Restaurants See Difficult Futures Even When They Open Their Doors Again

Restaurant owners like David Lowenberg, at The Beacon in Sag Harbor, are wrestling with difficult business model calculations even once the state allows them to open for dine-in service again.Michael Wright

Long before anyone uttered the term coronavirus, before shut-downs, before government loans that might be grants or might not, before social distancing protocols and phased re-opening metrics that still have business owners wondering if they will be open by Fourth of July, before all of that, the financial obstacles to steering a restaurant on the South Fork to success was a dizzying calculation.

Soaring rents, elevated costs of food deliveries and basic maintenance services, a seasonal market from which three-quarters of annual revenues must be earned in barely more than one-quarter of the calendar year, and fickle weather that can take large bites out of margins make wrapping up a fiscal year a few percentage points in the black a tall order.
In the new world that has suddenly been dumped on the industry like a Bloody Mary spilled into the lap of a customer in white linen pants, the restaurateurs making those calculations are no longer adding up the figures to success come the end of the 2020 season — but to survival.

Many are not getting there.

At the earliest, most South Fork restaurateurs don’t see the state allowing them to open until at least June 15, and very possibly not until the end of the month, depending on which phase of the reopening the industry is dropped into. Even those dates are based on the assumption that a new spike in coronavirus infections from earlier phases does not force a retreat.

When opening dining rooms is allowed, it’s expected that there will be requirements that capacity be no more than 50 percent of what it was before — though no specific guidance has yet been offered.

And there is the expectation that many customers will not be comfortable returning to dining out in a public space again right away, or particularly drawn to restaurants that have sacrificed their bustling vibe in the name of safety.

Those expected losses to the number of bodies — covers, in restaurant lingo — that will pass through the doors in the summer of 2020, leave a large and foreboding gap in the that year-end calculation. The federal small-business aid package has been of little help to local restaurants, since hiring back help to work in an empty restaurant is of little use — not to mention that because of the blanket $600 bonus to all unemployment checks, few employees would be willing to return to work for less than they are guaranteed through the end of July.

Some of New York City’s most respected restaurateurs have already said that they will not reopen until there is a vaccine or they are confident they can operate safely at 100-percent capacity, because the financial calculations just don’t work.

On the South Fork, three of the region’s veteran restaurant owners say the math is even more dire.

“When you spend a dollar in a restaurant, if the operator is doing a good job with all the expenses — his labor, the costs of food, rent, paying the electric bill, all of it — if he’s doing a good job, he’s keeping a nickle,” said Mark Smith, a co-owner of East Hampton mainstays Nick & Toni’s, Rowdy Hall, Townline BBQ, Choche Comedor and La Fondita, and the region’s largest restaurant employer. “We have 160 days to make 70 percent of our revenue. If you are saying the cover count is going to be off 30 or 40 percent, you can’t make enough money to carry on. At 50-percent capacity, I don’t know that it’s realistic for us. We are still trying to figure it out.”

Industry experts have said they expect that one in four restaurants in New York City will go out of business because of the coronavirus epidemic.

“I think it could be higher — much higher,” said David Lowenberg, a co-owner of three restaurants: Bell & Anchor in Noyac, The Beacon in Sag Harbor and Fresno in East Hampton. “The problem is in front of us now, but the moment of truth is going to come next winter.

“That is when relationships with your landlords are going to come in,” he continued. “Structures are going to have to change, or a lot of places will not make it through the winter. The landlords will realize that, I hope, they will realize that they are our partners now, because if you have vacated restaurant spaces, nobody is going in them, nobody is going to open a new restaurant in this climate.”

Two months ago, with the forced closures newly imposed, Mr. Lowenberg spoke to The Press as he was getting ready to start serving takeout meals at his two year-round restaurants, Bell & Anchor and Fresno. The takeout service has seen modest success, and this weekend, The Beacon will open for its 22nd season in Sag Harbor, with a takeout-only menu.

But while doing takeout has allowed many restaurants to keep a few staff members employed and bring in some revenue to ease the losses with rent and utility bills due, regardless, it cannot sustain a restaurant on its own.

David Hersh owns perennial Hampton Bays hot-spots Cowfish and Rumba, as well as restaurants in Patchogue and New Hyde Park, and is preparing to open a new venture in Westhampton Beach.

“I lose $50,000 to $100,000 a month from October to May — May, I usually break even,” he said this week from the deck at Cowfish. “I have to make the rest of that back in four months. Takeout will not do that — 50-percent capacity will not do that. If it’s 25-percent capacity, you might as well put us out of business right now.”
So, what can be done?

The industry’s veterans and local lawmakers are searching for a game plan and appealing to the state for flexibility in how different situations are addressed.
New York City’s indoor-only restaurants, they have said, are in a very different situation than the South Fork’s, many of which have outdoor spaces into which they could greatly expand seating.

From Mr. Hersh’s standpoint — on the sprawling outdoor patio of Cowfish — spacing between tables should be the more important consideration than simple reductions in the numbers of seats. If a restaurant is able to spread out on its property, it should be able to keep its seats and simply move them to new areas, primarily outdoors.

“If you just reduce seating, you end up with people crowded outside a restaurant waiting and often not social distancing there, so you’d be better having them at appropriately spaced tables,” he said. “The government has a responsibility to keep people safe, but they also have an obligation to keep people employed. They can’t expect 100-percent tax dollars from 50-percent of the business.”

Relying on extensive new outdoor seating in many cases would typically require permission from municipal regulators — a long and a laborious process. Southampton Town Supervisor Jay Schneiderman said the town has discussed allowing restaurants to draft new business plans showing new seating arrangements, to bring to the board for a quick review and approval.

“I think we should be going out of our way to help these businesses, after what they have been put through,” he said. “This is about survival for them. We don’t want to come up with some cumbersome process. Give us plan, we’ll stamp it and that will be fine for a few weeks or a couple months.”

In the downtown business districts, there has been talk of letting restaurants utilize sidewalks for new seating, where feasible. In Sag Harbor, there has been scattered suggestion that closing Main Street to cars, allowing restaurants to spill their tables onto the sidewalks or roadways has been bandied about — usually landing on the double-edged sword of losing Main Street’s parking supply.

In East Hampton Village, officials have formed a business advisory group to explore the options for helping owners. Mayor Richard Lawler said that allowing expansions of seating areas, including on sidewalks, has been a main topic of discussions.

“We’re willing to work with them as much a we can,” the mayor said. “We are trying to find safe locations for everyone. Many of our restaurants have good outdoor spaces, but a couple are in difficult locations as far as that goes.”

The businessmen are also searching for other ways forward. Mr. Lowenberg — convinced that there will still be steady demand for take-out from customers not yet comfortable in a restaurant setting this summer, but who are still looking for professionally prepared food — says that his restaurants will be looking at limited offerings for dinning in, with evolving menus and an emphasis on ambiance, since the normal buzzing scene of a crowded restaurant cannot take care of that.

“For 22 years, we’ve been moving a lot of people through this space,” he said from the elevated dining room at The Beacon, overlooking Sag Harbor’s waterfront. “Those days are over now. Nobody is going to want to be ass-to-elbow anymore. Not for a while. We’ll do eight tables, one seating a night, and they will be beautiful, but that will be it.”

He said all three restaurants are also honing their take-out menus, too, in a search of the right balance of special offerings and logistical presentation that will keep drawing customers away from cooking at home. Considerations on his chef’s drawing boards range from printed instructions about how to quickly reheat fries and baguettes so that they are eaten the way they were intended, to finding the right containers in which to send home large quantities of bouillabaisse.

The New York State Liquor Authority continuing its allowance of liquor sales by restaurants is a key component, owners said. That regulation change, shortly after the shut-downs were mandated, having kept restaurants solvent during the shut-downs has been a recurring theme for weeks. Take out jugs of pre-mixed cocktails sends home more of the full restaurant experience, the owners said.

“The ability to serve alcohol with to-go orders is the only reason I’m not out of business right now,” said Mr. Hersh, whose Caribbean themed Rumba has been selling take-out margaritas, rum punch and passion fruit pina coladas by the gallon with take out food orders.

Mr. Hersh said he would welcome a Main Street closure in Westhampton Beach, coupled with more freedoms of people to move around the village with their cocktails from local restaurants, able to enjoy a night out while staying safely separated.

“If you allow people to get a beer or cocktail and walk up and down the streets, they will be shopping and spending money elsewhere, too,” he said. “The towns really need to put some thought into it, what can they do for restaurants and retail. That is where the real impacts from this are going to be seen.”

In the end, the veteran restaurateurs all said they see the best chances of survival being creativity and business acumen, and a dose of assistance from the government officials.

“The places that are going to be successful are the ones that re-engineer their menus a little, reduce labor costs and maybe raise their prices a bit,” Mr. Smith said. “It’s math. You have to do so much business to pay your bills. This almost couldn’t have happened at a worse time.”