The Price of Pandemic: The Restaurateur's Dilemma

An NYC restauranteur shares how destructive COVID-19 has been to his business, and the many others that are dependent on his success. How will an already low margin business survive in a post Corona world?

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Hey everyone,

We're well aware of the pain the restaurant industry is going through right now. Millions of people out of a job and thousands of businesses shut down overnight. Without government involvement, it’s possible that a majority of businesses won’t reopen. That’s why many in the industry are calling for Congress to make sure there’s a proper representation of the restaurant industry in the CARES Act.

Episode 4: The Restarauter’s Dilemma - In Today's episode, we talk to NYC Restaurateur Gabriel Stulman, who tells us his experience shutting down all nine of his restaurants. We learn:

  • How quickly restaurant revenues went to zero, and why millions are out of a job
  • All the other businesses that restaurants support and how they’ve been affected
  • How the CARES Act & SBA program can save the industry, and what reopening might look like post quarantine
  • The cost of what it would take to support employees that were let go due to the virus, and how other methods may be more impactful and economical like Happy Cooking Grocery.

We wish all the best to all our friends going through tough times right now. We’ll be there when the doors are reopened. In the meantime, stay safe out there!

Mesh

Episode Transcript

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(Coin Drop)


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MESH VO:  Hey everyone, Mesh here from Talk Money. Welcome back to The Price of a Pandemic, our series on how the coronavirus is affecting the economy, business, markets & investing.


In today’s episode, I wanted to shed some light on the restaurant industry. In Season 1 of this podcast, we met New York restaurateur Gabriel Stulamn. When we talked last March, his nine restaurants, scattered throughout the city, were bustling, lively - popular. Fast forward to now. As we know, bars and restaurants, both big and small, were some of the first businesses to shut down globally in an attempt to slow the spread of the virus. The industry didn’t have any lead time to figure things out. Almost overnight, revenues hit zero. And given that restaurants run on notoriously low margins, they didn’t have a ton of cash reserves to keep things operating. Instead of being able to offer a seat at the bar or a table inside or out, they had to decide if they could even offer delivery.


Millions of workers out of a job. Thousands of business owners with rent and invoices piling up. And that doesn’t even include the myriad businesses restaurants support. On today’s episode, we check in with Happy Cooking Hospitality’s Gabriel Stulamn. Let’s get started.


Gabriel: [00:00:14] My name is Gabriel Stulman and I'm an out of work restaurateur.

Mesh: [00:00:30] Before the virus hit New York City, how many restaurants did you own and operate? Can you tell us about them?

Gabriel: [00:00:36] Yep. I have nine restaurants and bars. They range in age from about 10 and a half, and the youngest one is about [00:00:53] eight months, something like that. The first one is [00:01:00] called Joseph Leonard another called Jeffrey's Grocery. We have Fedora. We have a gastro pub called Bar Sardine a cafe and wine bar called Fairfax. [00:01:30] A new American restaurant called Simon and the Whale. [00:01:34] A Mediterranean-leaning cafe called Studio. A cocktail bar called the George Washington Bar. And last, we have a little neighborhood joint called The Jones.

Mesh: [00:01:52] On a given weekday or weekend, how many seats would you say you are filling on a daily basis? // [00:02:10] How many turns per day, just to give us an idea of how many customers you were having between all these restaurants.

Gabriel: [00:02:30] // All in I have 405 seats. So I would say between our 405 seats on an average weekday between breakfast, lunch, and dinner, we're serving about 1200 people a day.

Mesh: [00:03:27] And on a weekend?

Gabriel: // [00:03:31] I'd probably call it 2,400 because brunch can be a service where we do three turns at brunch alone, [00:03:39] sometimes four and five...

Mesh: [00:03:42] And how many employees did you have total?

Gabriel: [00:03:46] 270.

Mesh: [00:03:51] That's a lot of people.

Gabriel: [00:03:52] How many do I have right now? Five.

Mesh: [00:04:00] So after New York announced social distancing guidelines how did you react to that? What did you have to change with your restaurant and staff?

Gabriel: [00:04:18] It was a very rapid progression. [00:04:24] When New York instituted social distancing it was on a [00:04:30] Friday afternoon,[00:04:33] and then we were mandated to shut down by Monday. So it's like [00:04:39] shit happened in a blink of an eye. 00:04:47] there were very clear instructions on what we had to do. We were required to remove 50% of our seats, [00:04:58] so we did. [00:05:06] And then [00:05:08] Sunday after brunch, I made the decision to not serve dinner. [00:05:22] The tone and the energy of the city was off. So I made the [00:05:30] decision to shut down before the government mandate, [00:05:34] but as it turned out, I only made that decision by about 24 hours.

Mesh: [00:05:40] // What was the economic impact for your company? I mean, it seems like it was over a weekend.

Gabriel: [00:06:05] My answer would be catastrophic.[00:06:09] We went, we went down to zero.[00:06:12] So that's like, that's not gradual decline. That's just,[00:06:18] that's a guillotine.[00:06:25] It's not like, Oh, the airlines are slowed down. It's down to [00:06:30] zero. It's fucked up.

Mesh: [00:07:10] So how did you make the decision to let your staff go, who stayed and who you had to fire?

Gabriel: [00:07:18] So the decision of letting the staff go is less of a decision I made and more of a decision that was made for me. [00:07:30] And what I mean by that is [00:07:51] you cannot bartend from home. You cannot wait tables from home. You cannot be a prep cook from home. You [00:08:00] cannot be a sommelier from home. So our industry is not one of those industries that you can do remotely. [00:08:50] Look, I would like to keep everybody on board. [00:08:53] I don't have that luxury. It's a financial impossibility. You know [00:09:06] we operate on such razor thin profit margins, even in the best of years, right? [00:09:12] Like, when business is booming, we're doing seven or 8% profit margins. So // that being said, there's still work that I know I need to do. So we kept on five people that are very helpful and are working full time and they're doing jobs that can be done remotely.

Mesh: [00:09:49] What would that entail?

Gabriel: [00:09:50] Our CFO is still on board so she has been very busy since we closed whether it's communications with landlords or [00:10:00] communications with vendors that we owed bills or filing for leniencies with the state for sales tax or filing for leniencies with loans that we have managing all of the unemployment claims that come in. As well as quarterbacking with our CPA, all of the various forms of financial assistance that are out there. [00:11:05] Then there is our COO we've been generating newsletters and how are we sending out communication to all of the people that we parted ways with those 265 people. [00:11:35] Then we also have kept on our director of operations and our food and beverage director at the freehand, at Torres, they have been quarterbacking [00:11:44] all of our political activism.

Mesh: [00:12:39] Are you paying that out of pocket given that there's no revenues coming in?

Gabriel: [00:12:44] That is correct.

Mesh: [00:12:46] And besides obviously the employees at the restaurants, what other businesses do you interact with?

Gabriel: [00:13:00] The ecosystem that comes from a restaurant is quite tremendous. So the domino impact that I don't think people realize is quite profound. When we close one restaurant nonetheless, 27,000 in the city, [00:13:24] here's kind of the ecosystem that's impacted. All of the linen companies there's like seven [00:13:30] or eight big linen companies that provide all of us restaurants with our aprons, our chef coats, dishwasher, shirts, napkins.[00:13:38] All of them just dried up. We're not allowed to put our trash out with the city pickup. So there are private cartage companies, trash removal. Nobody has trash anymore, so all of that's [00:14:00] dried up. All of the vegetable purveyors, all of the meat purveyors, all the fish purveyors, all of the dairy purveyors, right? All of the paper goods supplies that one needs to buy, whether it's like toilet paper or to go boxes or to go bags or, uh, coasters or cocktail napkins When they have no longer anybody to sell anything to, that impacts all their delivery drivers. That impacts all the people in their warehouses that pack up our orders every day. That impacts all the people in their accounts receivable department and their accounting departments. Then that impacts all the people that they buy from all the farms that they directly interact with, whether it be for fish or for dairy, or for meat, or for vegetables or for fruit. [00:15:13] [00:15:30] You've got all these other branches, electricians, plumbers, handymen. That are on daily call. You've got all the refrigeration companies that are on service contracts. [00:15:52] All of them are impacted.

Mesh: [00:16:07] And it would seem to be that without the government intervening and providing the right stimulus // It seems like a pretty negative outcome here for most people. [00:16:30] What are your thoughts on the stimulus package and the SBA loan program // have you found it somewhat helpful? Do you see flaws? 

Gabriel: [00:16:43] I mean, look, it's impossible to come up with a system in a pressure cooker environment. This is not [00:17:00] some bipartisan or partisan position here. [00:17:04] It is impossible for anyone to come up with a system in a pressure cooker like we've had that is applicable to every different type of small business. So my needs are different than the nail salon. [00:17:20] And we're different than the Broadway company. [00:17:23] But yet we're all applying for the same CARES Act. I think that there should be some comfort in knowing that we are not in this alone. It is not a problem just for New Yorkers. It is not a problem just for Americans. This is a global problem. [00:17:54] It's different when you feel [00:18:00] like you're the only one bleeding.

Mesh: [00:21:45] In terms of restaurants // making [insert “it] through this, like who survives?

Gabriel: [00:22:39] I think there's gonna be two waves of shutdowns. [00:22:48] I think there's going to be a load of restaurants that do not come back from this. Either they are [00:23:00] unable to get money through the CARES Act because the money dries up [insert “or] because they don't have all of the information to apply. It's a finite amount of money. It's 348 billion. Like that's got to cover [00:23:24] basically every industry. Except the airlines have their own pot. I think that this money is going to artificially prop up many. [00:23:48] I think it's going to allow a lot of people to reopen [00:23:51] and stay in business for another four to eight months and I think it is going to allow a lot of people to pay some debts [00:24:00] to put some people back on payroll. And then I think it just gives them a little bit of like // life assistance // for a period of time. [00:24:12] But I believe that the industry is going to be impacted for so much longer than after this pandemic. I think when we get the green light [00:24:27] // I don't think it's like [00:24:35] a fresh rubber band and it just snaps back into place. I don't think that means go put all your seats and chairs back in. [00:24:55] It's going to be gradual. It's going to say you can [00:25:00] reopen, but you have to have half the seats. [00:25:45] And so what that's gonna mean is I have fewer seats to make money on. Separately I think there's going to still be like some sort of psychological phobia amongst people that even when they're told they're allowed to go back to restaurants, [00:26:00] // there's going to be a meaningful percentage of the population that pre-COVID would've eaten out, but post-COVID are going to be // still fearful.

Mesh: [00:26:19] Yup. I mean, that makes, it makes complete sense.

Gabriel: [00:27:15] You're going to be dealing with a smaller dining demographic because of a phobia. [00:27:22] Clearly this is fucking a lot of people's pocketbooks everywhere, and I think that when people [00:27:30] start to go back out, their spending habits are going to be different. What we say in my industry is a lower check average. I anticipate that as people come back to our restaurants, it's not going to be [00:27:40] hey, oh my god, I'm so happy I get to go back out. Let me get that $20 crab cake appetizer and let me get the $45 steak and I'm also ready for a $100 bottle of wine. No. I think people are going to have less money, and I think that they're going to spend less when they go out. 

Mesh: [00:33:33] Well // the big first announcements that you [can we find a “made?”]  actually did make was that you did create a food bank, a grocery bank // for your employees and their families. What made you decide to then do that and how did you go about that whole process?

Gabriel: [00:34:00] What was important to me was being there and being supportive for my family of colleagues because they're there for me. They work hard every day making our restaurants function. I need to find a [00:34:30] way to support them. [00:34:50] You're hurting. I'm hurting, I'm hurting. You're hurting [00:34:53] but I can still try to help you. Everybody's trying [00:35:00] to just seek donations. So that they can give money to their staff. And I sat there and I started looking at all these dollar amounts that people were trying to raise, starting to think about like, people were putting up 200,000, $400,000 goals and I thought let's be honest here. How many people just lost their job in our company? // 265 people. // Now at a bare minimum  like if I paid them less than unemployment, $400 a week, right? [00:35:49] $400 a week, one week costs $106,000. You multiply that out by the minimum eight weeks that we're going to be closed. We're getting close to a million and if I could raise $1 million, which I have no confidence in // [00:36:14] that gets people $400 a week for eight weeks. $400 isn't a lot of money // for a lot of people. And $1 million is not possible for me to find. So I started to think about well, what can I do? // We know how to make food. // I have relationships with wholesale vendors. Wholesale’s cheaper than people can get it in the grocery store. [00:37:00] And so I have the ability to // get product where other people can't even get it, and I can get better quality  [00:37:30] and I can get it less expensive.  [00:37:35] Now, if I do all of that, I can take away one stress. [00:38:25] I think I can fix the food problem. If I can take one stress away from you, that's better than taking [00:38:30] none of your stresses away. [00:39:00] And so that's what I figured is I started doing some math. // How much food would we want to put in one grocery bag to last one person a week. // We were like two onions. One head of garlic, two zucchini, a grapefruit, two apples and orange, a whole chicken, a dozen eggs, a quarter milk, a bag of coffee, a loaf of bread, [00:39:30] a bag of pasta. I know rice and lentils, right? // [00:39:37] Can we make some prepared goods? // What if we made a carrot salad? What if we made hummus? What if we made like a cucumber salad?  And make [replace with “made”] it delicious because we have the skill to do it.  Then I thought, that's not enough. A lot of people in our company have children and have spouses and having dependents. [00:40:42] So then we did a survey and we found out that that actually doubles the size of our company in terms of mouths that we typically [00:41:00] feed. So when we did the math on that and [00:41:45] We can feed over 500 meals for 10 weeks.

Mesh: [00:41:48] that's pretty incredible. [00:42:05] Besides the go fund me that we'll link to in the notes, // what else can we do, as // patrons and supporters of the hospitality industry?

Gabriel: When we reopen, [00:42:30] please come. // [00:29:58] The world is different now and it's going to be different when [00:30:00] this passes. So it's going to be different for me. It's gonna be different for you. // It's gonna be different for everybody.


MESH VO: No matter where you work in the restaurant chain, there’s uncertainty, and a lot of decisions to be made that can affect the fate of your livelihood. All we can do in the meantime is try to support each other as best we can. I hope that restrictions are lifted when the coast is clear, and that our favorite establishments weather the storm so we can support them. And to Gabriel’s point, the world will be different. But restaurants will find ways to adapt, and create new experiences for that new world. We’re working on an upcoming episode exploring the future of delivery and virtual kitchens, so stay tuned. And if you want to support Gabe and his team with their Happy Cooking Grocery, visit gofundme.com or check out the show notes for details.


I want to thank my guest Gabriel Stulamn for his time. This episode was edited and produced by Olivia Briley & engineered by Maia Tarrell. Sign up at thetalkmoney.com for further deep dives and to hear other episodes. We appreciate you sharing this with your friends, and subscribing to us on Apple, Spotify or wherever you choose to listen. Until next time.




*https://www.gofundme.com/f/groceries-for-hch-workers - link for show notes

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