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Episode 15: How Will Restaurants Survive?

Alvin and Brady discuss the overwhelming financial challenge the restaurant industry is facing and how they're dealing with it in their own restaurants. On the flip side, they take a look at some areas that are thriving during COVID-19.




Episode Transcript

August 17, 2020

Brady Viccellio

If you've ever wondered about what goes on behind the scenes at restaurants, then you're in the right place. This podcast takes you inside the minds of restaurant owners, chefs, bartenders, servers -- basically anyone who has anything to do with food drink or hospitality. I'm Brady Viccellio, owner of Steinhilber’s restaurant and La Bella Italia on Laskin Road in Virginia Beach. Welcome to The Check podcast.

Alvin Williams

And I'm Alvin Williams, cohost of The Check and owner of Cobalt Grille restaurant in Hilltop, Virginia Beach. Welcome to our podcast. We'll be talking about restaurants, people who work in restaurants, who own restaurants and the people who like to dine in restaurants.

Brady Viccellio

Alvin, have you made any money this year?

Alvin Williams

You want the short answer? No.

Brady Viccellio

I thought you're doing okay.

Alvin Williams

Well, we're doing okay. People are coming in through the doors but, of course, we're still 50% capacity and less than that when it rains, because we lose our patio, so it's still difficult. But people are coming out.

Brady Viccellio

Yeah, I'm kind of just like you. Living off savings.

Alvin Williams

Yeah. Well, my savings started drying up. So I did have a rental property -- the condominium where I used to live and ended up selling that recently. So kind of out of necessity.

You know, I'm interested in talking about seating capacity. So this week, which I think it was Thursday, we had a private party. Obviously, it was less than the 50 people that are required. I think it was 36 or 38 people. And it was a rehearsal dinner, and worked out really well. You know, they took the main dining room and everyone still wore masks and the tables are socially distant, but it meant that we could have kind of like a private dining situation in that one room, and it really worked out. But what was interesting is--great couple, I just met a couple but I knew their father and he was the one who booked Cobalt for their rehearsal dinner--they had started off with their wedding plans for 250 people. And at some point, they were able to do that because you could have gatherings of that size. And then he got chopped. So then they chopped it down to you know 200, and it just kept getting cut and cut and cut. So our rehearsal dinner we did for them, I think was 38 people. But their wedding the next day, they said that they were going to do three separate events of 50 people. So they had one thing at one space for 50. And then someone was going to clean that space. And then they went to another place somewhere else and did it again with another 50 people and then went back to the original place that had been then cleaned up and do it again. So they have three…

Brady Viccellio

Three weddings or three receptions?

Alvin Williams

Well, I think there were three receptions. I think they did maybe one wedding, and then the three different reception parties. And I'm like, man this is crazy, but they were good sports about it. You know, he had a really good positive outlook and was like, you know what, we just got to do what we got to do. And we love these people, and we want them to share in our day. So if it means that we’ve got to do three separate events, then that's what we're going to do. So I just thought it was a lot to ask. But but they did it.

Brady Viccellio

You just have to adapt. That's the thing. I think the those of us who are able to adapt, or those are going to be successful in the end. I mean, I think that eventually we're going to get through this. I don't know if it's gonna be another year or another month. Who knows. But eventually we're going to get through it and I think the people who stick it out and fight through it, the restaurant operators, owners, employees, they're the ones are going to be on the top of the industry.

Alvin Williams

Well, we don't want to see any restaurants fail, but it's certainly thinning out the pile a little bit. Places are closing. Fortunately, we're still here.

Brady Viccellio

We squeezed in a couple of weddings when we had that 250 gathering. They weren't that big, but I think one was 80 and one was 65 or something like that. I think we had only a couple weekends that we had that capacity. And they were both in one of those weekends. I think they were lucky -- one of them had been rescheduled maybe half a dozen times throughout this whole thing. Another thing we did is we put up cabanas and on the back lawn. Of course, they're like everything on our bak lawn it's socially distant. And a little bit of protection from the from the weather and gives you shade and a nice little private area to have a party of 10 or 15 people. Yeah, and those have done quite well.

Alvin Williams

It's nice. We had a we have a friend who's rescheduled her wedding like three times and finally it's just like look, we just not doing it until next year or something. You know, you got to send out invitations and then you got to organize and hold rooms and put down deposits for photographers, cakes and for the venues and it's just really tough. It's really tough.

Brady Viccellio

Obviously the weddings and larger events have waned or been postponed. But Alvin, have you seen the same number of people celebrating couples and small groups celebrating birthdays anniversary?

Alvin Williams

Yeah, people are definitely still coming out and doing those smaller gatherings for birthdays and anniversaries. Usually parties have, you know, eight to 12. Tonight we’ve got a birthday party, they're coming in -- 20 people, so we've got a little section off of them so they're away from other people. But people are still coming out and celebrating, which is great. But again, we've got to socially distance our tables, six feet apart from each other. My concern not to be negative Nelly, but you know summer’s going to be done soon and we're going to be going into the winter months and we're not gonna have that outside seating anymore.

Brady Viccellio

Plus it's raining every day.

Alvin Williams

Every time we ring the dinner bell, it starts raining. So we lose that patio seating.

Brady Viccellio

You’ve got a bell over there?

Alvin Williams

No, it’s figurative. You know, around four o'clock in the afternoon, it starts raining. And you know, we’ve just put the tables out and sanitized them and cleaned them and got everything ready. And then here comes the rain.

Brady Viccellio

Yep. happens to us too. And then the rain goes away. And then it's squishy on my lawn. But like you said, we're just adapting. A lot of people have asked me about the scalability. You know, why can't you scale a restaurant? Why can't you just scale down and still be sort of successful? You know, half the people come in so you make half the money?

Alvin Williams

Well, I think what people need to realize is we still have the same overhead costs. We still have to turn on all the lights. We have to have the gas and we have to have the same amount of staff. So all the overheads are still the same -- rent, you know, those costs don't go down, they're still there. So it's hard to scale and make things work like they used to when you only have a certain percentage of your guests.

Brady Viccellio

Yeah, that's right. I’ve seen that as well, on my end. And, you know, a lot of people don't understand exactly how the finances work in a restaurant.

Alvin Williams

And not to interrupt. I say it's hard. It's not that it's just hard. It's impossible. It’s not an achievable thing to do. Right? Which is why we've closed our restaurant for lunch -- we've been open 20 years, and we've always done lunch. But now if we serve lunch which is a lower check, average, and we still have the socially distant table, so we can only serve half the amount of people, but we still have to have payroll and we still have to have you know, the air conditioning on the lights and the cooks and everything else would actually be going backwards. We would hurt ourselves. If we open for lunch, we would end up closing for lunch and dinner if we offer that service at this point. I mean, my payroll is similar to where it was pre COVID. I mean, it's not much lower, but my sales are much, much lower. But the sun will come out tomorrow. We can't get buried in this because we'll get dark and gloomy. I think, you know, at some point things are going to be better.

Brady Viccellio

Let me try to explain a little bit of the finances of restaurants so we understand Alvin's statement about the impossibility of scalability with success. So food, liquor, beer wine, labor -- if everything's going right, it's about 70% of your gross. Then you add in your rent, probably 10%, utilities and all that kind of thing. Five to 10%. I mean, you're up at 90% of the dollar, that's going to expenses. You turn off the faucet of the people coming in the front door, or they're only coming two days a week, there's just no way that you can turn a profit. Only busy restaurants make money. You only make money on busy nights. And on slow nights, you lose money. And it's what we deal with every day and it's how it works. We're used to it, you know, busy months, we make money, slow months, we lose money. And it’s seasonal and it goes around. And you know a lot of people close down when it gets slower. You have seasonal restaurants like we talked about with Sam McGann. And he wanted to be the 12-month-a-year restaurant in Duck and, and I'm sure he's had to make some serious financial sacrifices to do that.

Alvin Williams

Yeah, so basically the busier nights make up for the slower nights to kind of balance and even everything out. But on those busy nights, which we expect to be Thursday, Friday, Saturday -- if for some reason it's not busy because of rain, or because we can't use our outdoor seating or something, then we're going backwards.

Brady Viccellio

You either have no profit or you have loss.

Alvin Williams

We're not balancing for those slow Mondays or Tuesdays. And for Sam McGann in the Blue Point and those kind of seasonal restaurants, they have to kill it in those busy months to get them through the winter, right? Because they still have to keep on their staff, payroll, and they still have to keep their restaurants open. So they got to make money in those four or five months.

Brady Viccellio

Right. And when I said your utilities and your rent could be as much as 15%, that 15% grows really quickly, when your gross is half of what it should be -- it turns into 30%. Your expenses are, let's see, I mean, you're that's just occupancy costs, plus food plus labor. You're already at 100%. And that's and that's if everything's working right.

Alvin Williams

Now you’ve got to account for things like some wastage.

Brady Viccellio

We’ve got extra waste.

Alvin Williams

Yeah, you’re buying food. You're not selling it at the same rate that you used to.

Brady Viccellio

So your food cost goes up to 35 to 40%. And then you gotta have your salary guys come in no matter what. And then you’ve got to try to get your people on the schedule, have them clean or do whatever, keep them busy.

Alvin Williams

And this is why a lot of restaurants are closing through no fault of their own. It's not that they're running their restaurants poorly. It's just that they don't have the traffic anymore. And that's due to COVID.

Brady Viccellio

Right and then your AC stops working on the only busy night you have that week, of course. Or you get a couple employees call him call in sick on the one night that week that you're going to make some money. You're two people short, your AC is not working. People come in, it's hot. You're service isn’t up to par. They leave upset.

Alvin Williams

We have to make a movie about this. I think it'd be pretty cool if we made a movie. But what would we call it?

Brady Viccellio

The Check. The motion picture. Alvin, in addition to all these expenses, you also have COVID expenses.

Alvin Williams

Yeah, new to us that we never had before. Like to go boxes, to go containers for example. We had them before but we never did as much to go, so that's a new expense. Cleaning supplies of course, we cleaned before but not like we do now every day with the sanitizer -- so we got new cleaning products and more frequency so that's added expenditure as well as masks, gloves. What else?

Brady Viccellio

At La Bella and Steinhilber’s I contracted sanitizing foggers to come in. They come in weekly. So they come in and any surfaces that are touched, they sanitize. You know in in mass once a week – it just brings you back to zero.

Alvin Williams

Something I thought was interesting. You and I had lunch last week and we went to a restaurant in Virginia Beach. And they served our food in to go boxes. And then they brought the silverware and it was the takeout with the little spork thing in the little wrapper with the napkin, salt and pepper. Well, we kind of question it because we're sitting down at a table inside, socially distant, but our food is coming like we're at a picnic or something. And we inquired, and what I think we got out of it was is that they're easier to do that than to have a dishwasher.

Brady Viccellio

That's true. You either pay a dishwasher or you buy disposable. You know, we're running full service restaurants. And so we've got dishwashers and disposables. And I think that maybe, for us, it's challenging to do a big volume of to-go food and a big volume of for-here food because it's a another whole layer of complexity of preparation and planning. When you do that, if you just choose one or the other, I think that would give you some ease and some efficiency. Alvin, we were looking at a website earlier, and it has some statistics that I think we should share with our listeners.

Alvin Williams

Yeah, the restaurant employment statistics.

Brady Viccellio

15.1 million restaurant industry employees in the United States. 1.6 million new restaurant jobs will be created by 2028. These are pre COVID statistics. The restaurant workforce makes up to 10% of the overall US workforce.

Alvin Williams

That I found pretty interesting.

Brady Viccellio

Yeah, it's amazing.

Alvin Williams

Nine in 10 restaurants have fewer than 50 employees. So there's a lot of mom and pop restaurants out there -- a lot of small restaurants.

Brady Viccellio

How many employees do you have?

Alvin Williams

Before I was running at around 25 to 35 employees, because you got bussers, and you have servers and you have dishwashers and you have cooks.


Brady Viccellio

Over the course of a year, you probably you probably put out 50 or 60 W2’s I bet. You have lots of rotation as summer workers, and kids go to school and part timers.

Alvin Williams

I can tell you now in the kitchen, 5 people in the kitchen right now, Probably around the same up front so we're, we're barely just hitting double figures with staff. Well, Brady, how many staff do you have right now?

Brady Viccellio

At Steinhilber’s I've got, I think closer to 60 on payroll right now.

Alvin Williams

Wow. Well, that's pretty big. So you had a lot of work force stay with you through COVID or they came back?

Brady Viccellio

I've hired a lot of people.

Alvin Williams

It's still hard to hire new people. And they're out there but they're just not ready I don't think.

Brady Viccellio

At La Bella, I have about nine people on the payroll now. It’s a lot smaller.

Alvin Williams

So with the unemployment – I think they were getting paid $600. And now I believe that there’s going to be $400 version. And I think a quarter of that is supposed to be paid by the state. And I think some of the states are saying, Hey, we don't have this money to put towards that. Have they put that through yet? Are we still waiting?

Brady Viccellio

I don't think they can agree on anything right now.

Alvin Williams

I heard they were trying to 200 and then 400. So I don't think anything's solid yet. And I think a lot of the workforce is waiting to see what happens with that.

Brady Viccellio

So there's a bill Alvin that's onthe floor right now they're working on. It's called the real economic support that acknowledges unique restaurants assistance needed to survive, or restaurant act.

Alvin Williams

Is that the one with the $120 billion?

Brady Viccellio

$120 billion for relief for restaurants. And the thing is, the name restaurant comes from, it's the same root as restore. So a restaurant is something that’s a restorative thing. It's almost like a spa, that everybody goes to. You go in a bad mood, you enjoy a nice meal, you enjoy some good service. You're hungry. You’re no longer hungry. It fixes things. A restaurant is a restorative thing, you refuel. So not only do we need restaurants, as people in our society, but we also need them for life. We talked about all the jobs that create, not only do they create a vital service to society, communities, but they also provide places for people to work. And, you know, these relief acts, a lot of people that don't think it's fair for restaurants to get this kind of attention. There's plenty of industries that are that are suffering. Some people have really, really done well during the pandemic, but restaurants have really taken it on the chin. And a lot of the restaurant problems are government created for our safety, but they're mandated by the government and restrict our ability to run a business. That's just why that hundred and 20 billion is so important. And you think there's a million restaurants in the United States? So 120 billion. What's that? $1200 dollars per restaurant?

Alvin Williams

Yeah, but not to go too far.

Brady Viccellio

Not going too far.

Alvin Williams

But think about all the other industries that your restaurant or my little restaurant affect. It’s the linen company, and it's the trash guy, the garbage disposal and the recycler and then there's the farmers that we're buying products from. And then there's the vintners that we're buying wine from and the beer guy. There's so many other different revenue streams that come from our restaurant that they're all been affected too.

Brady Viccellio

There’s the guy that fixes that AC that broke. The person who refinished your tables --- so many little jobs that you don't think about that. I mean, every time you write a check, you're supporting somebody. Right? And there's a lot of checks we write.

Alvin Williams

So we are restaurants. We are a huge nucleus for all these other industries that surround us. And that's why we're so important. And that's why they now realize that they've got to help us.

Brady Viccellio

We have a friend who said every every business deal he's ever done was done in a restaurant somewhere. It’s become people's offices, conference rooms, etc.

Alvin Williams

Right and what do you think some of the industries are that are thriving, since this has happened? I mean, obviously, Amazon, Jeff Bezos, he's doing pretty well out of it. Maybe Cottonelle, the toilet paper supplier as well.

Brady Viccellio

You know, they're challenged because they've had to basically retool their commercial lines to put out homelines because the commercial toilet paper was plentiful. They had too much of that, while they had none of the stuff of you use in your house. I mean, you don't go to the gas station, and unroll a couple of squares of Charmin, right? And that's the nice stuff that you get at the Kroger's and stuff they're out of and still there's a lot of people at home. So there's still there's still a higher demand on that soft tissue that you use at home.

Alvin Williams

So liquor sales went up too right?

Brady Viccellio

Liquor is up, wine’s up, beer’s up, not from us, but grocery stores, grocery stores are from what I understand, they've done okay. Very well actually, landscapers, Home Depot, oh my gosh

Alvin Williams

That's right. Lowe's and Home Depot -- because a lot of people wanting to do projects because they were home so let's paint this room let's do this finish this project. Hand sanitizer people. Gloves.

Brady Viccellio

We deal with Adams Birch -- there's a truck that comes twice a week and loads gloves and to-go boxes I deliver some pizzas but that’s not really my main thing, but Domino's, Pizza Hut…

Alvin Williams

Fast food restaurants and they're already set up with drive thru windows and streamline and they've already got the systems in place. Yesterday and you could barely get through Hilltop because the line at Chick-fil-A. It was unbelievable. And God bless them. I mean, I'm telling you their customer service is top rate.

Brady Viccellio

Let’s talk about that for a little bit. You're a big fan.

Alvin Williams

Well, say why I'm a fan. It's not that I like going to fast food restaurants, because I because I don't like to support them and I generally don't like that food. But Chick-fil-A, I like to go there because of their service. I mean, they make me feel good when they ask your name andhow can I help you in the ass so eloquently and then when you get to the window, thank you so much. And you know, my pleasure, it's a nice experience. Right?

Brady Viccellio

It’s a simple sandwich, but it's always very good. Always cooked properly, always warm. You know, they don't they don't push cold food on their windows. Your fries are crispy and hot.

Alvin Williams

For me, I gotta tell you the food is secondary for me. I'm amazed at how they always have so much staff and I don't know where they get the staff from. I mean, I wish I could poach some of them, but that's not a nice thing to do. But they get staff. And they train them well somehow.

Brady Viccellio

It's a little bit like cult. And it's great. It's a service cult. And it's something that we both try to produce in our own restaurants or, you know where service is so important. That's what Chick-fil-A is – they just realized in the fast food world how important service is.

Alvin Williams

And I'm not surprised that how busy they are, but it does get a little frustrating when they're blocking up Hilltop because everyone's rolling in there.

Brady Viccellio

So there are people who are prospering in this. I think the category that's hurting most is the full service restaurants. The fast foods are doing well. The pizza delivery people were doing well.

Alvin Williams

And I think the big chains possibly doing okay, I mean, a lot of those people got the PPP money, but gave it back.

Brady Viccellio

Yeah, but that was political. I mean, I think a lot of them needed it. And they gave it back so they wouldn't look bad. I don't know how well Ruth's Chris is doing and they had to give theirs back. Danny Meyer gave his back. Danny Meyer, who is a New York restaurant, owner and restaurant guru has expanded his empire from New York full service restaurants into Shake Shack. And he did Shake Shack almost on a lark to try to help revitalize a park.

Alvin Williams

He was full service fine dining, and I guess now he's doing a fast casual, I guess they call that?

Brady Viccellio

Well. It's fast food. It's hamburgers and shakes. But he's done better with that than he has all his other restaurants in history. He does better with Shake Shack in a month than he does in a lifetime.

Alvin Williams

He’s a very astute restaurateur, and I believe he started with Union Square and Gramercy Tavern. Brady another industry that's doing real well out the COVID is a bicycles. The bike shop next to us, I talk to the manager regularly because he's next door and he says they can't keep bikes in.

Brady Viccellio

Yeah, it's amazing. I went to the sporting goods store to get some running shoes. They have empty shelves where the all the bikes go like it’s the toilet paper aisle.

Alvin Williams

And that Peloton company. Apparently they just can’t keep them either – they’re super sold out.

Brady Viccellio

All the all the workout equipment or anything you do at home, Zoom, Netflix, all the streaming stuff. Now, now the chains that aren't doing well are Outback Steakhouse, IHOP, Denny's, Cheesecake Factory, Dave and Busters. We've got all of these close to us. Also on that list, BJ’s Restaurant and Applebee's. All down. All in trouble, according to USA Today.

Alvin Williams

So then what happens to those buildings when they vacate?

Brady Viccellio

Could be the new Cobalt Grille I guess?

Alvin Williams

Or it could be more warehouse space for Amazon.

Brady Viccellio

Yeah. Amazon Depot. That’s what they should be doing is buying up all these closed restaurants.

Alvin Williams

I think that's what they're doing with shopping centers. I think when shopping centers, though, I think they're taking large spaces and shopping centers and using it as warehouse space.

Brady Viccellio

The world is changing so fast and what do we do?

Alvin Williams

We've got to stay on board for the ride, man. And hopefully figure it out.

Brady Viccellio

Start delivering for Amazon.

Alvin Williams

Well, you know, I bet you they're gonna get into the food business soon.

Brady Viccellio

They're in it. They own Whole Foods.


Well, I'll tell you, everybody support your local restaurant, your mom and pop restaurant. Don't go to Chick-fil-A because you're going to clog up the line for Alvin. We want him to be able to get there.

Alvin Williams

No, we wish no ill will on anyone. Go to Chick-fil-A. Just go there on Sundays.

Brady Viccellio

Closed on Sunday. Don't send them then.

Alvin Williams

All right, everybody, thanks for listening. Remember, you can check us out at thecheckpodcast.com where you'll see photographs and all the archives of the previous podcasts that are always fun to listen to.

Brady Viccellio

Oh, one more thing -- we want everybody to notice the transcripts. We have transcripts that sometimes don't come out as quickly as a podcast comes out. But we do transcripts for all our podcasts. And if you don't have time to listen to the podcast, you can read it.

Alvin Williams

Please rate us five stars. We now have more than five listeners.

Brady Viccellio

We've got, I think seven now.

Alvin Williams

No, we're a little more than that. We’re doing alright.

So anyway, I'm Alvin.

Brady Viccellio

I'm Brady.

Both

And this is The Check.

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