Even as they prepare to reopen indoor dining after a six-month, pandemic-induced shutdown, many restaurateurs worry they will struggle merely to get by. A mandated cap on capacity will guarantee that at least three out of four tables stay empty. And as fall turns to winter, outdoor dining will become less attractive. Everyone agrees more establishments will close for good.
“For most restaurants, it’s not month to month, it’s week to week,” said Luke Ostrom, managing partner at NoHo Hospitality Group, which owns The Dutch and nine other New York establishments, seven of which are open. “They’re not sitting on piles of cash for a rainy day.
“If the landlord says, ‘You owe me every penny since March,’ almost no restaurant will have the ability to pay it all back.”
Ostrom said his group is renegotiating a lease that would give its landlord a percentage of the profits, a structure employed by many food halls and hotel restaurants. At the start of the pandemic, Ostrom’s group laid off 98% of its staff; a little more than 30% have been hired back, he said.
A lot of the difficulties of running a restaurant during the pandemic stem from the fixed costs. At The Dutch, Ostrom employs the same number of line cooks—five—at 25% indoor capacity as he would if seating went up to 75%. Meanwhile, the price of perishable goods has crept up, accounting for a third of monthly revenue. Ostrom’s restaurants also had to absorb the cost of personal protective equipment including gloves, masks and filters—which has run in the “thousands and thousands of dollars,” he estimated.
The federal Paycheck Protection Program helped Ostrom relaunch his restaurants, but the PPP loans for The Dutch expire Oct. 1. After that, the restaurant has to rely on its own cash reserves—at a time when plummeting temperatures might crimp demand for outdoor dining. Congress might vote on a $120 billion restaurant bailout as early as next week, providing support to the ailing industry. But for now, Ostrom said, he is hoping his restaurants can soon restart holding private events—which would help offset the drop in revenue.
“Places that are only doing 35% of previous sales, without an influx of cash or forgiveness of debt, they’ll close,” he predicted. “50% capacity is the baseline threshold for restaurants surviving.”
Jeff Katz, owner of modern American restaurant Crown Shy, said that without private events, his business might be doomed. “Even with a good landlord, a good first year, good head winds, we might not make it,” said Katz, who opened Crown Shy last year and is also general manager at Italian restaurant Del Posto. “For many restaurants, December and the holiday season can bring in more than one-third of the entire year’s profits.”
Crown Shy’s revenue last October was a little more than $1 million, he said. This year, at 25% occupancy and even with outdoor dining, he estimated the restaurant will lose more than $80,000 after his expenses—including rent, labor and food costs—are paid. For November, he estimated, he might be able to clear $9,000—what he calls breaking even—assuming the capacity cap doubles to 50% by then.
“Nothing is more important than getting to 50, then 75, then 100% occupancy,” he said.
David Berson, co-owner of venerable steakhouse Peter Luger, said he’s one of the lucky ones. He doesn’t have to worry about rent—Luger owns its property. He has brought back more than 90% of its staff, including more than 40 servers. And he intends to keep the establishment’s roughly 60 outdoor seats and add electric heaters, in addition to 90 inside the restaurant.
“It will be almost a server per table,” Berson says, half-jokingly.
But even he is worried. “My fear,” he said, “is that we get stuck at 25% indoors when it’s too cold for comfortable outdoor dining.”
While having outdoor dining has helped, he said, the average check per table is lower than what he would expect for indoor tables. Patrons inside tended to stay longer and drink more, he said.
Because of the impact from the virus, Marco Moreira said, he is combining the two restaurants he owns, French restaurant Tocqueville and sushi destination 15 East, which are just steps apart in Union Square. They will share one space with a combined menu, he said.
Moreira estimated he has already spent about $150,000 to “keep the lights on during Covid,” for everything from insurance to utility bills and a minimal staff. He said it will cost $100,000 more to reopen—which includes an outdoor patio that he bought essentially at cost for $35,000 and a filtration system upgrade for about $15,000.
At the existing Tocqueville location, he negotiated with the landlord to pay rent based on a percentage of sales. This month labor costs exceeded revenue by 25%, he said, and he expects to lose money again next month. He said he doesn’t anticipate any profit this year.
“If I break even,” he said, “I’m lucky.”
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'We might not make it': The math simply doesn't work for many restaurants - Crain's New York Business
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