Bars & Restaurants
What can we do to serve you? It all depends on the Fogo de Chao
Fogo de Chao, a Brazilian steakhouse chain, thought it was over.
In an earlier year when news came in almost every hour about a new city or state being affected by the pandemic, executives switched to WhatsApp, a messaging system that allows them to instantly communicate with their general managers at the 43 U.S.-based restaurants located all over the country.
“When we first heard that a state had issued a stay-at-home order, we were confused. Barry McGowan is the chief executive at Fogo de Chao. It was like dominoes were falling. Boom. Boom. Boom.”
Communication with vendors was difficult. Restaurants were not open when trucks loaded with food arrived.
In just three days, the restaurant chain had created a takeout menu. It reached out to landlords in order to get discounts on its leases. It was able to rent tents and other equipment for outdoor dining in many of its restaurants, where indoor dining was not permitted.
It worked for a while. The restaurants were flooded with diners who spent a lot and flocked to them. Fogo de Chao was selling 500 premium steaks per week before the pandemic. By July, that number had risen to 1,300 per week.
New restrictions have been put in place on indoor and outside dining due to the resurgence of virus cases in the United States. They are not uniform no indoor dining in Philadelphia, Chicago, and New York City; indoor dining curfews for New Jersey and Massachusetts; and no restaurant dining in most parts of California. Fogo de Chao is one of the larger dine-in chains. The ever-changing set of rules presents a logistical challenge. How can you create a companywide strategy when each location has its own regulations?
Sean Ryan, a partner in Kearney, a consulting company, said that “what you have is a huge deviation from the standard in terms of how a restaurant chain operates restaurant locations in a different state, which then requires all of the processes and management to ensure that you comply with regulations.” It’s expensive and time-consuming.
Restaurants should work closely with local health departments to receive specific guidance about how to prevent the spread. For some, outdoor dining tents must have two walls or less to allow for adequate ventilation. Some people prefer that tents have three sides.
Restaurants are adapting quickly, just like they did during the pandemic. They are shifting food, alcohol and linens from temporarily closed locations to those that remain open. Others are doing the exact same thing with staff.
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Phil Kafarakis, an industry analyst who was also the former chief innovation officer of the National Restaurant Association, stated that “Restaurateurs have lost all hope.” “People are going through a panic attack right now, and they are taking drastic measures to ensure their survival.”
This year’s coronavirus pandemic has decimated the restaurant industry. According to some estimates, close to 110,000 restaurants were closed permanently and nearly 2.1 million people were still unemployed in October. Many large, casual and upscale restaurants like Chuck E. Cheese and California Pizza Kitchen went bankrupt.
These restrictions are a bit of a shock since the holiday season is usually the busiest time for the industry.
Maggiano’s Little Italy restaurant chain has over 50 locations in the United States. Typically, this time of year would see many family celebrations and company parties.
However, 2020 will be different because of various dining restrictions. In September, Brinker International executives, who own Maggiano’s and Chili’s Grill and Bar, warned Wall Street analysts. Joe Taylor, Brinker’s chief financial officer, stated that “our expectation right now is that we won’t find that same similar environment” Brinker pulled its guidance for the quarter this week after several of its facilities were shut down.
However, large chains of dine-in restaurants are now better suited for the new restrictions in many ways than they were during spring.
R.J. Hottovy from the consulting firm Aaron Allen & Associates said that there were many unknown variables in springtime. “This time, restaurant owners had a clear game plan.”
With empty dining rooms left, casual and upscale restaurants quickly stepped in to offer take-out or enhanced dining options. They also launched curbside pickup and partnered with Grubhub and DoorDash as food delivery partners. In some states, liquor laws were relaxed and chains could now offer takeout alcohol. Restaurants were again allowed to serve diners, but with some restrictions. Many rented tents and opened patios to create outdoor seating.
However, chains had an uneven performance in comparison to other restaurants.
Olive Garden restaurants had a weekly average of $70,000 in sales by the end of the summer. However, sales at Olive Garden’s flagship restaurant in Times Square, New York, which offered only takeout during summer, dropped to $17500 per week from approximately $288,000 per semaine, according to executives of Darden Restaurants.
Darden’s stock rebounded this fall and winter along with many other restaurant companies due to the success of many in offering to-go dining or outdoor dining. There is also the expectation that diners would return in large numbers to eating out after vaccines are widely available in the United States.
Ryan of Kearney said that chain restaurants are like people and can be adapted to any situation.
Just a few weeks back, the caipirinhas were flowing freely, and the $135 Wagyu Rib-eye Steaks sizzled under a tent at Fogo de Chao Beverly Hills. This was the busiest location of the chain, but many other restaurants are also recovering strongly.
The chain was based in Plano Texas and was purchased by Rhone Capital in 2018. It was making 93 per cent of its revenues last year. In addition, it had hired back approximately 90 per cent of those employees who were furloughed earlier this year. Its 16 restaurants, which are mainly located in states that have fewer restrictions on dining, saw higher sales this year.
Fogo de Chao is now back to its old ways, despite the fact that states have imposed new restrictions. Fogo de Chao is currently moving food and reached out to landlords to discuss lease payments a few weeks back.
After three weeks of closure by health officials, the once-bustling tent at Beverly Hills is now empty. Another tent is empty about 2,300 miles away, in a suburb near Detroit. Fogo de Chao was required to remove three sides to comply with local health regulations. Now, Fogo de Chao must find a way to create barriers that block the freezing winds.
Customers can enjoy shrimp cocktails and South American wines every night in Rosemont, Ill., just outside of Chicago. The tent is themed “Winter Wonderland”, and customers can sit under heaters with Christmas music blasting through speakers.
Fogo de Chao offers to move some workers from temporarily closed locations to those that are thriving in order to keep as many workers as possible. This includes Rosemont, Dallas, Orlando, Dallas, and Dallas.
McGowan stated that “our goal is to keep our employees employed throughout the holidays.” “Our goal is to open our patios and tents on parking lots in January. The vaccine will then be available and we can hopefully return to some kind of normal by March or April.
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