual Wow Baos in their kitchens and have it delivered by a third-party delivery.
That's new income for Wow Bao and also a different revenue stream for the restaurants that they're delivering the dumplings to. There's crazy stuff going on out there.
Key Advice for Restaurant Operators
Matt Levin: So put your advice-giving hat on. What's the best single piece of advice you can give restaurant operators right now?
Bret Thorn: Listen to your customers. If all of the Yelp reviewers are saying that your fish is salty, maybe your fish is salty. Figure out what they need. That's how operators have adapted during the pandemic. As I said, if customers wanted groceries, they gave them groceries, if they wanted a fried chicken sandwich, which apparently everybody wants, they gave them a fried chicken sandwich. Just really being responsive to your guest's needs.
And part of that is there's also a technological solution. There are more ways of getting feedback from customers, whether that's listening to them on social media or finding new ways to answer surveys or otherwise give feedback to you. That tends to be more of a chain restaurant model than an independent one, but I have no doubt that there are also solutions for independent operators that allow them to leverage similar technology. Not my area of expertise, but I'm sure it's out there.
Matt Levin: I talked to some operators who say, there's just no substitute for walking the floor, doing table touches, and seeing faces and body language. Do you think that in a world where there's permanently more takeout and delivery, that people are going to get the same type and quality of feedback?
Bret Thorn: Well, certainly nothing can be walking the floor, but a food delivery experience is different from a sitting in a restaurant experience and your expectations are different. While in the restaurant you might want a smile or a friendly banter or abrupt efficiency, depending on what kind of customer you are.
What hospitality. Means when you are getting delivery, it's different. They want order accuracy above all else. They want the food to arrive in a timely manner and they want it to be in good condition when it gets to you. It's less of a human interaction and more making sure that you get everything done correctly.
Now that people are trained to rate something, most often their ride share, the minutes that it's over, to get a prompt on your phone and give however many stars and possibly comment.
It's a different kind of feedback, but in many ways, it's a more honest feedback because if I'm commenting on an app, I'm going to tell you what's wrong. Whereas almost all the time if somebody in restaurant management walks the floor and asks me how everything is, I'm going to say, it's great.
I actually think you'll get more honest feedback from them answering those basic questions that you can ask them digitally. Operators do have to understand that as I said, hospitality means a different thing based on the transaction, whether it's your anniversary and you're in a restaurant and you're celebrating and having fancy wine, or you just want a burrito and pancakes delivered to you that you're going to dip into your milkshake while you're sitting in your pajamas.
That's it's a different occasion. Operators I think have to be excited about handling any of those situations. Or if they're not excited about it, then they have to not do it and take the consequences because you don't go into it into the restaurant to make a lot of money. You do it because you love it.
Matt Levin: Any last words of wisdom for folks in the industry?
Bret Thorn: I think there's just the basic aphorism that just because something didn't work before doesn't mean that it won't work now. You know, we're in a new situation and six months from now, we're going to be in a different new situation. And so try different things.
Matt Levin: That's fantastic. Bret, thank you so much for joining us today. I think we all share your hope that many of your optimistic predictions will come true. And I personally certainly hope to share a table with you sometime in the near future as well when things go back to normal.
Bret Thorn: That would be great. It's been really fun hanging out with you virtually, and I would love to do it in real life someday.
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This podcast was produced and edited by MarketMan. Music by Joseph McDade.