How to Close Your Restaurant
Caroline HatchettApril 9, 2020
Editor's Note: Plate is making coverage of the coronavirus available to all readers. Find more articles here.
While many of the country's restaurants have shut down, there are still hundreds of thousands that are open, having pivoted to take-out and delivery operations, general stores, and community kitchens. These owners and workers make up an industry of relentless hustlers and problem solvers. A closer in this business is the last person working, not someone who quits.
But that mentality has left the restaurant industry wholly unprepared to pause in the weeks, and, possibly, months ahead.
How do you know when it's time to close?
Making the call is harder for some business owners than others. There's no manual for closing a restaurant—let alone during a global pandemic or with the hopes of reopening at an uncertain future date. Even in parts of the country, like New Orleans, where natural disasters occasionally halt business, owners are uncertain how to proceed.
Camilla Marcus made the decision to close West-Bourne at midnight on March 14. "I'm low-key. I don't have high anxiety. I'm not a worst-case scenario person. But I told my staff [that] the day I feel unsafe, we're closing," she says. Marcus is a Union Square Hospitality Group alum, who has also worked in law, real estate and technology. She co-founded TechTable, a conference connecting food, technology and investing, and launched West-Bourne in 2018 as a mission-driven, zero-waste all-day cafe.
She knew if she felt unsafe, her team members would, too. Many relied on public transportation. New York still does not have mass testing, and Marcus couldn't guarantee that protective equipment and extra cleaning would prevent the virus from spreading to and among her employees. And while her SoHo neighbors have the resources to stock up on weeks of groceries or leave the city altogether, "I didn't feel comfortable putting my team at risk in a neighborhood that's not food insecure," she says.
Outside of a dense viral hot spot like New York, Marcus' decision might have been different.
Elizabeth Tilton, founder of the restaurant consulting firm Oyster Sunday, has been guiding clients about when and how to close their restaurants. Tilton previously managed public relations and marketing for Momofuku, and, with Oyster Sunday, she's offering independent restaurants the infrastructure of big groups with services, including operations, accounting, payroll, marketing, communications, branding, and technology. During the Covid-19 crisis, her team is working pro bono to produce resources for the industry.
The bottom line: Safety has to be your first priority. If you can't provide the guidance, protective gear, or space for people to safely work and interact with guests, Tilton says it's time to close. Now.
Make the decision swiftly, and then move on to closing your restaurant and helping connect your team with resources. "This virus has no inclination toward race, gender, or location. We contaminate each other. It's a people issue, and we are a people-driven industry. You have to evaluate whether your operations can be run so that we don't infect each other," says Tilton.
If your team does feel safe and can adopt new Covid-19 cleaning protocols, the next step is to take a hard, objective look at your numbers. "I'm talking to accountants, and they're telling me that most people who have pivoted to delivery are only making 10 percent of usual sales," says Tilton. "When you look at labor, rent, and unemployment, all these factors dig into your budget after laying people off. All of a sudden, you're in the red again."
The CARES Act includes two programs that could offer significant financial lifelines for restaurants that want to stay open: the Economic Injury Disaster Loan (EIDL) and its $10,000 emergency advance, along with the Paycheck Protection Program (PPP). The latter is designed to cover ongoing fixed costs (payroll, utilities, rent, and employee benefits), and if 75 percent of funds are used for payroll, the entire loan can be forgiven. However, there's a hitch for restaurants.
"Since the PPP loan is meant to offset the cost of payroll, there is a grey period with restaurants around layoffs and rehires, because the loan takes in the account who is on the payroll when the application is submitted," says Tilton. "We are trying to get more transparency into how this is determined and if the loan can be applied to rehire rather than maintain staff since this will drastically impact the loan that is possible for restaurants who have little to no staff."
Wherever you are right now, take a step back. Talk to your people. Call your accountant and lender. Reflect on your values and your obligations to your team and the community. And know that there is no one right answer for restaurants. If closing is your best path forward to reopening, make the call, develop a thorough closing check-list, and get to work.
Communicate with Staff
If you don't have staff email addresses or cell phone numbers on file, start collecting them now. Your staff should be your first priority, and you need to be in touch in as many ways as possible. Choose what technology you'll use (or need to set up) to communicate in the weeks ahead.
First determine whether you will lay-off or furlough employees. In normal times, lay-offs mean permanently severing ties, but right now, many restaurants are choosing to lay-off workers with plans to rehire them. Furloughing essentially puts workers on unpaid leave, but they retain access to healthcare and other benefits. Both categories of workers are eligible for unemployment benefits, so it's really a matter of whether you can afford to continue paying for benefits.
Once you have an official closing date and plan, huddle with managers and then call an all-staff meeting—in person, on the phone, or online—and clearly explain your decisions and the implications for employees. No one knows for certain when the crisis will abate, but tell them as much as you can about your short- and long-term plans.
As best practice, each employee should receive a letter of termination in person and/or attached to their paycheck. However, the language used in termination letters is formal and transactional. Tilton recommends writing a separate letter to employees, where you speak from the heart and provide as many resources as you can: links to unemployment applications, relief funds, mental health services, your personal email, education opportunities, etc.
Plan on sending weekly communications to your team. Laid-off workers are scared and vulnerable … and broke. This is the time to be a proactive leader.
Also, work with a translator so non-English speakers aren't left in limbo. Ineligible for unemployment and other government benefits, undocumented workers are particularly vulnerable right now. If you participate in the under-the-table economy, figure out what you can do for these workers in need, whether that means sending groceries, covering utilities or other bills, or checking in often.
Tell Your Community
Your diners are your biggest advocates. After you talk to your staff, it's time to share details with your community about when and why you're closing. "People are looking for strong voices right now. Explain what's happening with the most transparency with which you feel comfortable," says Tilton. Once you determine the message, update your website, send a note to your email list, and post from social media channels. You also need to mark your business as temporarily closed on Google, Yelp, and other platforms to avoid confusion.
Don't go silent in the weeks ahead. Marcus is posting daily on her personal Instagram account to educate diners on legislative issues and share what's happening as she shelters in with her husband and six-month-old. Her team has also launched a West-Bourne IGTV channel since shutting down.
Many chef/owners have launched staff fundraisers via GoFundMe or gift card sales. There are different tax implications for each of these, so check with your attorney and accountant before starting anything.
Assess and Deplete Inventory
Sensing a shut-down was coming, Marcus' team slowed down produce orders and stopped bulk prepping. They conducted a full inventory the day before West-Bourne closed, and the staff took home any perishable goods they wanted. Marcus arranged for next-day pick-up of remaining food by ReThink Food, a hunger relief organization.
Other restaurants have burned through inventory by making meals for their teams and other hospitality workers, or by briefly transitioning to delivery service before closing. Others have set up markets for customers to buy goods. In L.A., Jonathan Whitener and Lien Ta held a one-day "bodega pop-up" from All Day Baby to sell excess eggs, ribs, shishito peppers, beer, pasta, bread, and banana cream pie.
Call Your Vendors
Marcus' director of operations assembled a list of West-Bourne's vendors with contact information for the business owner and their account manager. Marcus wrote a personal note to each one and paid all vendors up to date. "This will affect their businesses, too," she notes. "One of our farmers, who sells to a lot of high-end restaurants in the city, wrote to me and said, 'You're the only person who wrote and paid up to date.' That broke my heart."
Tilton says to go line by line on your budget to eliminate as many fixed costs as you can: reservations platforms, POS system, music streaming services, delivery structures, garbage pick-up, pest control, linens, hood cleanings, etc. Don't assume that your grease trap service will automatically suspend charges. You have to call or email. Negotiate payment terms, if necessary, and pay as much as you can. "When you're opening back up, being in good faith with all your vendors will pay off in the long run," says Tilton.
What About Rent?
You know what your relationship with your landlord is like and what they're likely to help with in this time of crisis. Marcus emailed her landlord a week before West-Bourne closed, and he ignored her for six days. It's her impression that landlords are waiting for state governments to enact stays on mortgages before ceding any major breaks to businesses. Marcus and her landlord are still negotiating terms, and she has informed him that she's not paying rent in April.
Tilton says all you can do is call and be honest. Some leases are more complicated than others, and some cities have better protections for businesses. She has seen some landlords defer payments, but don't count on generosity from the real estate industry.
Fill In Investors
In the pecking order of priorities in Danny Meyer's book Setting the Table, investors come dead last—after staff, guests, community, and vendors. This is not the time to pay them back.
"Tell investors what decisions you've made and how they will affect the longevity of the company. Lay it on the table immediately," says Tilton.
Be as transparent as possible. What's your cash flow today? What will cash flow be like four weeks from now? Are owners or managers taking reduced salaries? Did you furlough or lay-off employees, and what impact will that have one to three months from now?
"They need to know that you're making decisions with sincere effort and an understanding of where you are now and what your projections will be," she says.
Clean and Secure Your Space
Start deep cleaning projects as soon as you set a closing date—empty fryers of oil, disassemble and clean the grill, degrease and scrub the oven, the walls, every surface. The last thing you want are pests taking over your kitchen and dining room during the shut-down. Marcus immediately sent everything to the laundry so it could come back the same week. Her team also conducted an equipment check and even sent for a repairman to fix their combi oven—better now than when they're trying to reopen. The only piece of equipment left running is the (empty) walk-in.
Gas and power are the only services Marcus did not pause. Triggering ConEd, New York's utility company, would delay reopening, potentially for months. To be safe, they turned off all pilot lights and shut off the gas valve to the restaurant: "God forbid, you have a gas leak, or if something goes wrong while no one is here."
Marcus secured valuables, turned off all the lights, and boarded up the restaurant. The plywood was a necessity that did not please her neighbors. "There are already reports of looting in New York," she says. "The problem is, if in two weeks, things get bad, we won't be able to get someone to do it."
Tilton, who is sheltering in New Orleans, says the city looks it does in like hurricane season. "It's smart to board up but sad to see as a neighbor. Restaurants should use their storefronts—boarded up or not—to communicate with people. Diners don't know if you're permanently shut down. You can post a message that tells them where you are in the process," she says.
If you plan on returning to the space during the shut-down, develop a list of projects you can tackle: retiling, painting, sealing floors, polishing bar tops, etc.
Ongoing Efforts
Marcus has not slowed down. She is in constant communication with her team. They're planning for scenarios A, B, and C. She's also helping lead fundraising efforts for Relief Opportunity for All Restaurants' (ROAR) and advocacy work with Independent Restaurant Coalition.
She doesn't have any regrets about the way she closed West-Bourne. "We wanted to be thoughtful and in lock-step with the city," she says. "We did it as gradually as we possibly could for something that was fast and furious. We were able to slow it down and do it on our own terms."
Caroline Hatchett is a New York City-based food and drinks writer, who also happens to host the world's only casserole lifestyle podcast.