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How restaurants can preserve cash to weather the coronavirus outbreak
By Arnold Shain, Restaurant Group, Inc.
Washington restaurants must preserve cash for the future because it is unclear where all of this is going and when we might return to normal.
I think there will be a new normal that will maximize our assets and minimize our operating expenses. The major objective for today is to preserve cash.
Let’s presume you are to be in the pick-up/delivery business. Here is what I have learned so far.
1. The first step is to develop what your anticipated sales will be as well as what your expenses are to be. Use your existing operating statement, create a column for anticipated sales and expenses. Then you can decide whether it is worth the time and effort to even do pick-up and/or delivery. It may not be and that probably is OK. Be sure to factor in delivery fees and extra to-go paper products. Be sure to put some salary in for yourself as well. Most owners have taken large hits on their own draws, which is understandable, but put something in.
2. The second step is to talk with all your employees advising them of what you intend to do and ask them to contribute to this dialogue. I have found that some may not want to participate in this form of the business while others may in fact be on board with the program. They are going to ask about pay. There are several scenarios to discuss:
- Can managers take a temporary pay cut and still work? If they are willing to do so I’d take them up on it. I have found several managers cut their salaries in half.
- Can staff take a pay cut? I think not.
Once this is squared away you need to visit with your vendors.
- Food vendors: Be sure to communicate with them about what you are doing, days/times of delivery and payment terms.
- Beverage vendors: Same as above. Remember it is OK to sell factory-sealed bottled spirits, wine and beer.
- Address fixed or ongoing payments: Each vendor is different, but what I have seen is that they will essentially decrease payments for a three- to four-month period and then they would reassess. The payments I am referring to are as follows:
- Payroll taxes
- Excise tax
- Equipment rentals: Dishwashers, POS, signs, etc.
And lastly apply for loans via the U.S. Small Business Administration. Applicants may apply online, receive additional disaster assistance information and download applications at https://disasterloan.sba.gov/ela. These loans are going to be at low interest rates with flexible terms.
Arnold Shain is the founder of Restaurant Group, Inc. and is known as an “idea man.” His strong suits are concept development, branding and restaurant “rescues.” He helped develop the concepts for Cucina! Cucina!, Dragonfish Asian Café, and several others.