NY Restaurants Open at 25% Capacity

On September 30, after a near-six-month hiatus, restaurants in New York reopened their dining rooms to customers.

Unsurprisingly, indoor dining in the fall of 2020 bears only a passing resemblance to the pre-COVID version to which we’d grown accustomed – and long taken for granted. For starters, a mandate from state legislators has capped the maximum number of patrons allowed inside at 25-percent of capacity. Additionally, diners venturing into their favorite eateries will now encounter temperature scanners (wall-mounted or handheld), air purifiers, tableside hand sanitizer, and contact tracing information requests. Gone are physical menus, replaced – perhaps forever, but definitely for the time being – by QR codes enabling access to a digital version of the menu.

On the surface, for an industry desperately trying to navigate a perfect storm, the resumption of indoor dining is a sight for sore eyes. In an operating environment that would charitably be described as “unprecedentedly bleak”, any tangible steps in the direction of “normal” ought to provide, if not cause for celebration, at least an incremental boost in morale.

It’s not perfect, but it’s progress… At least things aren’t getting worse.

Sadly, it’s not so simple.

It bears mentioning that many restaurants – not only in New York but nationwide – have done an admirable job of adapting to their brutal circumstances. Virtually all eateries have tried to pivot toward a more delivery- and takeaway centric operating model. Meanwhile, many have also taken to cleverly utilizing the outdoor space at their disposal – sidewalks, terraces, patios, back “yards”, parking lots, you name it – to facilitate an enjoyable environment, while maintaining diners’ safety – and ensuring their own survival along the way.

To say that business is booming would be disingenuous, but these shifts have allowed restaurant owners to at least conceive of a future in which their establishments have endured this horrific stretch more or less intact.

According to several accounts, most restaurants seem to still be operating well under that 25% mark, with most dining rooms largely empty. It is worth acknowledging that these reopenings have coincided with one of the year’s final runs of outdoor-friendly evenings, which has undoubtedly led diners to continue opting for the great outdoors. As long as the weather remains cooperative, expectations are that this will remain the case. Alas…

For all but a few parts of the countries, such cooperation can only be relied upon for so long. In the coming weeks, the weather in much of the East Coast, along with the Midwest, Plains States, and Big Sky country will no longer be particularly conducive to outdoor dining. At that point, restaurateurs in these regions will face the same monumental challenges that have plagued them since March: an ongoing pandemic, little evidence of a coherent governmental plan to ensure the health of its citizens, let alone this embattled industry, with any progress that has been made toward controlling COVID-19 (basically, a vaccine) still a ways away from being felt by the average American. In addition, restaurants must now cope with the fact that the past six months have instilled within many diners a strong apprehension, if not outright fear, of eating indoors, in relatively close proximity to strangers. Exacerbating the issue is the risk that even those diners willing to venture inside may be turned off by sparse dining rooms and nervous neighbors.

Interestingly, this shift could prove a blessing in disguise for a segment of the much-eulogized independent restaurant sector of the industry – as much anything can be a “blessing” when operating at a quarter of capacity, in an ultra-competitive, low-margin field.

Compelled to operate at a reduced capacity, restaurants that have historically relied on atmosphere, buzz, and large, energetic crowds – “hot spots”, if you will – run the risk of losing their appeal. These establishments charge premium prices for food and cocktails of differing quality, on the expectation that a seat at the “cool kids’ table” will continually get patrons in the door. However, in the absence of palpable energy and a party vibe, these spaces, which tend to skew larger, may begin to feel cavernous and impersonal, diminishing the value of the accompanying dining experience.

On the flip side, smaller, more intimate restaurants that rely on a strong, standalone décor and – hold on to your hats – food and beverages of outstanding quality will be well-positioned to capitalize. While these locations may not have the same space to dedicate to social distancing as their larger counterparts, their lower overall capacities, which will result in fewer actual people being on the premises – are likely to contribute to diners’ feelings of safety.

The rules of the game have gotten very simple: It’s going to have to taste good, it’s going to have to feel safe, and it’s going to have to feel worth it, both in terms of value for money and the risk assumed by customers. For some time to come, regardless of what’s on the menu, every restaurant is going to have to serve comfort food. Those restaurants that obsess over serving top-quality meals in a safe and welcoming atmosphere are poised to have their moment.

It’s worth noting that this (highly) relative best case scenario is little more than an opportunity to implement safeguards to insulate their businesses, both in the short term (second COVID wave) and beyond. Business models will likely need to evolve further.

The increased emphasis on off-site (delivery and takeaway) dining seemingly a permanent shift in the industry that must be addressed, The “ghost kitchen” (shared culinary space with no storefront that exists solely to prepare food for delivery) – a concept we’ve discussed previously – presents an opportunity for smaller restaurants to boost revenues (rent kitchen space to other restaurants and delivery-only businesses); reduce costs (downsize their own space and rent excess kitchen space “as needed”), or both (downsize and rent ghost kitchen space, with an increased emphasis on off-site business).

Whether or not a cataclysmic second wave is forthcoming, the shockwaves from the first six months of the COVID-19 pandemic have made it clear that no business in the dining space has the luxury of standing pat and allowing events to play out around them. Restaurants, understandably, are unlikely to view operating at dramatically reduced capacity as much of a silver lining. However, for those operators – particularly of smaller, independent restaurants – it can serve as an opportunity proactively reshape their business models, with an eye toward flexibility.

That’s the price of optimism these days – you’ve got to take some leaps.

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