Some Restaurants See Sales Going Up

(A correction has been made to this article. See end for details.)

But some have fought through to what they hope is the other side. These are seeing sales return to normal and even increase.

These restaurants appear to have a few characteristics in common: a fast-casual or quick-serve business model that allowed them to transition quickly to full takeout mode, a strategy of adaptability, a dedication to their employees and a fierce determination to ride out the storm.

Make no mistake: This storm is a Category 5 hurricane. The restaurant industry has faced the highest total business closures in the United States, surpassing retail, according to the latest Yelp Economic Average Report. As of July 10, 26,160 restaurants had closed, an increase of 2,179 since June 15. Of those, 15,770 have closed permanently.

The Little Rock Convention & Visitors Bureau last week said that 16 restaurants in the city had closed permanently (see Closures), and the North Little Rock Advertising & Promotion Commission reported that Newk’s Eatery and Old Chicago Pizza & Taproom, both on Warden Road, and the IHOP on Maumelle Boulevard had closed.

“It’s a hard environment in which to run a business,” said Montine McNulty, executive director of the Arkansas Hospitality Association. Survival for many depends on whatever relief package Congress approves and the potential for the state of Arkansas to offer additional aid, McNulty said.

“Restaurants in general tend to have low cash reserves,” she said. “And they just can’t survive this long. Many of them are spending their own personal money, their retirement, their savings, which is a real burden too.”

Prioritizing the Team

Dyne Hospitality Group of Little Rock is the largest Tropical Smoothie Café franchisee in the United States with 65 operating in six states. Stuart McLendon, the company’s chief financial officer, said that Dyne expects to have 76 or 77 at the end of 2020.

When the pandemic began to be felt, there was a lot of uncertainty, McLendon said. “We went ahead and felt like it was important to prioritize taking care of our team first,” he said.

Dyne expanded benefits — for example, providing part-time employees with additional paid sick leave. And with the passage of the Coronavirus Aid, Relief & Economic Security Act, Dyne felt even more confident in expanding benefits, McLendon said, implementing additional hazard pay for its workers.

According to data released last month by the U.S. Small Business Administration, Dyne received between $2 million and $5 million from the Paycheck Protection Program that was part of the CARES Act.

The company also facilitated testing of employees for the coronavirus to provide a quick turnaround. And Dyne put extra money into what it calls the Pineapple Fund, a reimbursement pool that allows employees to apply for grants to cover unexpected expenses associated with COVID-19.

“At one point, 5% to 6% of revenue was going into extra COVID-related employee benefits and hazard pay programs,” McLendon said.

Revenue at the end of March and through April fell by about 33%, he said. “That was obviously concerning, but we felt like with the PPP funding that was going on and being able to participate in that program, we could thread the needle and still prioritize taking care of our employees.”

Of course, Tropical Smoothie is set up to do a lot of takeout and drive-through business — the only kind of business many restaurants could do in many places — and currently, only about 12% of Dyne’s Tropical Smoothie traffic is dine-in. The company also focused on enhancing delivery service. Pre-pandemic delivery was about 3% of sales; now it’s 11%.

In the past month, Dyne has seen its year-over-year comparable sales “return to the positive and [growth is] up into the double digits,” McLendon said. “We’re definitely, I feel like at this point, capturing market share and things are looking pretty good for us on the sales front.”

Dyne still has “a lot of extra costs associated with the response to COVID, but overall we feel good about our ability to weather that,” he said. “And the fact that we’re going to open or acquire about another dozen cafes over the back half of this year, I think reflects the fact that we feel pretty optimistic about where we’re ending up in terms of our overall market position.”

Flat to Up

Slim Chickens, the fast-casual chain based in Fayetteville, also has appeared to weather the pandemic fairly successfully. Tom Gordon, co-founder and CEO, told Arkansas Business late last month that year-to-date sales were flat to up compared with year-ago figures. “We’ve done very well in most markets throughout this time period,” he said.

“I think we were uniquely positioned because of our drive-through, because of our curbside service and especially because of our app,” Gordon said, referring to Slim Chickens’ ordering application. “We’ve been fortunate that we’ve been able to be open and stay open for all the guests that count on us.”

David Alan Bubbus, who goes by Alan, is the owner of the David’s Burgers chain, based in Little Rock. His drive-through business has soared during the pandemic. “Normally, our business is about 30% drive-through,” he said. “And so our drive-through business has effectively tripled.

“Our numbers are close to the same as before the pandemic, and sometimes they’re a little higher,” Bubbus said. “We’ve been very blessed to be able to change our business strategy from primarily a dine-in business to a drive-through business, and we’re very thankful that our guests have been loyal, and sometimes patient.”

The greatest shift has been in technology, he said. “When you’re set up for primarily a dine-in business, you have to switch to where you can get all of those orders into the system and efficiently make those orders, package them up and get them out the window.” David’s Burgers changed its ordering system to speed their entry into the system.

Another adaptation was “just having a good strategy for traffic flow,” Bubbus said. “Just simple things have been really important — having a good game plan, being flexible with that game plan.”

Another element of the company’s success “was to just have fun in the drive-through,” he said. “We like to really enjoy our guests. I tell all our people, your No. 1 goal is to get them to smile and have a little fun. You tend to do a better job with all the details when you really enjoy the guests and value them and not look at them just like a number.” That, however, has been more of a challenge with the mask mandate.

Bubbus said that at the beginning of the pandemic, he had to lay off employees. But now, “everybody who wanted to come back was invited back and then we had to go recruit more. We’re still hiring now.”

Finally, McNulty has some advice that applies to everybody: “Any business, I think, instead of ‘woe is me,’ they need to be thinking about, ‘OK, how am I going to adapt to this and do the best job that I can?’”