Jerry Barakat, owner of upscale Little Rock steakhouse Arthur’s, took a reporter’s call at 5 p.m., an act that in itself underscored the dire state of the restaurant business in Arkansas. Five o’ clock is usually the preamble to the dinner rush and for a restaurant lifer like Barakat, that meant working the room, keeping the staff on point and greeting tables full of old friends and new faces. Anything but talking to the press.
But these days Barakat, like hundreds of other restaurateurs across the state, has got considerably more time on his hands.
“Nothing like this has ever happened. Not in my wildest imagination I would see this, especially in a place like this,” Barakat said of the current state of the industry. “No, sir.”
America’s restaurants and bars — among the most foundational of all Main Street small businesses — are in big trouble. A two-month financial broadside has ripped many establishments asunder, and most of those that remain cling tenuously to solvency, hoping to float long enough to be rescued.
Anthony Valinoti, owner of acclaimed DeLuca’s Pizzeria in Hot Springs, said his business is down 25 to 30 percent from what it was. “We’ll have one good day a week where we might do around 70 percent, and then you’ll have two days where you’ll do 30 percent of your normal business or 25 percent. It’s a very, very hard thing right now to be really honest with you.”
It’s small comfort to Arkansas proprietors to hear that they’re not alone in their plight, but the fact is there’s seemingly nowhere restaurants can take cover against the storm raging over their heads. An April 1 forecast by global financial firm UBS predicted 20 percent of the roughly 1 million U.S. restaurants, a staggering 200,000 establishments, will shut down permanently as a result of the coronavirus pandemic. Around 30,000 had already closed due to COVID-19, a number UBS predicted could grow to 110,000 (11 percent) by month-end.
Restaurants, particularly mom-and-pop joints, have always walked a notoriously thin line when it comes to profitability, but ever since the first U.S. case of coronavirus was confirmed domestically in late January, it’s exposed just how narrow that margin is. As a JPMorgan Chase Institute analysis showed in 2015, only half of restaurants had sufficient cash reserves to stay open more than 16 days.
Proprietors like Valinoti harbor no illusions as to what’s been lost over the past two months or what awaits if the situation doesn’t take a dramatic turn, and soon.
“Thank God the stimulus package came in. We were right on top of it; my accountant was all over it, and the money came in, and that’ll give me two months of breathing room,” he said. “But the great reality, like every other business owner that’s out there knows, is that the income lost in the last couple of months you can never regain that; it’s gone. That’s never coming back.
“Obviously, we have fixed costs every day, our rent and utilities and all that. All businesses are going to have to carry that, so you’re just trying to minimize the bleeding, right? It’s just hard to do that, extremely hard. I don’t know how much further I can go past, I would say August, if this were to continue. And that’s a scary thought to a lot of people. I’ve put seven years of my life into this. I know people have put even longer periods of their life into this, and you hate to see it flushed away.”
It’s surreal to see Arthur’s and DeLuca’s, rated among the top steakhouses and pizzerias in the nation, respectively, sending their award-winning fare home in to-go containers, but such is the current state of things.
“This is certainly not the model we started out with,” Valinoti said. “The model is, sit down, get your appetizer, your drinks, and we serve you pizza, dessert. I was always against doing takeout, you know. It was the last thing I wanted to do. I wanted you to sit down and come enjoy it. Cardboard products are not the vessel I want to serve my food in.
“But with what’s going on here, I mean, we literally had to change our whole business plan in 24 hours. It took a few weeks for us to adjust to that idea, but, you know, we’ve done a really good job.”
Valinoti and Barakat say they haven’t laid anyone off yet, but only by having taken drastic measures themselves.
“There’s not that much business to start with; business went from 100 percent to 20 percent. The reason I kept it open is because I have a bunch of employees, and they need that money,” Barakat said.
“Anything helps. To-go wine sales, we’re really giving it away for half price, 50 percent off on wine, just so it’s revenue so we can pay the employees so they can go out and buy some groceries.”
Other restaurants haven’t been so fortunate. Despite augmenting food sales with an on-premises mini-farmer’s market, Jack Sundell, owner of Little Rock eateries The Root Café and Mockingbird Bar and Tacos, estimates he’s laid off about half of his workers. As bad as that is today, he predicted an even tougher slog for most establishments as restrictions start to ease.
“One thing I haven’t heard talked about that much, I think there is going to be sort of a reckoning when all of these businesses try to start back up all at once,” he said. “They’re going to realize that a lot of their staff members have moved back to Los Angeles or decided this is the right time to make that break for Fayetteville they’ve always been thinking about.
“I’m already aware of three people on our staff at The Root and two down at Mockingbird who have decided they probably won’t be coming back after this. So, for us, as much as we can maintain normalcy and keep a lot of our key staff here working full-time, that’s what we want, and that’s what they want.”
Sundell also says he hopes some of the additional offerings that have been made possible through easing of restrictions will become permanent, such as to-go beer and wine sales and the ability to operate the farmers market in conjunction with the restaurant.
“Offering another reason for people to come in is an important thing,” he said. “The number of times you’re going to be interested in grabbing lunch is one thing, but the number of times during the week you’re going to think, ‘Oh, I need to grab something to cook at home,’ or ‘I need to grab whatever it is we might have on the grocery list,’ that incentivizes people to keep us in mind. Those visits are what help us keep sales up and stay on people’s radar.”