The Number One Problem Plaguing Restaurants As They Try To Reopen

As a diner, you may have waited all through shutdown to make a restaurant reservation. You were delighted when your state’s governor says they could begin patio or dining room service.

And still, the place where you want to eat hasn’t reopened — and it may even have announced it isn’t coming back.

What’s the main reason that’s hampering places from coming back to life?

In a word: cash.

“The big thing for us is cash flow,” says Michael Gulotta, the James Beard Award-finalist chef and owner of Maypop and MoPho in New Orleans.

“It’s really frustrating. A lot of us thought we’d be busier (doing carryout and delivery), and we’re not.”

The situation brings to mind what happens to companies when they skate close to Chapter 11 bankruptcy.

They begin to hoard cash because they will have expenses to cover, once they wind up in bankruptcy, and they’ll no longer be able to count on lines of credit and bank loans.

The cash issue is the key reason why restaurants across the country have decided not to reopen.

The lengthy list of shutdowns include Foley’s, the sports bar in New York City that is a favorite of baseball fans; Logan, an Ann Arbor, Mich., restaurant that has been in business for the past 16 years; Toast, a pair of popular breakfast spots in Chicago; McCrady’s in Charleston, S.C.; Locanda, in San Francisco, and the Souplantation chain in California.

The list of closings is likely to grow even longer when New York State lifts a moratorium on evictions that lasts until mid-August.

Many places simply can’t afford to make the renovations required to operate in the COVID-19 era. And, the income they hoped to derive by offering food to go hasn’t materialized.

A carry out disappointment

I’ve been writing about Gulotta as he has navigated the COVID-19 world.

He originally chose to keep Maypop and MoPho closed, even though other chefs pivoted to carry out and delivery.

Gulotta figured that customers would excitedly rush back in mid-May, once they heard he was serving food to go at MoPho, his casual restaurant near City Park that specializes in pho and other Asian-influenced dishes.

He had hoped he would bring in about 100 orders per day, or roughly one-third the business he did with sit-down guests.

But, he is only doing 15 to 25 percent of the restaurant’s pre-COVID business, depending on the day of the week.

The tepid business is keeping him from re-hiring more staff.

“It’s hard,” he says. “We can only go off the numbers we’re bringing in. If we see the numbers aren’t big, we have to keep (staff) small.”

Like a number of restaurants across the country, Gulotta received a Paycheck Protection Program loan from the government.

He used the proceeds to cover the salaries of staff that he laid off when his restaurant dining rooms closed earlier this spring, and pay some outstanding expenses so that the restaurant was current on its bills.

The problems pile up

However, in order to reopen MoPho, he had to take a series of steps that are something like restaurants faced after Hurricane Katrina:

— He spent several thousand dollars to repair ovens, as well as a freezer and walk-in cooler that failed, requiring him to throw out $500 in food that spoiled.

— Gulotta had to completely sanitize the restaurant’s surfaces and equipment, and invest in personal protective equipment such as masks and gloves for all his staff.

— Vendors, who used to allow him 10 to 15 days to pay bills, now are demanding payment on delivery.

Meanwhile, he has yet another dilemma.

As I wrote earlier, Gulotta has put off reopening Maypop, even though the well-regarded downtown restaurant is the reason he is a finalist for the Beard Award as Best Chef-South.

However, Gulotta still faces covering the monthly lease payment and the payment for the loan he took out to open the restaurant.

He can get out of the five-year lease by paying a steep penalty, but would still owe his restaurant lender.

“We can’t go anywhere and get more money,” he says. “Nobody will give it to us right now.”

So, everything he owes has to be covered from the income from MoPho, which has meant decisions that even affect the menu.

No spring rolls right now

For instance, customers have been asking Gulotta to bring back the restaurant’s popular spring rolls, which came with a variety of fillings, including marinated tofu, fried gulf shrimp, griddled pork, chicken vindaloo, and roasted eggplant.

But, the spring rolls are made by a cook whose only job is rolling spring rolls. “It’s a whole ‘nother cook, and a whole ‘nother shift,” Gulotta says.

That means Gulotta has to sell enough rolls, at $11 per order of two, to cover labor costs for the cook, the ingredients for the spring rolls and factor in the serving costs.

And with limited seating, and the limited carryout demand, he can’t afford offer them. “It’s one of those heart-wrenching things,” he says.

Gulotta says he plans to reopen MoPho later this week with 25 percent of the seats he previously served.

To cover all his costs, he has to sell $1,000 more per day in food. With a typical check of $25 per person, or $50 for a table for two, that means at least 40 people a day need to eat in his restaurant, along with those getting food to go.

In pre-COVID times, that would be a no-brainer for MoPho, which served 350 customers on a busy weekend day. Now, Gulotta says he’s figuring on 15 people for lunch and 25 people for dinner.

He’s regularly pondering, “How do we keep MoPho on life support, and get Maypop back open? We love Maypop, and we don’t want to get out of it.”

But as a restaurant owner, Gulotta maintains he’s an eternal optimist. Of the new environment, he says drily, “It’s going to be interesting.”