Toward the end of April, leaders at the Williamson County based restaurant group A. Marshall Hospitality started counting down the days until they would have to lay off key employees.
Gov. Bill Lee had suspended dine-in service weeks earlier, and takeout alone was not paying the bills. Restaurants lost more than $400 million in March—and likely more in April—according the Tennessee Department of Revenue.
For A. Marshall, which operates five restaurant brands including Puckett’s, the situation was dire. At the last moment, the company grabbed a lifeline in the form of a loan through the federal government’s Paycheck Protection Program.
“We were running out of time as it was,” CEO Andy Marshall said. “Trying to keep our key people employed, and having to lay off so many of our associates. If we had not gotten the PPP, it would have been difficult.”
Tennessee started allowing dine-in service for restaurants outside of the state’s largest cities on April 27, and A. Marshall has now opened all its restaurants with limited seating capacity, except for two locations in Nashville where dine-in service is still prohibited.
That’s little comfort to most restaurant owners, who will continue to lose money until the number of customers increases dramatically. During a virtual event hosted by Williamson Inc. last week, Marshall estimated that restaurants would need to reach 75% or 80% capacity to break even.
“We'll be losing money, but we’re willing to do that right now in order to get things started and get things moving," he said. “The longer this goes on, the more restaurants we'll see that won't survive it.”
In a letter to Congress seeking financial relief, the National Restaurant Association reported that it expected 15% of restaurants to permanently close by the middle of April.
Marshall said he decided to open at limited capacity—operating at a loss—in large part because of the Paycheck Protection Program, which requires recipients to keep paying workers in order to qualify for loan forgiveness.
About half of the company’s employees have already come back, and Marshall hopes to bring all employees back soon. However, at limited capacity tipped employees could see a major cut in their pay.
“We expect our customers are going to be very generous because they know how the waiters and waitstaff and the bar tenders have really suffered through this,” he said. “We think they'll be generous, but we don't think the volume will be there for them to make the money they used to make.”
In response, A. Marshall is offering a bonus to all employees that return—paid from a $35,000 support fund raised through tips on take-out orders and a portion of recent gift card sales—and significantly raising the wages of tipped employees.
Even if opening at limited capacity isn’t profitable, it brings some money in and keeps the wheels turning. Other restaurants have pursued a different strategy: hunkering down and cutting costs as much as possible so they can reemerge if the pandemic subsides.
The Williamson County based restaurant group McConnell Hospitality Group, which operates four restaurant brands including 55 South and the Red Pony Restaurant, closed its restaurants on March 16.
In a Facebook in late March, the company told customers it would remain closed to protect employees and focus on “saving resources to survive and extended closure.” In a post in late April, the company explained that it had already furloughed hundreds of employees and didn’t want to risk more layoffs by opening prematurely.
“With no timeline in sight hunkering down seemed wise. A month later, we stand by that choice,” Director of Operations and Development Sharon Davis wrote in an email. “I can’t make predictions as to what is economically viable for others but for us dine-in business that includes bar is vital. Our food is largely fresh meat and produce and our staff is highly skilled and compensated. Running solely on takeout or limited capacities don’t serve us long-term.”
McConnell restaurants are still closed for dine-in service, but Davis said the company is planning a slow return to normality. That begins with a takeout options, which are already available.
“We pray we are open for regular business in June but we will resume normal dine-in service when it’s safe for our staff, our guests, and viable for our business,” Davis wrote.
Joni Cole, the owner of Gray’s on Main and O’ Be Joyful in downtown Franklin, said limiting the number of customers and offering a takeout menu is far from sustainable.
She recently opened her restaurants for dine-in service, but sales are only 20% to 30% of normal. That’s better than take-out, which was about 1% of normal sales.
“You're not going to be breaking even for a long time,” she said. “You're still going to be in deficit for a while.”
Cole said a loan through the Paycheck Protection Program has been critical. Without it, she wouldn’t have been able to keep paying her employees.
Marshall said the Paycheck Protection Program loans are buying many restaurants more time, but ultimately they need to increase their volume to survive.
A big part of that effort will be building consumer confidence by following strict cleaning protocols. A. Marshall is sanitizing dish washers every hour and has created menus customers can read on their phones. Still, in the first few days of dine-in service, Marshall said business has been slow.
“We've got a long way to go to get on the other side of this for sure,” he said. “Opening up was not a lifeline. It was just the start.”