When 2020 began, more than 15 million people worked in the U.S. restaurant industry, and more than half of consumer food dollars were spent on restaurants. What a difference six months makes.
Like every industry right now, restaurants and hospitality businesses are working hard to adapt in the face of a global pandemic and major economic downturn. Many restaurants have already closed, and for those that are hanging on, what does the future look like?
That’s the topic of the latest episode of Full Comp, Josh Kopel’s podcast for the restaurant industry. In this episode, Alex Susskind, Associate Dean and Professor at the School of Hotel Administration at Cornell University, shares his views on the current environment. He discusses his research on “information sufficiency” and advises restaurateurs on how to communicate with guests to create positive experiences, even when things go wrong.
Josh and Alex also discuss the evolving role of technology in the dining experience and how tech should never be a replacement for human interaction and customer service. And the dean talks about how the pandemic has impacted Cornell’s curriculum and the way the school is training the industry’s future leaders.
Listen to the full episode below, and listen or subscribe on Spotify or Apple Podcasts.
Ready for more? Check out more episodes of Full Comp:
Episode 1: Building a Restaurant Empire in a Recession: Tender Greens’ Erik Oberholtzer
Episode 2: Creating Opportunity from Tragedy: Serial Restaurateur Darin Rubell
Episode 3: Redefining Cocktail Culture: Death & Co’s Alex Day
Episode 4: The Art of the Pivot: Iron Chef Eric Greenfield
Episode 14: The Benefits of Community Building: Chef Nina Compton, Chef/Owner of Compère Lapin
Episode 22: The Art of the Pivot: Mark Canlis, owner/operator of Canlis
Episode 34: Becoming a Brand: Celebrity Chef Jet Tila
Episode 36: Fighting the Good Fight: Celebrity Chef Rick Bayless
Full Comp, episode 26 transcript
The Future of Restaurants: Dean Alex Susskind, Cornell University
[Josh Kopel]
Today’s episode is brought to you by Yelp, whose mission is to connect people with great local businesses. They’re also helping me connect with you, which is totally awesome. Now, here we go.
[Alex Susskind]
We have to teach our people, our students to be more compassionate, and that will help them be better leaders and help them deal with whatever adversity they face when they get out.
[Josh Kopel]
Welcome to Full Comp, a show offering insight into the future of the hospitality industry, featuring restaurateurs, thought leaders and innovators served up on the house.
[Josh Kopel]
If hosting this show has made one thing incredibly clear it’s that teamwork, data, and resources will be what help us thrive post pandemic. Understanding that, Yelp and I have created a cheat sheet offering insight into consumer behavior, popular trends, and free tools and resources to help you get open and stay open. You can download that guide at joshkopel.com/resources. Didn’t write that down? There’s a link in the show notes as well.
[Josh Kopel]
Who doesn’t love a great mashup? To get a read on where diners currently stand, the Yelp team released a survey to thousands of users. Cornell University analyzed that data, and today we review their findings with Professor and Associate Dean Alex Susskind. His specialization centers around the strategic elements of the industry. But Alex is more than a theorist. He came up through the ranks of the hospitality industry and that’s where our conversation begins.
[Alex Susskind]
I’m the Associate Dean of Academic Affairs at the School of Hotel Administration at Cornell University. I’ve been at Cornell for 22 years. I’m relatively new to this role. I’ve only been in this administrative role for about two years. Prior to that, like most people in the industry, I got my start as a dishwasher when I was 14. I fell in love with the industry the first day I was there, my first shift. I guess it was the beginning of the end for me. I never looked back and have been in love with the industry and working in the industry ever since. Now I’m in the academic side of things, but along the way I had worked for restaurants and cooked. And I think I’ve told you this before, I don’t consider myself a chef because that insults the true creative minds that fuel our industry. I was a good cook, that’s about the way I would frame myself. I manage restaurants and cooked. That was about it. So anyway, hope that covers it.
[Josh Kopel]
It does absolutely. And you and I both had access to the Yelp Diner Survey, which I thought offered amazing insight.
[Alex Susskind]
Yeah, for sure.
[Josh Kopel]
And before we dig directly into that, I do have a general question for you.
[Alex Susskind]
Sure.
[Josh Kopel]
Looking at the pre-COVID failure rates of restaurants, would you say that the pandemic created the issues that we’re facing as an industry, or did they simply highlight foundational issues that were there all along? I’ve asked that question to past guests, but I’d love to get your input.
[Alex Susskind]
Yeah, sure. So I think what happened is it highlighted some of the problems that we have in our industry. And a lot of our operators, the folks who are in there every day doing their work, they’re relying on cash flow. Our business is a strongly cashflow driven business, and so when that dynamic is removed from the mix, it’s going to identify a bunch of weaknesses in operating models that operators have. You’re used to that cash register every night providing you with the stuff that you need for the next day and so on and so forth. And even the smartest minds rely on this cash flow, which this pandemic basically highlighted, I guess that dynamic, if you will, that business dynamic.
[Josh Kopel]
Well, and every parent thinks their child is beautiful, and I’m a restaurateur. So I think that the hospitality industry is special and different, but when we look at the numbers, the average full service restaurant nets out at 6%, that means that 94 cents of every dollar that a restaurant earns goes back into the economy. What do you think the collapse of our industry would do to the rest of the economy?
[Alex Susskind]
Oh, we’ve already seen it. It has a huge impact on everything that we do. And we’re the largest employer in many ways. We also support the agricultural business. We support the wine business. We support the distribution companies. We support all of these things. We support consumer goods companies, because our restrooms have toilet paper and paper towels in there. And we use tablecloths and silverware and all kinds of equipment. And there are so many restaurant locations across the country, but across the globe. And when that dynamic changes, when those things disappear, that changes the economy for everybody. And it’s not just labor, the labor to go into all the stuff that we need to open a restaurant doesn’t even count the people that are working in our restaurants. So I think it has a huge impact, and it always has. I think it’s come to light now more than ever.
[Josh Kopel]
For sure. Well, I mean, even when you just look at it like, let’s say the agricultural sector. The damage done to the hospitality industry has shown the fragility of the food ecosystem as it stands, right?
[Alex Susskind]
Well, without question, and not just for the producers, but for all of the other folks that touch that product before it gets to your guests’ plate. And we have a … well, he’s a national distributor, but based in Binghamton, New York; Maine’s Food Distribution. They announced about a month ago that they’re closing their broadline business. So the work that they did to serve independent restaurants after the pandemic hit, and these restaurants closed, they’re not doing business anymore. They’re still going to do some distribution for the chains, but that’s their systems work and that’s different than their broadline stuff. So the grocery store for restaurants basically shut down, right?
[Josh Kopel]
Right.
[Alex Susskind]
So that’s huge.
[Josh Kopel]
Well, it is. And if you and I are aligned and we are in believing that there are foundational issues within this industry, then I think we can also agree that now is a great time to reset, to recalibrate and to make a better future for ourselves as an industry.
[Alex Susskind]
Yeah.
[Josh Kopel]
But we’re three months into this. Even though it is an opportunity to evolve, based on what you’re seeing out there, are we changing? Are we evolving? Are we bettering the industry? Are we missing this amazing opportunity?
[Alex Susskind]
In the early stages, I think we’re not missing it. I think there are many operators out there who now realize that it’s either now or never. If we want to fix the wage structure in our industry, now’s the time to do it. If we want to find a better way to … and I hate to say it, but a better way to regularly pass the increased cost of doing business onto our guests, like every other industry in the universe does. It costs you more to do business, you charge your guests more and like it or not, they accept it. And the restaurant business has always been struggling with finding a way or has always struggled to find a way to do that.
So we can do better. We can do better in hiring our people. We can do better in the environments in which they work. Clearly, we have a long way to go with that, but now is the time. And then we can do all of these things. So I think now is when we’re going to start to see this. And fortunately, I think what’ll happen is a lot of these larger chains who have always been reluctant to do things that don’t necessarily help their shareholders. And I’m not faulting them because they have multiple masters that they have to serve, and that’s just the way the world works. So that’s the way capitalism works, and so I’m not criticizing that, but they’re starting to see that there are things that they need to fix. And when these large operators get behind fixing some of these things and take the time and the energy and the effort and the resources to do it, then it’s going to make it easier for everyone else to do it.
And your mom and pop diner down the street may have been paying their people fairly forever and we’ll just never know about it. And so now is the time to do this. And it’s not just letting your employees wear a Black Lives Matter shirt, because yes, that’s an important step, but there’s way more to it than just appearances. It has to be stuff that actually gets done and gets re-institutionalized into the way that we do business.
[Josh Kopel]
I couldn’t agree more. I think systemic change is the only way to get things done. I want to pivot slightly. So let’s say we raise prices. Like I raise all the prices in my restaurant so that I can actually afford to stay in business, and everyone else does too. My big fear is the bloodletting. My big fear is that I’ll lose my business, a bunch of people will lose their businesses, but some people will survive because there are still enough customers that are willing to pay. Can you speak to that fear about being worried that some people just aren’t going to be willing to pay the premium and what that’s going to do to independent restaurants?
[Alex Susskind]
Right. Yeah. So I think that, yes, there are going to be some people who reconsider the transaction, being engaged in consuming a restaurant experience because it costs more. But I believe that what restaurants provide to, not just to the workers and to the people who own the businesses and support the businesses, but to the guests. It’s a cultural thing that’s very important to a lot of people. We can use the last downturn as an example. When the economy crashed, it crashed in a different way, but there were a lot of people who had less money in their wallets and they didn’t stop going to restaurants, they changed the way that they spent their money. And so for restaurant operators, it’s really crucial to recognize that yes, people are going to change their behavior and you need to re-situate yourself and identify what that piece of business is going to look like and capture it and be the best at whatever it is.
[Alex Susskind]
So maybe you never did any takeout at all in your business, that your thing is, people sit down in my restaurant, they’re here for 75 minutes, they have an amazing experience, and they leave. Well, maybe 25% of your guests don’t want to do that anymore, but they still love your food and they still want it. So find a way to create a transaction that will work for them, that will work for you, that will keep the money coming into your business and keep your guests excited about the stuff that you do. And so instead of them coming once a week, maybe they come once a month now, but they’re still in once … those other three weeks, they’re in there getting a bag of food that they’re going to take home and figure that out.
[Alex Susskind]
And so I think that we as operators have to be savvy to just know what our guests want and get your fair share of their wallet as you had in the past. And when that shrinks, when the total pie shrinks a little bit, well, you have to get a little bit less, but as things recover, people are going to want more. And right now the National Restaurant Association, they do these regular consumer surveys, they do regular operator surveys, there’s pent up demand. There are people who are like me sitting in the basement of my home doing a Zoom meeting that would prefer to be, first of all, either sitting in a studio doing this, or sitting in a restaurant having lunch. Right?
[Josh Kopel]
Mm-hmm (affirmative)
[Alex Susskind]
And that’s there. There are people who want to do that. Now, there are people who are still nervous. There are people who still haven’t figured this out, but that’s a short term problem that I think we’ll get through. And if operators are really smart and savvy, and they bring their customers along with them, and they communicate well, and they explain, they say, “This is why I’m doing this. The reason why this steak is more expensive is my supplier just charged me a dollar a pound more for the steak. I’m buying it and cooking it for you, but I have to charge you more in order to make that happen.” And they’ll get it at some point. I know there’ll be some people who are like, “I don’t like the steak. Well you know what? Great. I have this chicken dish, or I have this pasta dish, you’re going to love it. And it’s priced differently than the steak or this lobster or this higher end item.”
[Alex Susskind]
So you have to figure out what that is. And I remember high end restaurants never wanted to serve a hamburger. It was beneath them to do it. And I don’t know, I’ve been to plenty of high end restaurants now that sell $30, $40, $50 hamburgers. So anything’s possible. And figure out what that is for our guests and own them. Own your guests. And I don’t know if that’s the right term, but be with them to the point that they get it. They understand what you’re trying to do, why you’re doing it and listen to them. And believe me, if no one’s ordering that steak anymore, well, maybe it’s time to move on from that. And maybe that was just something you thought they wanted. So we always have to listen to our guests, but now is the time to really, really listen to them.
[Josh Kopel]
Well, and that was reflected in the Yelp Diner Survey. The trend that I noticed again, and again, and again, is that diners want to be kept in the loop. And communication is going to be paramount to a restaurant’s recovery. And you’ve done a ton of research around the idea of sharing information. Can you talk about that and the steps that you feel restaurants need to take when communicating with their customers?
[Alex Susskind]
Sure. And most of the research I do is, I become naturally curious about things that I can’t explain, and so I try to figure it out. And one of the things that I’ve uncovered through this is that information sufficiency is feeling that you have enough information in a transaction is really, really important to your satisfaction, to your loyalty, to all the things that matter. And it’s not just for restaurants, it’s for every single business. And if you think about the transactions that you engage in, where you’re the least dissatisfied or the most frustrated. Frustration is a term that I use to describe when things don’t work out the way that you want them to. It’s usually connected to sufficient information. So if you have enough information and something goes wrong or something isn’t right in a circumstance, you process it and accept it more willingly and regularly than you would if you don’t have enough information.
You get frustrated and then that leads to dissatisfaction and drop off. And again, I’m not intending to criticize anyone, but I’m going to, I guess, a little bit. Think about a transaction that you have at a car dealership or with a mechanic. Those are things that are largely out of your control, like how cars are priced and the deal that you get when you go in to buy a car. They’re all these things, and these bells and whistles, and you never know what the true value of that car is and you walk out, you always feel like you just didn’t get enough information about it. You still buy the car, but you don’t feel right about it. And that’s the same thing, assuming it doesn’t happen all the time, but it happens a lot is getting your car fixed.
Mechanics for example, they have a technical skill that you don’t necessarily understand how that works. And so unless they come out and they show you that broken part, like my mechanic actually does this. When I bring my car in, he doesn’t just take the part and throw it in the trash can, he brings it out and he says, “This gear thing cracked, look. This cracked and it was connected to these two things. I had to put that in, but to put it in, I had to pull these three things out, and that’s why the labor was $1,000. The part only costs 14.75, but to put this part in, I had to take these three things apart.” Then you’re like, “Oh, okay.” And so you’re okay with that. You may not be happy that you just had to spend money on that, but you understood why.
Airlines, the same thing. They cancel flights all the time, and sometimes they tell you why. Sometimes they tell you why, and they’re not necessarily telling you the whole truth or the full truth, and how does that make you feel as a consumer? So all of this stuff led me as a researcher to kind of focus that attention of understanding information and how powerful it is to help consumers have a positive experience focusing on that to basically understand how it works in restaurants. And it works exactly in the same way, precisely in the same way that when you provide your guests with timely, accurate information, explaining what it is they’re doing, when they’re doing it, why they’re doing it, what happened and why, they will be more satisfied and more loyal to you in the long term.
Again, you’re not going to make everyone happy all the time. And even the most honest and direct explanation will still make some people unhappy, and that’s okay. But the majority of it has to do with the information flow and just telling your guests what you did and they’ll respect you for that. And they’ll expect it. In other words, you can’t be forthcoming to them one day and then the next day, so yeah, I better not say anything. It’s kind of like when I was a cook and I screwed up an order, I mean, not that you’ve ever done that, but when I messed up an order, when I was younger, I used to try to pretend that it didn’t happen and cover up something that wasn’t necessarily right. As I got older, I realized … Well, and I had a really great mentor who said, “What are you doing?” If it’s not right, don’t do it.
And so I would rather say, “Hey, you know what? This dish is going to take another five minutes to get out because I didn’t get it right the first time. And I’d rather have it go out right five minutes late than wrong now, and then you’ll have to deal with more problems later on down the road.” And that matters. If the server goes to the table and says, “Hey, you know what? We’re going to be five minutes later than expected. I’m really sorry about that.” Most of the time, they’re okay. They didn’t even realize that it was a problem and they feel better about it as opposed to getting it when it’s not right, and then you have to re-cook it, or you have to figure out. So that’s just an example, small example of how all this stuff works. And it’s not just restaurants, it’s in every consumer domain that you could think of, or at least most consumer domains that you could think of.
[Josh Kopel]
Does the media matter? I mean, do you believe that it’s more effective through email, through telephone, through the website?
[Alex Susskind]
Yeah, so I’ve done some research on that as well, and it really depends on a few things. It depends on what the complaint is, the severity of the complaint, and it depends on who’s complaining. So I used to think that face-to-face communication mattered in almost every circumstance. And it depends. It really depends on the circumstances. If it’s a severe error, most people want to speak to a manager, but not necessarily a line level employee. That sometimes the guests use the line level employee as not being empowered enough to address their concerns, or not being well trained enough to address their concerns. And some guests prefer to actually just leave and write a letter or even … Well, very few people actually write letters anymore, but some form of communication, whether it’s writing an email to a restaurateur or going to Yelp or going to some other medium to communicate.
So some guests prefer different types of things, but if the complaint is minor, for the most part, it can be handled at the line level. But once it becomes something more, then usually the manager is the best way to resolve that problem and face-to-face communication works. Remember that once the guest leaves, it’s harder to repair that. Dealing with a negative online review is harder than if the guest is still at your table. Once they leave, you have to work a little harder to make it right. Not that it’s impossible, but it’s just harder. And that’s the world that we live in. In fact, your guests can be sitting at your table, 20 years ago they couldn’t do this, but they could be sitting at your table typing in the review as they’re still sitting there and they can post it before they even leave. And so that, that makes it even more complicated.
[Josh Kopel]
Well, and I also think it speaks to a changing dynamic. When we look at the data, we see the call volume is way up for restaurants. People are afraid and they’re apprehensive and they want to talk to someone and they want that reassurance, which I think requires a change in the restaurateur’s perspective. I mean, I can speak for myself in my own restaurant, which prior to the pandemic was opening at 5:00 every day, we never cared about the phones. Who would call a restaurant at 9:00 in the morning when everyone knows it’s closed, but those are the hours the world works, and those are the times we need to be available because that’s when people are calling.
[Alex Susskind]
Right. Yeah. And so I think being available to your guests in multiple ways are … well, it’s important to say the least, but we can learn from the chain restaurants. All the chain restaurants have customer or guest support centers where they’re staffed, some of them 24 hours a day. So if something goes wrong, you can talk to a human. And I did a little bit of work with Darden coming on well, maybe 15, 16 years ago. And I was really curious on how these call centers actually worked. And a lot of the call center calls were just guests asking for directions. They were asking for specials or promotions. And very few, I mean, there were, but very few of the calls, if you took the whole volume and parsed it out were unhappy guests calling and complaining.
Believe me, they took those calls, but the vast majority of the calls that came into the call center were guests just wanting information about stuff, about the company, about the restaurant, about what was going on, as opposed to saying, “My steak wasn’t cooked properly, or I was overcharged on my credit card or …” And stuff like that. Not that those things didn’t happen.
So that was eye opening for me. So these companies have been doing it for a really, really long time. So yeah, it makes sense. Have someone there to answer the phone. If you’re the one in the back loading, unloading the truck and doing your prep for the day, you may not have time to answer the phone, but someone’s got to do it. So I totally agree that human contact even today is probably ten times more important than it was, but it was still something that smart, savvy operators thought about.
[Josh Kopel]
I couldn’t agree with you more. I also see that technology is going to play a huge role in the next evolution. How do you see reservations and waitlist technology playing a role in the reopening process. And is there room for walk-ins in a post-COVID world?
[Alex Susskind]
Yeah. So I think the short answer to your question about technology is technology, as we know, is becoming increasingly more important, and it helps us be more efficient in many, many ways. It’s one more thing to manage, but it does help us. We’ve all seen that reservation book. I mean, that’s a great classic thing when you see that and they write your name down in that book. I love that, but again, you can’t get to that reservation book from your smartphone while you’re riding a train to work in the morning. Well, I guess you could call theoretically. So technology is everywhere. And I remember the first time I was working in a restaurant when we got our first point-of-sale system. I’m like, “Oh my God, this thing is complicated.”
And if you look back at that first micro system, it’s nothing compared to what we have today. I mean, those archaic dinosaurs, but I mean, compared to the dup system, it reduced errors, it reduced the amount of time it took you to check out at the end of the night from revenue management, cost management, all that stuff became easier because it was automated. So technology is going to help us with all of that.
Now, getting to your second part of that question about walk-ins, I think there is going to be a need, and there’s going to be a way for restaurant operators to leave a little bit of space in their system for people who just are walking by and feel like coming in. And with bars being questionable… You always had your little bar and you can go and sit down and get an app or a drink. But I think post-COVID, we’re still going to have a need for that type of thing. And restaurants are going to have to figure out how they do that. And I think there is no right answer now, but I can tell you from a consumer behavior perspective that not being able to walk into a restaurant at the spur of the moment is going to be something that hurts us in the end, because not everything is spontaneous, but in our business, a lot of what we do, how we purchase things, how we consume things is very, very spontaneous.
I mean, if you want to go eat at the French Laundry in Napa, I think you have to wait every three months. It’s like three months from today you can get a table. That’s different than walking by a local restaurant and going in and sitting down and having a dinner when you decided that you were hungry. So I think those are two slightly different things.
[Josh Kopel]
I saw it in my own restaurant. I mean, I saw that I had 100 reservations on the books on Thursday evening, and by Friday evening, beginning of service, we had 300 on the books. People are just operating differently and I don’t see that changing because of the pandemic.
[Alex Susskind]
No. You’re right. And I think, yeah, and we have to accommodate that and make it so that consumers can consume the way that they need to given whatever constraints we have in place. And it won’t be the same. And we know that, unfortunately we just don’t know what it looks like.
[Josh Kopel]
Well, and I feel the same way about tech generally. So I do believe that a lot of the tech that we see today serves to take the humanity out of the hospitality experience, but I do believe that the future of tech and the future of hospitality are intertwined. And I do believe that there is a way to infuse more humanity into the hospitality experience using tech. Have you seen any of those indicators?
[Alex Susskind]
Yeah. So it’s funny that you mentioned that because another area of research that I’ve engaged in over the past five years or so has been the use of technology in restaurants. The first couple of studies I did looked at the tabletop devices that they were adding in casual dining. And people were really skeptical saying, “Oh, the restaurants are doing that just because they want to reduce their staffing. Why do I have to check out? Why do I have to do all this stuff?” And so I looked at several chains that were using these technologies. And what I found is about 80% of the guests that we surveyed extensively enjoyed the technology for a variety of reasons. Some like the convenience, some like security, some like the ability to be able to play around with the system. But 80% of the people had a favorable reaction to this technology.
Now, again, that means that 20% didn’t. So there were a group of people who didn’t like it. But my findings basically demonstrated that restaurants need to use technology because guests are looking for it, it helps them. They’re used to it because it’s a part of their lives. So you have this thing in your pocket or clipped to your belt or wherever you keep your phone and it’s a mini computer. So the guests are used to that now in every way, particularly the younger guests; Gen Z, Millennials, however you want to categorize their age groupings. It’s really, really important to them.
But the thing that stood out for me, and the thing that I say from all the work that I’ve done in this domain is that technology is a layer added into the service process. It’s just another layer that you add in that you have to manage like anything else. If I’m going to add tableside cookery to my restaurant, and I decide I’m going to get some gueridons and I’m going to start cooking right next to my guests, that’s a layer of service that you’re adding in and you have to manage that carefully, make sure it’s right, make sure that people want it. Not everyone wants their steak cooked right in front of them at the table. Just like not everyone wants to swipe their credit card and leave without having to say goodbye to a guest.
So technology for everything is really, really important, but how we layer it in is the main challenge that operators have that it’s not a replacement. And in the studies that I found, restaurants could theoretically reduce their labor by about 30%, 33%, depending on the type of restaurant by having this technology in place because their service labor, not their culinary labor, but their service labor by 30% because the staff needed to do fewer things, that they took fewer trips to the point of sale system to process credit cards and hand something back to someone to sign.
So you can say, “Oh great, I can cut my stuff by a third.” Or you can say, “You know what? I’m going to pay more attention to the guest in the dining room, make sure they have everything they need.” When they press the button on the system that says server call button, I show up within a reasonably short period of time, like a few seconds, as opposed to holding your empty water glass up hoping that someone comes by to fill it up.
So those types of things allow operators to choose how they deal with the efficiencies that some of these technologies bring. So do you want to reduce your labor? Yeah, you can, but don’t change the experience for your guests and maybe use the technology to serve them better because they’ll be like, “Oh yeah, every time I needed something, I pressed that button. The server was right at my table, but I didn’t have … I could swipe my card and be out of the restaurant when I needed to go. I had to catch a movie and I didn’t have to wait to leave. I was completely done and settled and moving on.”
It doesn’t affect the positivity that you create. They have a great meal, and if they have to sit and wait an extra five minutes before a server comes to close out their check, that could change the whole dynamic of their processing of the experience where just being able to swipe your card and leave makes it better. Or you want another beer, you press a button and then boom, a beer comes to your table without having to intervene. So those are all … And again, I did the study and the work that I did was in full service settings. And so quick service has had technology that’s doing similar things for much longer, but full service finally jumped in and now there are apps on phones and things like that, that you don’t even need the tabletop devices anymore. So boy, that was a long-winded answer to a simple question, I think. But tech is really important and it’s a layer of service. It’s not a replacement for anything. So there, that’s it.
[Josh Kopel]
Yeah. I couldn’t agree with you more. And I got to tell you an 80% approval rating is startling. I had no idea. There are definitely more layers to the experience at a restaurant now than there ever had been before. Everybody’s talking about the third model. This a bodega-style offering where it’s prepackaged foods, farmer market boxes, retail sources, a third takeout and delivery, everything from individual meals to large party to actual meal prep for families. And then the third becomes traditional dining. Is this a model that you think is sustainable and is this the natural evolution of the hospitality model expedited?
[Alex Susskind]
Yes, it’s a really great question because I don’t know. I think for some businesses, I think that is the way that they’re going to actually be able to get over the top. And I don’t know if you saw just today there was a lot of talk about liquor legislation that a lot of municipalities now, states are saying you know what? We had all these tight restrictions on what you can do. You know what? If your guest wants to take a Mai Tai out of the restaurant, make it for him. So stuff like that I think is favorable for us. The third, the third and the third, I think some restaurants are going to need that to be able to survive. And it depends on where you operate.
So if you’re in a downtown location where people live and work in that domain, that may be actually a new level of convenience that they never experienced before. So it may be an actual benefit. Now we’re doing it because there’s no other way for us to generate revenue, but when guests get used to things and they like it and you do it well, then I see that as an opportunity. But do you want to be in the grocery business? Well, I don’t know. I mean, if I sell you a six pack of beer, just hand it to you, that costs me way less than if I have to open six of them, give you a frosted glass, pour a third of it into the glass, put it on a table, take the … Right. So there’s some efficiencies that come out of this.
Again, the margins are smaller, probably on those transactions. I can charge you five or six dollars to open a beer for you where the six pack might … you’re not going to get as much from that, but again, everything’s relative. So you have to take that into consideration. But in terms of takeout and carry out and you mentioned meal kits or meal prep stuff, that’s here to stay. That type of stuff, it’s going to be a larger share of our business. The people who resisted it three, four or five months ago, none of them are resisting it any more because they know that it’s a bigger component. They have to master it. They have to figure it out. They have to make it so their guests enjoy it when they get at home. And that’s a big challenge for a lot of operators.
And then, yeah, that last little bit, maybe it’s not a third, a third and a third for everyone. Maybe those percentages change a little bit. But again, there’s math, you can do the math and all of those components of the business model all have their advantages and clearly they have their costs and I’ll hand a six pack over the counter 100 times if that’s going to help me do all the things I do, pay my people fairly, make sure I can pay my rent and save for my kids to go to college and all the other things that are going to have to happen later on down the road as I continue on in this business.
[Josh Kopel]
We say “if” a lot. Right?
[Alex Susskind]
I do.
[Josh Kopel]
And I think the reason is we’re looking at a 20 to 40% permanent closure rate across the industry. Though those statistics are sobering and it is truly a tragedy, especially for an independent restaurant operator. I’d like to look at the other side of the coin and ask what obstacles and benefits are afforded those of us that are able to remain open. For those that survive, what does the world look like? What are the struggles? And then what are the ancillary benefits?
[Alex Susskind]
Yeah. So the struggle that every operator is going to have to face is basically guest safety, employee safety, and operating in a way that protects your constituents, regardless of who they are. So I think that’s a really, really big part of that. So that’s work, and again, that’s another layer that you have to add to the equation. But the other part has to do with being able to protect and deliver on the things that are important to you and to your guests, where right now … and again, I don’t want to criticize our business, but there are a lot of people who prior to January who were open doing business, who really weren’t doing a good job by all of the constituents in their world. They were open because our economy was smoking hot.
You could open up a restaurant. A food truck pulled up in front of your neighborhood more often than it had in the past 10 years prior. So everyone could open up a restaurant, everyone could open up a food truck, but not everyone could do it well. But because the economy was so strong, people had so much disposable income. Unemployment rate was historically low. So all of these operators were able to do stuff that, you know what? If you talked about perfect capitalism, perfect competition, they probably shouldn’t be allowed to be in business. So this pandemic kind of turned the knob on that a little bit so that some of these folks who really weren’t doing a great job are not going to make it at the other end. But the sad part, and I don’t want to generalize. The sad part is there’s some really great operators whose business model didn’t allow them to sustain the cash hit, the closure or the reduced volume over time.
We are going to lose some great operators in this mix, but the ones who are going to die… That’s the wrong word. The ones who are going to close the quickest are the ones who probably shouldn’t have been in business to begin with because they don’t have what it takes to figure it out. Their guests weren’t loyal and committed. Their employees weren’t loyal and committed.
I think of the restaurants that I love, and just to give you an example. There’s a little local pizza place we have here in Ithaca, and once the pandemic hit, I think they were open for a week. In March, when things started to get crazy, they stayed open for a week. They realized that it just wasn’t working for them. They didn’t feel comfortable operating. They closed down. They had a Facebook page and Twitter account. They kept in contact with everyone. And they said. “You know what? We’re not ready to go, but as soon as we can open up safely, we’re going to do it.” And boom, they opened up and there’s a damn line out the door, as long as it’s ever been because these guys before pandemic were awesome, they did the right thing, they cared about their people, they cared about their guests. They couldn’t do it during the pandemic, people miss them. And the second that they opened, they couldn’t sell enough. And so that’s the kind of stuff that will be there.
If you weren’t doing the right thing beforehand, in any of those domains, you’re at risk of not being able to survive because you don’t have the skills in place to basically do it. If you didn’t treat your people well, you expect them to come back? They’re not going to come back. If they hated … Well, that’s maybe too strong. If they didn’t like the work they were doing with you or for you, then you’re going to get them back? Probably not. But if you treated your people well, they’re going to miss you; your guests and your staff, they’re going to miss you. They’re going to want to come back.
[Josh Kopel]
And you find yourself in a unique position in the way that you are also ushering in the next generation of hospitality leaders. How has COVID impacted the way Cornell is going to prepare the future leaders of our industry?
[Alex Susskind]
Well, it’s adding in a new level of attention to detail that we’ve always prided ourselves on teaching. We give our kids an amazing education i … I call them kids. I mean, they’re young adults. We give them an amazing structural education. We teach them accounting, finance, the works. How a business operates, how to do particular things, but that’s only part of it. The other part is who they are and who they are as a hospitality leader, who they are as a hospitality professional. And we teach them compassion. We teach them all the things that will separate them from their peers. And so all this means is that we have to double down on the compassion part, on the strategic thinking part of how do you basically deal with all of these twists and turns?
You can have a bad month under normal circumstances and come out fine at the other end of it. But this is different than any bad month that anyone’s ever seen since the great depression. I mean, in all sincerity, there’s been nothing like this. And so all it means is that we have to remind our students that our industry is really complicated. And it isn’t just about the four walls of your business, or if you own 10 restaurants, the four walls of those 10 businesses, it’s about the production, it’s about the environment, it’s about the suppliers that service you, not just for your food and beverage, but for your linens, for the stuff that you fill your restaurant with; the artwork, whatever it is. There are all of these components that drive your business, and everyone in the supply chain backwards has been affected by this in one way or the other. And so having people be compassionate and understand what’s happening behind them or below them in the supply chain is really, really important.
And that’s going to create leaders that are more forward thinking, they’re better suited and prepared to deal with the uncertainty that comes. So I think the leaders that we’re training now are going to be way more successful than they would have been otherwise, because all of the adversity. We always used to pride ourselves on having like a 98% placement rate of our students. Well, when unemployment rate is at 20% is that still possible? Our numbers actually from last year still look pretty good that most employers are still hiring our students, but they push the start date from June to September to October. And so the industry is still planning on moving forward and we’re creating leaders that … I guess a long winded answer to a simple question is compassion. I think we have to teach our people, our students to be more compassionate and that will help them be better leaders and help them deal with whatever adversity they face when they get out.
[Josh Kopel]
I couldn’t agree with you more. At the conclusion of every episode, I like to give the guest an opportunity to talk to the industry directly. Do you have words of advice, words of encouragement or anything you’d like to share with the folks listening?
[Alex Susskind]
Well, hospitality, that’s what it comes down to. Just taking care of the people around you to the best of your ability, and that’s what we need to get through this; hospitality, compassion, call it whatever you want, that’s the future of our industry, but it’s also the past because that’s what got us where we are today.
[Josh Kopel]
If you’d like to check out the results from the Yelp Diner Survey, plus get an exhaustive list of all the free tools and resources out there for restaurateurs, go to joshkopel.com/resources. Didn’t write that down? Don’t worry, there’s a link in the show notes as well.
[Josh Kopel]
If you want to tell us your story, hear previous episodes, check out our video content or read our weekly blog, go to joshkopel.com. That’s J-O-S-H-K-O-P-E-L-dot-com.
Thank you so much for listening to the show. You can subscribe wherever you get your podcasts, and while you’re there, please leave us a review. A special thanks to Yelp for helping us spread the word to the whole hospitality community. I’m Josh Kopel, you’ve been listening to Full Comp.
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