Rethinking Your Retail and Restaurant Business Strategy: 3 Important Steps
As the U.S. and other markets around the world move past the first wave of COVID‑19 infections and focus on recovery, it’s clear that customer behavior will continue to evolve. But how? What will “normal” look like? How soon will we get there? What are the implications for a brand’s business strategy?
These unanswered questions lead to a lot of confusion among retail and restaurant leadership teams … and a lot of opinions on the right path forward. How do you bring order to the chaos and design a strategy to compete in the months ahead?
We believe that smart retail and restaurant leadership teams will focus on monitoring changes in three key areas: customers, competitors, and markets.
Americans May Be Ready to Spend But Some Businesses Aren't Ready to Sell.
The coronavirus pandemic has hit hard. More than 100,000 Americans have died. Businesses nationwide shuttered, and more than 44 million people have filed for unemployment insurance since mid-March. The stock market wobbles. However, as the economy reopens, and many Americans benefit from federal assistance, businesses across the country may be in line for a healthy dose of increased consumer spending.
"If jobs are coming back relatively quickly," which the May jobs report indicates, spending should pick up, says Scott R. Baker, an associate professor of finance at Northwestern's Kellogg School of Management. Baker recently co-authored a study for the National Bureau of Economic Research, which found that consumers curtailed spending since March, while incomes remained largely untouched. Baker suspects that consumers largely pushed off purchases because of financial concerns or because the businesses they'd typically patronize weren't open.
This spending hiatus pushed the U.S. savings rate to a record high of 33 percent in April--boosted in part from federal stimulus checks of up to $1,200 per person, depending on income. Americans are notably bad at deferred gratification, a trait that will favor companies that can meet any uptick in demand as the economy continues to reopen.
The House passed bipartisan legislation Thursday to give small businesses more flexibility with the loans they received during the coronavirus pandemic to keep their businesses afloat.
The Paycheck Protection Program (PPP) Flexibility Act, authored by Rep. Dean Phillips, D-Minn., and Chip Roy, R-Texas, passed with a 417-1 vote and now heads to the Senate.
"Millions of small business owners in this country are one step closer to meaningful relief," Phillips tweeted after the near-unanimous vote. "This is what's possible when leaders listen, act and collaborate.
During the pandemic, Congress allocated $659 billion to small businesses in PPP loans that could be converted to grants if they met certain requirements. The new legislation loosens some of the restrictions on the loans that businesses found too burdensome given that many are still closed or operating at reduced capacity due to prolonged stay-home orders. The legislation extends the time to use the money from eight weeks to 24 weeks. The bill eliminates the cumbersome 75/25 restrictions that forced businesses to spend 75 percent of their loans on payroll and only 25 percent on other operating expenses like rent and utilities. The formula changes to 60/40 percent. For loans that aren't forgiven, businesses would have more time for repayment, from two years to five years.
Retail is already being reshaped by Covid-19 as shoppers are stuck at home and companies are forced to find new ways to sell their goods and stay relevant. Even as states begin lifting restrictions, it isn’t clear when and how consumers will be ready to shop. Longtime retail analyst Dana Telsey, who heads up Telsey Advisory Group, says executives are comparing the crisis to wartime, and trying to reinvent themselves for a rapidly changing new normal.
Telsey, one of Barron’s 100 Most Influential Women in U.S. Finance, had a long history as a retail analyst and money manager before starting her own business. The New Yorker has seen retail go through various iterations, not just in her career but also growing up: Her family owned a bookstore on Madison Avenue and her mother and grandmother both worked in retail. We talked with Telsey to see what retailers need to do in a postpandemic world, which companies can make the transition, and whether it’s time to start shopping. An edited and condensed version of our conversation follows.
Barron’s: What is the mood among retail executives?
Dana Telsey: Even the strongest of the strong companies are saying there is no road map—and [things] can change by the hour. They are watching their cash, evaluating their cost structure, and looking at store bases. When you think about fixed and variable costs, almost everything has become variable.
The COVID-19 outbreak has wreaked financial havoc around the globe, leaving many small-business owners struggling in its wake. According to the National Federation of Independent Business (NFIB), as of March 30—still early in the crisis—92% of small businesses said they had suffered negative effects as a result of the pandemic. Just 5% of small-business owners said they had experienced no effects at all.
While the short-term outlook for small businesses varies greatly by industry, it’s important to consider what recovery mode will look like once the economy begins to return to a state of normalcy—or establishes a new normal. Having an exit strategy in place for after COVID-19 can help you be prepared to hit the ground running and rebuild. If you’re not sure what your coronavirus exit plan should include, this guide can help with getting your business back on track.
1. Assess the Financial Damage
The first step in developing a rebuilding plan for COVID-19 is determining just how deeply your small business has been affected.There are different layers involved, starting with the hard numbers. If you haven’t updated your financial statements—such as profit and loss or cash flow statements—recently, it’s helpful to do that now. You can then compare them to last year’s numbers to see how much your business may be down. And while only a small percentage of business owners say they’ve benefited from the pandemic, 3% according to the NFIB, it’s possible that the damage might not be as bad as you think.
"It’s never to early to begin planning for re-opening! Our team has built what I believe is a very strong phased approach towards responsibly re-opening our venues in what is sure to be a challenging environment. I wanted to make this plan public in the event that it is useful to some, as well as to collaborate with others who may have their own plans. We are stronger together!" - Mitchell Roberts CEO of EVO
A few key points of advice to those looking to establish their own plans:
1.) Expect and prepare for heavy lead times and unexpected costs. Operating in the upcoming “new normal” will almost certainly require equipment that you most likely do not have. (Masks, Touchless Thermometers, Sneeze Guards, etc.) These items are currently seeing 2-3 week lead items. Get ahead of that.
2.) Don’t forget your team members. I’ve seen a lot of great guest-focused precautions, but don’t forget to take care of your staff too, as they are the ones on our front lines.
3.) Last but not at all least, weigh the impact of public perception. As important as it is that our guests ARE safe, it’s equally important that they FEEL safe. Public Perception will be the fuel that ignites our return to normalcy.
Here are some of the steps they will be taking in EVO restaurants
- reducing table capacity to 50%
- limiting groups to no more than 4
- removing bar stools from the bar
- using disposable paper menus
- sanitizer on every table
- masks required unless eating
- mask & nitrile gloves required for servers
Currently exploring mobile ordering as well.
Texas Gov. Greg Abbott’s “retail-to-go” phase of reopening the state’s economy starts Friday. But your favorite store may not be ready, and don’t expect to stroll into the mall.
A week’s notice may not be enough for some, from individual shop owners worried about new world protocols to store managers who must get payment systems turned back on and clearance from corporate offices outside Texas that are preoccupied with bigger issues.
And small shop owners said they haven’t received funds from federal loans yet to pay the employees they need to offer retail to go.
The COVID-19 pandemic has taken an especially hard toll on small retailers, which tend to have limited access to capital and minimal cash reserves. A March 30th survey by the National Federation of Independent Business found that the COVID-19 pandemic has negatively impacted 92 percent of small employers. About half the employers who participated in the survey can survive for no more than two months under current conditions.
Shopping center owners aren’t standing idly by in the face of this existential threat, and it’s not hard to understand why. Nearly 70 percent of shopping center tenants are small businesses that employ fewer than 10 people, according to ICSC. These small businesses play an outsize role in many shopping centers by helping distinguish one property from the next. “Small businesses are the heart and soul of our properties. They build long-lasting emotional connections with communities,” said Trademark Property Co. CEO Terry Montesi.
Many shopping center landlords are providing small-business tenants with some type of short-term rent relief, typically on a case-by-case basis, while steering them to resources designed to help them weather the economic storm and prepare for what’s expected to be a gradual return to normalcy.
On March 27, when both branches of Congress and the White House came to an agreement to provide sweeping financial assistance via the $2.2 trillion CARES Act, many of us in the restaurant industry cheered with a big sigh of relief. This pandemic, and the consequential shut-down of an entire industry that relies upon the gathering of people - at a moment when people cannot gather- had already shown that no restaurant is unsinkable. With slim margins in our industry to begin with, restaurants of all sizes and flavors were vulnerable and laying off people by the hundreds. Indeed, both Shake Shack and Union Square Hospitality Group needed to make those tough decisions too, furloughing or laying off hundreds of team members throughout our respective companies—one a publicly traded company, the other an independent restaurant group.
Restaurants function as the lifeblood of the U.S. economy and the nation's spirit. The bulk of the over $800 billion that restaurant-goers spend on dining out flows right back into the economy with much of that impact going to the very small businesses this PPP loan was intended to reach. The CARES Act was touted as the largest economic stimulus package in U.S. history and on its initial face, for restaurants, there seemed to be a lot to like in the bill.
With the country facing a prospective permanent loss of restaurants up and down the food chain, the bill arrived just in the nick of time. The onus was placed on each business to figure out how, when, or even if to apply. The “PPP” came with no user manual and it was extremely confusing. Both Shake Shack (a company with 189 restaurants in the U.S., employing nearly 8,000 team members) and Union Square Hospitality Group (with over 2,000 employees) arrived at a similar conclusion. The best chance of keeping our teams working, off the unemployment line and hiring back our furloughed and laid off employees, would be to apply now and hope things would be clarified in time.
The PPP funds are exhausted. Time for Plan B. National Small Business Town Hall #4
Learn from the expert panelists about where the CARES Act is at as of 4/17 and hear answers to small business owner's burning questions including: Where to go from here? How to use the funds? Explaining the fine print?
Texas leads the country with the most approvals for the U.S. Small Business Administration’s Paycheck Protection Program as of April 13, according to SBA data obtained by the Texas Bankers Association.
Texas has approved 88,434 loans totaling $21.77 billion, as of April 13.
California followed behind Texas, having approved 54,922 PPP applications totaling $20.85 billion in loans, as of April 13. Florida ranked third, having approved 52,021 loans totaling $12.65 billion.
Overall, the average loan size is about $239,152, according to the data.
March 26, 2020 — DENTON — Women-owned small businesses in Texas suffering financial losses associated with the coronavirus pandemic were thrown a lifeline today after the Center for Women Entrepreneurs at Texas Woman’s University announced a million-dollar grant program to help get them back on their feet.
Texas Woman’s University Chancellor Carine M. Feyten announced that the Center for Women Entrepreneurs is launching the AssistHER grant program, which will provide 100 $10,000 grants to women-owned small businesses in Texas that have been impacted adversely by the coronavirus pandemic. Grant funds can be used for operating expenses (excluding payment of sales tax and payroll, advertising, purchase of food for consumption, penalties and fees, and charitable donations), technology upgrades or help adapting to a new business model.
To be eligible for the grants, businesses must be at least 51% owned by a woman, have a demonstrated need due directly to COVID-19, and be owned and operated in Texas. Awardees will be required to complete online training on how to maintain business operations in the current environment and report all expenditures of grant funds. Eligible businesses must be up to date on payroll, sales and other taxes and be properly permitted.
APRIL 15, 2020 — The UTSA Institute for Economic Development today launched the Small Business Development Center COVID-19 Business Recovery Accelerator (SBDC COBRA) to help small businesses weather the financial hardships caused by the coronavirus pandemic. COBRA is the only recovery accelerator of its kind in Texas to help stabilize and rebuild the small-business economy.
COBRA will provide small businesses with the counseling and resources to pursue loans from the financial industry and to begin recovering from the economic impact of the COVID-19 pandemic. The accelerator will serve businesses in Bexar County and 10 surrounding counties. It will be funded by a $1.2 million grant from the U.S. Small Business Administration.
“For nearly 40 years UTSA’s economic development programs have been creating jobs, growing businesses and strengthening the economy,” said UTSA President Taylor Eighmy. “UTSA is committed to leveraging its knowledge enterprise to support the community in this time of need. I can think of no better way to do that than to pave the way for small businesses to get emergency financial relief.”
Jenna Saucedo-Herrera, president and CEO of the San Antonio Economic Development Foundation, answers your questions on KSAT.
AUSTIN — From Texas Governor's Office - Governor Greg Abbott today announced that Goldman Sachs and the LiftFund, along with other community development financial institutions (CDFIs), are partnering to provide $50 million in loans to small businesses in Texas that have been affected by COVID-19 as part of the Goldman Sachs 10,000 Small Businesses program. These loans, made through the U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP), will primarily be used for payroll so that employees can continue to receive paychecks and small businesses can retain their employees and will be partially or wholly forgiven.
"Small businesses and their employees are at the heart of the Texas economy, and they need support during these difficult times,” said Governor Abbott. “These loans will help us revitalize our economy and restore Texans’ livelihoods as we respond to COVID-19. I thank Goldman Sachs and the LiftFund for providing this lifeline to Texas small businesses and their employees by providing them with the support they need to overcome the challenges posed by COVID-19. This partnership is an important first step in our journey to economic recovery in the state of Texas."
"We have seen first-hand the determination and resilience of small business owners in Texas, having worked alongside them for years through our 10,000 Small Businesses program," said John Waldron, President and Chief Operating Officer of Goldman Sachs. "Goldman Sachs understands that our communities and economy rely on small business and we are doing everything we can to support this vital engine of economic growth and employment."
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