Veteran franchisees reflect on an uncertain reality, restaurants’ future
Illustration by Jonathan Hankin
Veteran franchisees reflect on an uncertain reality, restaurants’ future It’s mid-April as I write this, and restaurant sales and guest counts have been in the tank for a month because of the COVID-19 pandemic.
Neither of the veteran franchisees in this column has a clear image of what their volumes will look like in June. For now, Matthew Patinkin’s 93 Auntie Anne’s Pretzels and Cinnabon outlets (in malls, transportation centers and casinos in 10 midwestern states) are all closed. Sonu Chandi’s nine Mountain Mike’s Pizza restaurants in northern California (along with four Chandi Hospitality Group sub-franchises) are open for takeout and delivery only. Two independent restaurants the group owns—a brewpub and modern Indian concept—are shuttered.
While both believe the U.S. economy will have inched toward normality as summer begins, here in their own words (edited slightly for clarity) is their uncertain reality when we talked.
Patinkin: “The two main issues that have been offered” by the franchisor “are deferrals in royalties and marketing fund. But we haven’t gotten to the point of figuring all that out yet.
A big unknown is rent. Most tenants, it goes without saying, have probably not been paying rent for April. Most landlords have been deferring rent, as well.”
Chandi: “A restaurant can’t open at the switch of a button. It was great to see the PPP,” the Paycheck Protection Program, “released … but the funding has already run out, and I’m a little nervous as to what is going to happen. We applied for most of our business entities, and we are in the queue. We do not have a check but we’ve been approved,” and based on all the entities the loan is close to $1 million.
Patinkin: “Obviously, today’s world is so much different than anything we’ve ever experienced. We’ve been growing a lot in the last few years, and I still think there is tremendous growth potential ahead of us.
“When I look out the next three or four years, I’m optimistic. But I also know that the first thing is to get our existing stores back open again. Once we’re open, it will take time to ramp back up to historical standards. I have no idea how long that will take. But I certainly hope that by Christmas things are as they were.”
Chandi: “I have thought about social-distancing. Mountain Mike’s Pizza was already driven by takeout and delivery, and we’ve seen uptick in that now that our dining rooms are closed. In our North Bay region, Mountain Mike’s stores did around 35 percent” of weekly sales “dine-in, because our spaces are built very nicely and some have full bars. That’s a little more than the systemwide average, which is 30-35 percent. That’s gone since the shelter-in-place started. By then, we had already been looking into masks and gloves—and our franchisor’s support center had been doing a great job communicating to us. Our job is to communicate that to our management and to our sub-franchises.”
Patinkin: “Look, no one has ever shut down an entire economy like this before. So there is no playbook on reopening. There will be a lot of unknowns, and we will have to navigate our way back as best we can. There are our people, of course, who always come first.
“That said, I do imagine a rolling opening—not all stores will open at the same time. We haven’t gotten to the point of planning state by state, but some cities and regions of the country are more impacted than others. The Ohio governor said he’d like to see things begin to open” by May 1. “We are in malls and transportation centers—and each of those venues are controlled by landlords. And they may have different issues. So I’m guessing stores will open on different dates. But I’m also hoping it will be in a short amount of time.”
Chandi: “We’ve seen an increase in takeout and delivery of about 13 percent. And some stores have covered the whole 25 percent—and some stores that were built bigger are more impacted. So we are up about 15 percent in the last three weeks in takeout and delivery. So takeout and delivery are making up about half of what we lost.”
Patinkin: “In 40 years of business, the hardest thing I’ve ever done is to close all of our stores and lay off all of our people. When that happened, I cried. There’s nothing that motivates me more than reopening our stores and getting our people back. Sadly, we only have a skeleton staff in our office. All of our field-based personnel—store managers, district managers, and most of our support staff—have been put on furlough.”
Chandi: “The way our pizza business is going right now, combined with the fact that pizza survives better in recessions than other concepts, we can pretty much be back to full capacity” with sales.
“But the guidelines will change things. We will be doing more takeout and delivery. People may be eating more at home, in smaller groups and there won’t be many large parties. We’ll survive in this business by shifting and being nimble.”
Patinkin: “Oh my goodness,” sales volumes “are probably the biggest unknown all of us are facing.
“To be realistic, if sales when we open are 50 percent, will they then get to 60, 70, 80, 90 and hopefully 100 percent by Christmas? I don’t think anyone knows how the consumer will react. That said, when it comes time to reopen, nothing is more important than peoples’ health—customers and employees. It’s number one on everyone’s mind.”
Chandi: (Talking about his currently closed full-service Indian restaurant, Bollywood.) “I see the future success of this restaurant as being fast-casual, with quality food. That’s what Bollywood would turn into. We’ve trademarked the name. Especially with what’s happening now, the future is takeout and smaller dining rooms. That’s what I am hearing. But it is too early to tell.”
David Farkas has covered the restaurant business for 25 years as a reporter and food writer, and writes about development deals in The Pipeline in each issue. Send your franchise’s development agreements to him at firstname.lastname@example.org.