Restaurants Will Survive COVID19

6 May 2020

If anything is good for pounding humility into you permanently, it's the restaurant business. - Anthony Bourdain

Note: I have owned a small restaurant. This is personal to me.

A dear friend sent me a Bloomberg article about his restaurant. The article showed how one restaurant, his famous place, affects supply chains that stretch for thousands of miles and cross-country borders. He had never before closed his doors, yet COVID and self-protection orders for quarantines required the unthinkable. For a few weeks, he tried to operate only with a take-out and delivery service. Safety for his staff required a total shutdown. Now, after 20 years in business, he may never re-open.

Meanwhile, a man I know in Palma has a placement agency for top talent for the food service industry. By his estimation, we’ll be lucky to have 40% of current restaurants open in two years. He has quickly pivoted and opened a complimentary business that offers placement services to a sister-industry. However, not all consultants and auxiliary businesses will be so agile. With fixed overhead expenses and employment costs, many are struggling to find ways to remain in business.

Closed

Why Wouldn’t They Survive? #

Scientists are continuing to learn about the Novel Coronavirus, a.k.a. COVID-19. More is unknown than known. However, what is known about the spread of the virus:

  • The human body has never seen this virus before; hence, the name "novel“
  • Asymptomatic people spread the virus through visible and invisible droplets
  • Coughing, sneezing or simply rubbing the face or nose contaminates the air or surface of objects
  • COVID-19 lives for up to 2 days (from data that is currently known)
  • People congregating in a contained and high density environments are more likely to be infected
  • Restaurants are congregating places with smaller spaces than other community-centered places like meeting halls, churches and convention facilities

Looking at the points above, it’s easy to see the primary financial problem: restaurants will not be able to serve the required number of patrons to cover their costs. The owners are less likely to meet their financial obligations because they will have fewer patrons either from occupancy restrictions or the economic and health hardships of patrons.

What Dining Out Was Like #

For many, sharing a good meal with friends surrounded by themed-style ambience was the highlight of the week. Discovering a great Indian restaurant, a great sushi bar or just finding a chair at the Santa Catalina Market Bar made living in Palma fun. Another favorite was exploring the island to find places that specialized in a local heritage dish with a twist of fusion from another culture was the epitome of life for many of us.

Time with friends in these places was worth several conversations and many of us shared posts on Instagram of the dishes and the ambience to share the exhilaration. During high-tourist season, getting into a favorite place required Herculean planning and prior reservations. Even our most familiar places would have a hard time fitting us in.

Many years ago, we followed Donald from the Club de Vela in Port Andratx to his own restaurant in Santa Ponsa. We simply didn’t have many choices in the area for English-speaking patrons and when we found a place where they remembered our names and had good food, we travelled. We also traveled to other parts of the island to discover Mallorcan-owned restaurants. Generations of these families have entertained many of us. Then, the industry expanded after the EU opened up. Marc Fosh arrived on the scene to bring modernity to the Mediterranean cuisine in Mallorca.

The collective grief we currently feel from not being able to have a quiet meal out, celebrate birthdays and anniversaries in special places or simply enjoy someone else’s cooking for a change is real. The big question is what are we going to do about it?

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Economic Realities for the Restauranteur #

Operating in a seasonal market like Mallorca is never easy. With quarantine and self-isolation, mask-wearing and social-distancing have become our new normal. Bars and restaurants are unable to open interior seating to the public although there is talk that places will open soon. The physical realities of needing to turn a certain number of seats to pay for the hard costs of operating a restaurant are unavoidably impossible.

Costs of operations are more than licenses and health permits, a real estate lease, liability insurance, equipment maintenance and utilities. It’s labor and marketing costs - not to mention perishable goods. The hours of time and energy an owner has to bring a vision to life cannot be estimated. The social media management and marketing requires hundreds of hours that are never repaid by a hard currency. It’s the love of a place, sharing a drink with your favorite clients and calling special vendors for supplies that offer rewards of the heart.

Not only do standard operations have fixed costs, but the owner will need to add improvements to the HVAC systems to prevent the spread of COVID similar to what happened in one small restaurant in Guangzhou, China. This showed us all how spacing through social distancing is helpful, but will not prevent the spread of contagion.

CDC Mask Transmission

Solutions: A Path Forward #

Early in the COVID-19 quarantine, Affordable Mallorca created an online directory for home delivery services. We then became an Ambassador for Adopt Un BAR , an initiative to channel financial support to bars and restaurants. These were viewed as short-term measures to help provide assistance to some of those individuals most dramatically affected by COVID-19.

Truly, no one knows how restaurants will re-open safely. Some are doing it now with take-out. The Balearic Government has rescinded the “terrace tax” through December. The President of the Restauración Mallorca, Alfonso Robledo, has proposed a “methacrylate screen” between diners to provide better containment of those asymptomatic diners. It is unclear if these are shots in the dark.

Text Methycrylate Screen

Success Stories in Time of COVID-19 #

Healing for Hummus is our local example. Michael Hewitt teamed up with Ronen Levy of Simply Delicious and Antonio Serra Garcia of Es Reco by Antonio Serra to provide hummus, falafel, pitta and wraps to doctors and nurses at Son Espaces in Palma. Donations by caring people make this possible. For more on this, read >>. Compassion In the Times of COVID

Many restauranteurs have a strong commitment to communities. José Andres, a Spanish chef living in the USA, has created a social media following by creating programs that have showcased the history of food, the impact of the food industry and by feed those in need when disaster strikes. His ability to mobilize for human armies is remarkable.

Just one example, when a hurricane hit Cuba, he took his team on the road and fed the service providers. He has continued with this trend and gained a following for being The World’s Cheerleader for Community Service in Food. He is putting together an initiative in New York City to support existing establishments by raising funds to have them provide meals for nurses and first responders – up to 60,000 meals per day. This is a win:win –- Restaurants are paid to prepare meals and responders are fed.

Delivery to Son Espaces

Here are points to consider as we move forward:

  1. Landlords need to get real. An occupied space is much better than an empty space. Rent abatement, extensions of leases combined with a substantial reduction of monthly rent is mandatory if this sector will remain productive. Since tourists will allowed back on the island but travel is curtailed, the entire sector needs to reset back to 40% of total costs for the next two years.
  2. Banks, Lenders and Creditors need to be flexible. Stop with high rates of interest and be satisfied with a reasonable return on investment. In many ways, this is a perfect time to reset the financial system from the banks and equity providers having the most important role in a business. Instead, let the money be a part of the whole vs the monster that can never be satisfied.
  3. Friends and Family - step up. This is the traditional way restaurants and bars are funded. Now, it will be no different. According to John Mariani, a food historian who penned his latest article for Forbes, restaurants will not just survive - but thrive. He provides good historic facts to the current absolute visual collapse of our most visible sign of a healthy community – a neighbourhood bar and a few nice restaurants. Unfortunately, many of our favorite places can't survive.

Ex. If a lease is €1,500, monthly, the rent needs to be reduced to €600 per month for two years. This will be difficult if the landlord has to satisfy a mortgage. Banks also need to be real - - that may be easier said than done. But as a sector, negotiating with the banks will be easier than each property owner asking for an exception. There is no guarantee that any subsidy will keep many businesses operational, but this measure would be helpful.

Even though Mallorca will have tourists returning, the numbers will be much less than before COVID-19 entered our lives, at least for a while. This means dreamers and entrepreneurs will come and go but landlords will still need to get real about their assets and realize having a long-term tenant works better than short-term money.

Another idea is to find an investor with BTC or digital currency and try to pay as many of your suppliers in that digital currency. While it takes time to become familiar with this method of payment, the effort will save hundreds, if not thousands, of Euros in traditional transfer methods.

Mariani provides context during wars and recessions but this has little relevance if the basic numbers simply do not work anymore; i.e., the number of seats, multiplied by how many times you turn a seat a night, multiplied by an average cost of a meal, equals profit will not meet hard costs. That takes us back to #1 on this list of landlords needing to be reasonable.

Outdoor dining

Time to Pivot to a New Normal #

I remember years ago when distilleries in Japan would have tasting parties in cemeteries because of the open-space, landscaping and larger buildings that offered break-out spaces. We might see something similar here in the foreseeable future. Unexpected types of facilities will be modified to meet the new needs. Here are a few ideas:

  • Vineyards are already in demand but cost to mitigate the disastrous effects of the phylloxera fungus has caused much financial hardship on many beautiful properties including Biniagual near Binissalem. Offering a food and entertainment venue is not a hard reset for these properties if other costs can be contained. Agro-tourism properties like Villa Vegana in Sineu offer outside dining and gardens. These types of properties are not in Palma, but dining out will become more of an event for a while so a drive to one of these places will be like the old days here on Mallorca. These places usually have other items to sell – cookbooks, cards, memorabilia. Buy it.
  • In normal times, I am not a fan of consumerism, nevertheless hard effort was made by our fellow residents into creating these places. Supporting the owners – if you are able – is greatly appreciated by future patrons who have not been there yet. Remember, we are trying to preserve and nurture local dreams that are also our future opportunities.
  • Food Courts – Food Trucks and Food Gardens like those we see for festivals may become the mid-term solution for eating out. Spaced apart with sufficient distance between tables to provide reasonable hygiene, eating al-fresco is one way to be with friends and enjoy someone else’s cooking. For anyone who has been to Austin, TX, they have a great food court area that would be a hit on an in-fill site in Palma.

Conclusion #

While I don’t have all the answers, I spent several decades as an inner-city real estate developer of large-scale projects. I know the financial pain is real for many – property owners, restaurants and bars, suppliers, residents, and tourists. The next two years will not have a “one size fits all” solution. However, we can navigate these times together if we support one another in a shared vision of Mallorca's community.

If you have a favorite restaurant, jump in and offer support on social media with marketing. If you are in the position, help in the kitchen, source product, clean the restaurant and provide cash loans or help source community grants.

If you are a restauranteur, remember that it’s your energy that created your place. Your passion will attract support. If you network, join LinkedIn and other community-based social media platforms. Create a core advisory team and make sure your team is comprised of people with the skills you need, not just your best patrons. Stay open-minded and brainstorm about how to continue to serve in spite of the pandemic.

We need dining establishments of all price points. You may need to change locations, downsize, release executive managers. Now is the time to become lean and resilient. Remember that we all need to eat and food is locally-grown, which means we can truly turn this to a Locavores Haven.

I hope you use this article as a jumping-off place for conversations with friends and family about how to move forward. In the short-term, talk to your neighbors via video chat about how to have a progressive dinner online. I have friends who have celebrated anniversaries with friends through video conferencing. While this may not be your idea of fun, this is a safe alternative to sulking and feeling lonely.

Our collective grief over not sharing meals together is real. Scientists say we need to prepare for periodic quarantines over the next several years. Let’s support each other, our favorite restaurants, come up with new ideas and places. Together, we will get through this and find a brighter horizon.

For more on the re-opening of life in public, read here COVID19 Phases of Spain’s Lockdown Exit Strategy.

Ibiza Nightclubs Closed: A Look Inside the Realities

Listen to the President of the Island and a manager of local nightclubs describe the current situation. They are clear: We must have testing. "Without testing, this type of experience is NOT safe."

Click to watch the interview and see scenes from Ibiza
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Sources #

  • Bloomberg
  • Forbes
  • Personal Experiences

6 May, 2020

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