A Tactical Recovery Outline For Hospitality Businesses

• Current SBA program – check qualifications to see if you qualify
• Closely monitor news for changes to SBA relief programs

• Business Interruption (“BI”) Insurance – while most policies trigger is physical damage and virus excluded, several states considering mandating BI policies to cover pandemic
• Check with your insurance provider on potential coverage related to contingent business interruption, supply chain insurance, business interruption on PLL policy
• Workman’s comp – contact your insurance agent or representative as these coverage vary
• Despite lack of clarity on coverage for BI, go ahead and file claims as insurance companies will process on a first come first serve basis and it is important to get in the queue
• Some states are suspending insurance premium payments for a period of time

• Enforce stricter standards around safety and sanitation
• Constant communication on updated safety and sanitation – email, webinars, daily calls, team meetings, etc.
• Strict rules around social media posts: No joking about COVID, absolutely no naming of restaurants/employees that may have come into contact with the virus
• Have team members sign documents before each shift that they don’t feel sick nor have been exposed to anyone who feels sick (that they are aware of) – must be consistent with every team member signing
• Deploy timers that go off every 15 minutes for sanitizing stations, hand washing, temperature checks, etc.
• Hand washing and drying using a single use cloth
• Sanitizing tape for stations that have been sanitized with time and date stamps
• Soda – no refills without new cup
• Anti-tamper packaging/stickers on delivery packaging
• Long term heightened awareness is good to get team members to abide by strict standards

• Show your customers you understand their safety concerns
• BE THE CLEANEST RESTAURANT IN YOUR AREA. Brag about it, show your staff disinfecting via Facebook Live or Instagram.
• Follow CDC guidelines regarding food safety and handling. Review them regularly as they are updated often:CDC guidelines
• Reduce the number of tables in your dining area to ensure social distancing.
• Deliver curbside orders on a tray to reduce handling by staff.
• Consider switching to disposables (plastic cutlery, cups, paper napkins) during this time, if possible, to mitigate perception of risk.
• Contact local schools for a “Dine & Dash” event where the community picks up to-go meals and a portion of proceeds (10%) goes back to the school to help support them through this challenging time as well.
• Offer family style meals to-go, even if it’s not your typical cuisine. Hamburger shops can sell lasagna and salad for four people via curbside takeaway. It’s a higher price point sale and distributors have all the products you need.
• Use walking delivery to your immediate neighborhood. Your staff need something to do if customers aren’t coming in.
• Offer catered lunch specials to offices who want to thank employees who still need to work on-site. Make the pricing beneficial to the business owner, chances are they are hurting as well.
• Breakfast establishments may see the most impact as they typically have the least demand for takeout. Consider adapting your business model to capitalize on the “all day breakfast” trend and offer Brinner to-go (Breakfast for Dinner).
• Respect social distancing by spacing seating or tables three to six feet apart and remove bar seating.
• Provide hand sanitizer at each table, entrance and exit.
• Clean surfaces often and make it very visible to guests (and on social) as it’s one of the best ways to make guests feel more comfortable dining out.
• Prohibit any guest displaying any flu-like symptoms from entering your venue. Understand additional “hot points” such as coughing and sneezing, and provide a script for managers and/or security to use.
• Use the time your venue is closed to do the repairs or improvements you have been putting off.
• For now, prohibit staff from giving guests handshakes, elbow taps or fist bumps: some people sneeze and cough into their hands or the crook of their arms. Use tongs for straws and garnishes. Santize hands after handling cash and credit cards.
• Have a clear plan specifically for your door staff regarding coronavirus and guest interaction.

• Utilize Allset for lunch meetings to get people out of their homes when working from home.
• Use AI bots for to-go orders.
• Use AI bots to answer questions.
• Sign up for DoorDash, UberEats, GrubHub, etc. GrubHub is waving the first $100M of fees.
• Update your hours on your website, all social media, and third-party sites. Not everyone has a Facebook or Instagram to check your profile and posts.
• Implement technology to help ensure employees are washing their hands, like a $1,200 Hand Wash Coach or Pathspot’s HandScanner. Maybe not on the $1,200 spend during times like these…
• Research telehealth options like Teladoc and Zedic for managers and staff.
• Review all the systems you can replace with tech: attorneys replaced with LegalZoom, for example.
• Look into cocktails on tap, cocktail art, and over-the-top (and therefore Instagrammable) presentations.

• Contact your landlord to work on rent forgiveness and/or deferment. This is an example letter we drafted but have your attorney review it to cover your specific circumstances and make sure any agreement reached is in writing.
• Check to see if your lease has a force majeure clause to allow for rent abatement.
• Analyze your cash flow and consider a full short-term shut down if business is that bad. Expect delivery and to-go sales to be less than 5%-10% of your on-premise sales if you have no history of to-go sales.
• Check state, county, city and local mandates if you have to shut down. Prepare as if it’s coming and view our coverage here.
• Limit occupancy to guests as recommended by many state officials. For the 6 states and dwindling that have allowed on-premise to stay open, there are still usually rules in place around this.
• Negotiate with any other vendors or services if you must stop or reduce payments. Utilities, linen services, your leased equipment, your leased car, etc.
• Focus on what systems you can improve or implement when you reopen.
• Crowdsource for investors or reach out to your network for loans. Sites like Honeycomb or SeedInvest may take too long to get funds but are worth checking out.
• Obtain a Small Business Association loan if possible and as needed. They have resources now just for coronavirus relief.
• Research state and local relief specific to where you live and operate. Advocate that your liquor payments and other fees are delayed without penalty. Here is a great letter from Bobby Heugel to share with your local politicians. This is an example of what Seattle is doing, one of the first places to be affected.
• Learn about alcohol to-go sales and if you’re legally permitted to offer such a service. Pitch your local politicians to make an exception. PDT stated they sold 300 cocktails at $12 a piece. Who could use an extra $3,600 right now?
• Due to the proximity nearly every operation has, you will most likely be considered a medium-risk operation by OSHA standards. Additional rules now apply and a good metaphor is thinking how receptions are treated at a doctor’s office and how they are kept safe.
• Obtain a conventional bank loan, line of credit, or merchant financing. See options here.
• File a claim with your insurance broker. It may get denied as many have pandemic exclusions but it doesn’t hurt to try and be ahead of the curve. Read our interview with an insurance broker here.
• Check with local state liquor authority on your license status regarding your business being closed. Some have clauses stating you must be open to keep the licenses in good standing. While this is contradictory to many state mandates and guidelines, its always smart to double-check anyway.
• Perform a deep clean of your bar and restaurant and have a contact list of services that can come in in case someone who was infected has visited your store. See how long COVID-19 can live on surfaces here.
• Make an inventory of equipment and items that are in need of repair or replacement. Sadly, there could be a lot of restaurant auction sites with an influx of inventory.
• Move all your products to one refrigerator (or as few as possible) and turn everything else off at the breaker. Leave cameras and alarms on as needed. Clean out your draft lines using guidance from Brewers Association.
• Sanitize your place if a confirmed case of COVID-19 was in your restaurant using CDC guidelines.

• Start reducing your inventory now. Only order what is absolutely necessary and switch to a simplified menu. A national quarantine hasn’t been implemented but it’s not outside the realm of possibilities.
• Create and use a simple, downsized, throwaway paper menu.
• Use plastic glassware when possible.
• Spin up a ghost kitchen to avoid the front of house staff coming in with no business or tips.
• Create “everything but the booze” cocktail programs so guests can have a fancy cocktail with their to-go orders. They will add the booze themselves where liquor delivery isn’t an option.
• Start cocktails to go. NYC and Alabama have this available now.
• Setup wine to go programs with your food orders.
• Begin a food-to-go program and create a to-go station as needed.
• Start a delivery program and include handwritten notes thanking people for the business and remind them that calling in directly to place orders rather than using a third party saves your business money. See how UberEats, Doordash, and Grubhub‘s plans to waive or defer payments.
• If you’re mandated to close and don’t plan offer food-to-go or delivery, donate your inventory to non-profits (if doing so is legal) and/or make food care packages for displaced workers.
• Some broadliners are offering concessions like extended payables
• If possible, reduce menu items
• Think about higher mix, easy to execute, higher margin, minimizing skews, cross utilization
• Determine prep labor reductions, food waste, and other cost reductions from these decisions
• Correspondingly work with your managers to reset par levels and prep schedules for lower volumes
• Work with suppliers/distributors to anticipate any product shortages; adjust menu in advance
• Deplete inventory, keep the minimum needed to manage your business
• Work with distributors and suppliers to waive fees on minimum drop sizes and orders; Fewer deliveries means lower distribution costs as well
• Remember to have enough packaging and condiments for increased off-premise business
• Offer to donate ingredients that could be expiring to foodbanks or offer to employees on leave
• Negotiate with vendors for improved payment terms
• If you have several units in the same region, move inventory (particularly anything that can spoil) from fully closed units to units that remain open
• Check with broadliner if you can return excess inventory for full refund

• Increase communication with your suppliers, ensure you know if any of the products you order from them have potential shortages and adjust menu/ordering in advance to get in front of any issues
• Where possible buy ahead on items believed to fluctuate, or in short supply
• Confirm with suppliers that they are taking the same safety precautions

• Curate your menu to match circumstances
• Estimate how long you expect to have your service disrupted.
• Talk to your distributor about potential delivery gaps you may experience with your products.
• Scale back your menu where possible. There’s no need to carry slow-moving items until normal business resumes. Customers will understand if you explain it to them.
• Find creative ways to manage your perishable inventory
• Identify and prioritize inventory with upcoming shelf life issues.
• Feature “at risk” items in promotions that prompt customers to order now. For example, “FREE slice of cheesecake or FREE salad with purchase of a pizza.”
• Consider donating product to charity for a tax write-off.
• Transition from fresh to frozen where possible to eliminate waste and shelf life issues. Fresh ground burgers can be substituted with frozen until this crisis is over.
• Offer a “Come Back” incentive (Buy One, Get One Free) for next purchase on EVERY order that goes out for takeout or delivery.

• Be proactive/constructive with lenders – seek any relief you can work out (deferrals, accruals, suspensions, interest only, potential to add abated payments to end of the loan, etc.)
• Consider draw down on any available lines of credit to fortify balance sheet with cash
• If you have floating rate debt, extend LIBOR contracts/payment frequency from 1 month to 3 months or more
• Be proactive/constructive with franchisors on royalty and ad fund contributions – seek any relief you can work out (deferrals, accruals, suspensions, etc.)

Augment working capital

• Reach out to service providers, vendors and landlords to extend payment terms and seek other support
• Broadline Vendors: Reduce number of deliveries (for lower volumes), get out of minimum purchase contracts

Rent

• Some jurisdictions have passed legislation abating rent/late charges and other penalties – check online)
• Analyze leases as it will impact the approach you take with landlords
• Is your rent below market? If so, landlords may be less willing to offer concessions
• Highest and best use real estate (is your property more valuable as condominiums?)
• Do you have a force majeure clause for rent abatement or extended closing?

Is your landlord relationship already strained?

• Decide if you want to take a partnership approach or if you are forced to play hardball
• Partnership – offer percentage rent for a time, or add abated rent to back end of lease
• Hardball – don’t pay, negotiate . . . but be aware of the above analysis
• If you have to close your restaurant, it may be a default under your lease

Repairs and maintenance (“R&M”) and capex

• Set strict approval processes for R&M and maintenance capex – only critical items allowed
• Pause or cancel all development/remodel capex
• Seek potential refund of new development fees from franchisor with intent to repay later when new development restarts

Create a weekly (or daily) cash flow forecast that is as detailed as possible

• Run sales sensitivities at various sales loss levels to understand break-even point and staffing levels

COGS

• Some broadliners are offering concessions like extended payables
• If possible, reduce menu items
• Think about higher mix, easy to execute, higher margin, minimizing skews, cross utilization
• Determine prep labor reductions, food waste, and other cost reductions from these decisions
• Correspondingly work with your GMs to reset par levels and prep schedules for lower volumes
• Work with suppliers/distributors to anticipate any product shortages; adjust menu in advance
• Deplete inventory, keep the minimum needed to manage your business
• Work with distributors and suppliers to waive fees on minimum drop sizes and orders; Fewer deliveries means lower distribution costs as well
• Remember to have enough packaging and condiments for increased off-premise business
• Offer to donate ingredients that could be expiring to foodbanks or offer to employees on leave
• Negotiate with vendors for improved payment terms
• If you have several units in the same region, move inventory (particularly anything that can spoil) from fully closed units to units that remain open
• Check with broadliner if you can return excess inventory for full refund

Labor

• Reduce labor schedules to reflect lower volumes; consider shortening overall hours of operations to reflect only higher revenue dayparts
• Think about day-on / day-off laboring to keep critical staff on payroll
• Look to deploy team members in other ways (be careful of dual employment – check with legal counsel)
• In-house delivery, window cleaning/landscaping/etc. (and cut back outsourced services for these expense line items), local marketing (shaker boards)

Philanthropic activities such as delivering food to those in need

• Before terminating, laying off or furloughing seek legal/HR advice and assess WARN Act impact (discussed next section)
• Consider payments to furloughed staff (e.g., 25%-75%)
• Consider offering free meals to furloughed/terminated staff for a period of time
• Note from a cash flow perspective, reimbursement will take time (tax credits)
• Careful of treatment of “exempt” employees – if GMs are working hourly shifts ensure they still pass the “rules test”; you may need to move them to hourly in order to comply with DOL rules – consult labor counsel
• Consider any benefits that can be postponed (competitive dining cards, etc.)
• Consider creating an employee hotline or blog to maintain open communication

Dust off your GL and go through every single expenditure – what can be paused or canceled?

• For example, you don’t need audio or tv programing subscriptions if no one is dining in
• Challenge your departments to identify cost saving opportunities
• Try to get fees waived: Banks, subscriptions, etc.
• Reduce services: Trash, window cleaning, linens, preventative maintenance, and others

Utilities

• Try paying on a credit card to extend payments (especially a cash back card)
• Make sure all utilities are shut off for any closed units
• Ensure unnecessary heat/ac in dining rooms is shut off

Turn off all automatic payments (if any)

• Use of cash will likely decrease and credit card volumes will likely increase
• Do you need less register cash? If so, deposit excess into bank to increase liquidity
• Reduce or eliminate any expenses related to the management/storage of cash
• Proactively negotiate better rates for credit card processors in anticipation of bigger volumes

• Constant communication via E-Club, loyalty, exterior banners notifying of delivery and curbside pick-up
• Promote family type meals and meal replacement item
• Consider pre-fixed meals for pick up between certain hours (pre-ordered)
• Community support menu – kids eat free and other affordable offering to make the menu more assessible

Third Party Delivery

• Consider all delivery services/marketplaces; some operators ignoring delivery service exclusives
• Place bounce-backs and other coupons in the delivery bags to drive additional orders
• Take advantage of incentives: Free delivery, no commission fees on pickup orders, $200 in marketing, sign up concessions, etc. (all different/evolving, check with each)

Look to execute your own delivery: Opportunity to re-purpose servers to drivers

• Check insurance liability – depending on company owned vehicle vs employee
• Likely need for standard operating procedures
• NY, TX, CA and a few other states are temporally allowing for businesses with liquor Licenses to delivery alcohol – check your local laws

Curbside

• Use gloves (masks where appropriate) to give guests comfort
• Think of ways for Guests to communicate from car and vice-versa: Flashlights, honk horn, text, call
• Position team members outside during peak periods
• Communicate this option through marketing channels

Drive Thru

• Cashiers should also be wearing gloves (masks where appropriate)
• Speed is king: Develop strategies to improve speed
• Adjust and enforce upselling scripts
• Offer sanitizing wipes with every order and to wipe off credit cards/machines
• Offer “scarce” goods with certain delivery orders above a certain size (e.g., toilet paper, canned food, etc.)

• Start planning and promoting your grand re-opening.
• Many talented staff are unemployed. Toe the line of poaching and find available talent. Start the conversations now
• Over-communicate with your staff about re-opening procedures. Make sure you understand your local labor laws for having staff check email and start the ramp-up for returning to work.
• The re-opening of bars is going to be a very busy time. Staff up and accordingly. Prepare marketing to communicate how you’re helping your staff and community first.
• Negotiate cash on delivery with liquor, beer, and wine vendors as legally allowed in your area.
• Determine if you want to open with a limited menu, your full menu, or the menu you created while shut down. Ensure your staff is ready to handle changes and the load.
• Utilize social media to show your followers and fans your enhanced sanitation procedures to help address their concerns about cleanliness and make them more comfortable.
• Partner with other local businesses to drop off flyers or postcards offering special offers to capture more foot traffic.
• If you cant afford to re-open the doors full time when mandated closures are lifted, try select hours or weekends at first. Also, expect that your guests may also just be getting back on their feet and it will take some time for them to afford to visit regularly again.
• Consider selling your bar or restaurant if you can’t afford to keep operating it during this time. Check with your attorney and accountant for advice on determining viability and solvency.
• Start pre-selling specials for when guests come in for your re-opening events. This can provide necessary cash flow to buy food and other necessary supplies.
• Learn from China who is weeks ahead of us on how they ran their bars during the pandemic.
• Encourage your guests to post on social media or post their review. Get them excited for being out and tempt them with door prizes and gift cards giveaways.
• Reach out to your specific crowd via messages and emails to gauge their comfort levels. Find ways to mitigate any concerns that arise.
• While it’s easy to say now, the advice from financial and business experts recommending having six months of savings both personally and professionally rings true here. Start your “rainy day” fund the day you reopen and maintain that frugal mindset until this it’s fully funded.