A Message from CPA Eats President Matt Hetrick on COVID-19 Preparedness
One of the (few) good things about being a war veteran as is that it grounds everything else in life with a certain perspective: things could always be worse. Whether election riots, government budget shutdowns, or coronavirus, DC has a habit of throwing seemingly insurmountable challenges at its restaurants. And we have a habit of rising to those challenges, time and time again, and moving forward successfully.
None of us know, today, exactly how extensive the damage from this pandemic and related panic will be. We’ve read all of the news, listened to all of the politicians and the experts, and we still feel hardly better off for it, as the situation is extremely fluid. That’s OK.
Deep breath. Steady hands. We’ve got this.
Over the next few weeks our work together will be incredibly important. We expect volume to drop materially this weekend and next week, as it did in Seattle, which was the first US community to enter into the panic. We will be communicating regularly and working hand in hand with you to ensure that your restaurant remains financially viable. We will also be preparing to help you get as much assistance as possible when government financial relief packages are finalized.
Here are our current thoughts re: best practices to address this situation:
Accept that you really, truly, honestly don’t have as much control in this situation as you want to have. It’s not just you, there just isn’t a magical plan for how to run a full sized restaurant with a full sized staff and full sized obligations for an unknown length of time with an unknown sales drop and unknown health danger. Once you accept this, you can start looking at reasonable measures instead of end-of-days adjustments. It is important to balance capital preservation efforts against the potential of gutting your team long term, especially if this is only a four-to-eight week event.
Monitor your Year-Over-Year (YOY) same-day-sales. Don’t look at last week, don’t look at last month. Tonight, compare Thursday, March 12, 2020 against Thursday, March 14, 2020. How are you doing? What is the % trend up or down this week? This is the measure of how you’re actually performing. It is important to have your finger on the anecdotal pulse of your operation and observe everything that is happening, but it is also important to measure the actual variances.
Many of our clients experienced sales increases this week through Wednesday, however we believe yesterday was a turning point in short term public perception and we should expect 30-40%% reductions in sales this weekend, based on trends experienced in Seattle over the last few weeks and current cancellation trends. We expect substantial weekday reductions at the beginning of next week, as well, but we believe that the situation is too fluid to predict as far as next weekend.Plan for labor and menu change scenarios around the staffing levels you need to have at various sales levels. You should carefully analyze your current schedule and then identify the cuts you would make if sales drop 30%. What about 40%? What staff can you afford to employ, how much can they prep and execute if you’re down a station or two and how does this affect your menu? There’s only so much you can do, but be ready for it. We are optimistic that there will be imminent legal changes to help provide economic support and security for displaced workers, and you need to keep your eye on the overarching goal of long term job preservation for your team - you help no one if you go out of business because you are unable to make cuts.
Be mindful of health. Wash your hands. Be sensible about guest dining space and the layout of your restaurant - if there are less guests, you can likely spread them out. Do whatever you can to make it an amazing experience and ameliorate any health concerns. Keep guests informed online and in person about the extra health and sanitation measures you’re taking.
Deliver. Now’s the time to get in the delivery game, if you haven’t already joined it. We thoroughly recommend full scale adoption of all delivery services, ourselves, for any restaurant that can offer appropriate menu items. This project is time intensive, so if you intend to offer delivery, you should commence that work immediately.
Preserve capital. Austerity measures are called for in uncertain times. Purchase wisely, schedule judiciously, and take this as an opportunity to get lean on inventory and staffing. You should be making your adjustments now, not several weeks from now, as many of the adjustments (short of closing) take weeks to have a financial impact. We will be working closely with you to maintain working capital, while managing vendor relationships.
40% is the magic number. If sales drop less than 40% YOY, you can make difficult choices and adjust your organization to come to a sustainable loss-level during this crisis. If sales remain at 60% of expected sales or above, you will lose as much money (in utilities, rent, and owner salaries) if you are shut down as if you stay open. If sales decline more than 40% for an entire week, this paradigm starts to change and we will shift planning discussions to planning for a dormant period for the restaurant to wait out the panic. Most of the changes that you can make will not provide immediate financial respite, so we believe it is prudent to take the long view of this situation, but be prepared to be decisive.
Our primary financial concern through this period - and, by extension, yours - is on preservation of working capital and ensuring organizational viability through a period of uncertain sales declines. Accomplishing this goal may require some difficult decisions and extraordinary effort, but it will be achievable for most organizations.
Up through yesterday, we have seen very little impact on sales volume, but we expect this to change as the situation further develops. We are working closely with industry representatives and government officials to try to influence the creation of relief packages that are timely, accessible, and useful. We will work closely with you to avail your organization of any aid packages offered by the government - the fact that our teams maintain impeccable books for you will make it significantly easier to attain relief. We will continue to constantly monitor the developing situation and provide you with steady guidance and best practices advice throughout this period.
Yours,
Matt Hetrick, CPA
President and Owner of CPA Eats
PS - click here to see our full proposal for pandemic relief legislation.