Restaurateur Kelly Gordon (right), shown with business partner Jim Romer, says he had to lay off most of his staff and is offering customers a discount for pickup
Already facing financial challenges, restaurateurs have found creative ways to stay afloat during a pandemic that will bring lasting changes to their business
On Friday and Saturday nights, you can find Kelly Gordon at one of his Romer’s restaurants, pitching in to get hamburgers and other menu items out the door. “I’m like a quarterback who should have retired a few years ago,” jokes Gordon, who is 63. “I try not to burn the food at the same time as I’m burning my hand.”
Weekend evenings remain busy for Romer’s, founded by Gordon and chef Jim Romer in 2010, which has two locations in Vancouver and one in Port Moody. Like many of its peers since the COVID-19 pandemic forced restaurants to close their dining rooms, the small burger-focused group now relies on takeout and delivery. “Revenues are pretty strong,” Gordon says. “We’re about 25, 28 percent of what we would normally do.”
COVID-19 has reduced the B.C. food services industry to a shadow of its former self. Before the crisis, it comprised about 15,000 restaurants and caterers, according to the BC Restaurant and Food Services Association (BCRFA). Generating roughly $14 billion in annual economic activity, the sector provided jobs for 190,000 people, making it the province’s No. 3 private employer. More than half of those workers were aged 15 to 24.
And today? “I bet you as high as 175,000 people now are not working,” says BCRFA president and CEO Ian Tostenson. “So basically the industry is just core staff.”
That’s certainly the case with Romer’s, which had to lay off upward of 80 hourly employees. Depending on volume, each location still has three or four members of the management team on payroll. “In our situation, we kept a general manager, a chef and a sous-chef, and those three pretty much run the business,” Gordon says. “So it’s pretty lean.”
As Tostenson points out, the industry he represents is highly entrepreneurial, so it finds ways to make margins on service. The pandemic has left restaurants griping more than ever about the hefty fees—some as high as 30 percent—charged by popular delivery apps. DoorDash has pledged to cut its take from some restaurants in half through the end of May, and Vancouver-based mobile ordering, contactless payment and digital loyalty platform Perk Hero now offers a similar service for a fee of just 5 percent.
Romer’s came up with its own solution: offering a discount for pickup. Right now, 75 percent of the group’s revenue is pickup-based, Gordon notes. “So we’re actually passing that on to the consumer, and that seems to be working very, very well,” he says, adding that staff can also connect with customers by handing out drink and appetizer cards.
Low margin, high volume
Gordon and Tostenson both give the provincial and federal governments high marks for helping their industry with wage subsidies and other support. Tostenson singles out Victoria’s quick decision to let B.C. restaurants deliver alcohol for the first time: “We called them on a Friday, and we had it done by Sunday.”
But before COVID, there were concerns about too much cost pressure from government, he says. Besides a higher minimum wage, the employer health tax and the carbon tax, Tostenson cites rising property taxes and leasing costs. “Governments were almost oblivious to it,” he says. “Industry would talk to them and bring these things to them, but the economy was strong, and I think they always felt that there was this capacity for small business to take this on.”
Tostenson highlights another key number: pretax profit for the average B.C. restaurant is only about 4 percent. “So it’s low-margin, and it requires high volume,” he says. That might work for a big chain, but many small players are left struggling to pay the bills.
“It’s been very, very hard to do business in Vancouver and eke out a profit,” Gordon says, noting that he and his partner don’t lack financial acumen, having worked for large restaurant companies. “The numbers are just getting absolutely crushed.”
Because Romer’s can’t price B.C.’s $13.85 minimum wage into a hamburger, it must absorb about half of that expense, Gordon estimates. Either costs will have to come out of the business, or restaurants will need to charge $26 for a burger, like they do in downtown San Francisco, he says. “No one’s going to pay that in this city.”
To make life more affordable for restaurants when they reopen, Tostenson calls for an effort to “structurally deal with” taxes and other overheads now. “I truly think that the era of loading on government fees and costs and inspections and all this kind of stuff is going to streamline and change for the long-term profitable health of this industry—and, actually, many industries.”
For restaurants, Tostenson would also like to see an alternative to the federal government’s 75-percent wage subsidy and $40,000 business loan programs. “Those are good programs, but the loan suggests something that we don’t want,” he says, explaining that it will leave restaurant owners simply deferring taxes and fees.
During the 2008-09 financial crisis, lack of cash flow proved fatal for many restaurants. With that in mind, Tostenson is trying to encourage a move toward following Denmark, which offers businesses grants instead of loans. “They say, What are your fixed costs? Here’s a grant to take care of it and get you back going, because you’re going to need a lot of cash to start up.”
Do we really need that anymore?
Restaurants are trying to figure out what things will look like for them after the public health emergency ends, says urban planner Andy Yan, director of the City Program at SFU. “What’s the new normal? Is everybody going to go out to eat, or can you even go out to eat?”
Assuming that dining rooms do start allowing patrons again, chances are they’ll operate at half their previous capacity, for safety reasons. “What will happen to all this commercial space that isn’t producing?” Yan asks. “You can imagine that there are going to be all these restaurants that probably are going to be the last [businesses] to [reopen] and are going to have to have some level of physical distancing. That could undermine their entire business model.”
On the commercial real estate side, Gordon sees some reason for restaurants to be optimistic. “Landlords are going to have to understand that it’s a brave new world out there,” he says, hoping that rates and fees will come down.
But landlords giving restaurant tenants a break could run into trouble with their lenders, creating broader financial problems, Yan warns. “If I made that loan [based on] a business model from 10 years ago, and now half that space cannot be used because of physical distancing, what do you do?”
As the B.C. restaurant industry recovers from COVID, the weak Canadian dollar is another strike against it. “Because of the amount of food we import on this region, that’s going to have another impact in terms of cost,” Yan says. “Some people are able to pass on to the customer, but a lot of people aren’t. So now some restaurants are going to be compromised.”
When it comes to outside services, the economic pressures of the pandemic are pushing Romer’s and other restaurants to change things they’ve always done, Gordon observes. For example, to show cable sports, they pay a higher rate than homeowners. “All of a sudden we’re going, We’re not a sports bar. Do we really need that anymore?” Gordon says. “Why don’t we go with Apple TV and put on some guy jumping off a cliff?”
Gordon thinks he knows what many of his fellow restaurateurs will do when the pandemic is over. “They’re going to go, Yeah, I love the restaurant business—it’s a lot of fun. But is it actually a good business? And the answer is probably no for a lot of people.”