With winter bringing a COVID-19 surge and cold weather, some restaurants are temporarily closing
In 2019, restaurateur Andres Branger and his partners had three Orinoco: A Latin Kitchen restaurants in Boston. Now, he has only one. As of November 17, two locations are officially hibernating, ceasing operations entirely for the next few months and, hopefully, reopening when it’s safer and more profitable to serve customers again.
Whether or not to operate during a COVID-19 pandemic winter was a “very difficult situation,” Branger says. “It was a gradual progression of adapting; and that’s dictated by our cash flow and how much we’re willing to sacrifice. The hardest thing was severing the relationships with our staff. It was waiting until the moment where the choice was: close the doors or survive.”
Branger and partners didn’t come to the decision to put their Brookline and Cambridge locations on ice easily. They started running projections over the summer, and they evolved and adapted each location to try to capture what business they could. The decision to hibernate, he says, was “arrived at in consultation with our staff,” some of whom have been with the company for more than 10 years. “We made them aware of what was happening,” Branger says. “We let them know we want to be here for the long run, that we’d get to the other side of the pandemic.” His hope: By hibernating, he would have jobs to offer when this is all over instead of permanently closing.
Branger is just one of many restaurateurs across the country turning to hibernation as a way to get through the winter. From Seattle to Boston to New York, businesses are temporarily closing to hopefully survive long enough to be able to welcome guests back once the pandemic subsides. Below, everything you need to know about why restaurants are hibernating and what that even means.
Literally, what does it mean when a restaurant says it’s going to hibernate?
It means the restaurant will close to the public entirely, ceasing as much of its operations as possible to keep the business in a sort of stasis, spending only what is necessary to continue to exist (i.e., rent, mostly).
What does hibernation mean for restaurant workers?
It means they’re out of a job. Call it furlough, call it layoffs, but a restaurant in hibernation doesn’t need a server or a cook or a dishwasher. Sadly, that’s the whole point. While there’s no aid for workers whose take-home pay has been gravely reduced by dwindling sales, workers from restaurants that hibernate can apply for unemployment (though the additional $600 enhancement afforded to those on unemployment at the beginning of the pandemic has expired).
What does winter have to do with this?
Usually special events, catering, and holiday parties in November and December help balance out the typical winter dining slump. With the pandemic, those special events are off the table. Now that winter is here, it’s too cold in many of America’s cities to entice enough people to outdoor dining — and plenty of operators don’t want to (or can’t afford to) spend the money to winterize their outdoor dining spaces with things like tents or free-standing space heaters. (And that’s if outdoor dining is even permitted. At this moment, much of California is under a state order prohibiting outdoor dining, even though the weather is generally comfortable.) Likewise, a long-predicted winter surge in coronavirus cases might be making diners nervous to be out in a public setting at all.
“Unlike our politicians, we always knew that winter was on the calendar,” NYC wine shop owner Moshe Schulman told Eater NY about his decision to hibernate. “We knew that cases were likely going to spike again in the winter, and we knew with how cold it’s going to be, we would have to close at some juncture.”
How could hibernation save a business?
Hibernating allows operators the chance to save the money it costs to operate. A restaurant in hibernation saves money on payroll, on utilities, on inventory. Once operations are halted, the costs of staying open become fixed, and include things like rent and paying anyone still left on the team. In both scenarios, a restaurant with tanking revenue is losing money. In the hibernation scenario, the idea is losing less money, losing it slower — and knowing for sure how much of it will be gone each month.
Seattle restaurateur Miki Sodos put it this way: “The numbers just didn’t work, and this way we can just sit tight for a bit, pay rent, and open up later.”
For a restaurant that’s able to work out a deal with its landlord and/or has some money in the vault (likely from a loan), hibernation is a better option than staying open. At Orinoco, payroll was 50 percent of operating costs. Throughout the summer, Branger’s three restaurants did what they could to bring costs down: hours were cut and menus finessed. But at the Cambridge and Brookline locations, business was still down so severely that even cutting lunch didn’t save enough money to keep going. “We weren’t making even 50 percent of normal revenue,” Branger says. “The writing was on the wall. Either close and move out, or, if we had support of our landlords, we could acquire minimal debt and get over the hump [by hibernating].”
So if the big remaining expense is rent… how are restaurants in hibernations going to pay it?
Some lucky operators will come to arrangements with their landlords to lower and/or defer rent payments through the pandemic. But even with lower rent, money is going out and not coming in. Many restaurants will take on debt, whether through Small Business Association loans or other loans from their banks. Restaurants that secured PPP loans most likely already spent the funds on payroll and rent months ago.
Branger and his partners felt that after they spent their PPP money, it was simply too risky to burn through the SBA loan money they had. “Taking on more debt wasn’t a viable option: What if we got to the end of the year, and three more months of business, and then had to walk away?”
Will hibernating save restaurants?
Hibernation isn’t a long-term solution. Even with costs as low as possible, very few businesses can spend-but-not-earn and stay in business for any meaningful amount of time. Restaurants in particular run on such thin profit margins in good times, that surviving bad times by burning cash and getting deep in debt is in and of itself a risky proposition. Branger explains that even after hibernating two of his three locations, he remains uncertain about what comes next. “We’re burning money at a lower rate, and it allows us to have some sense of control. And again, we’re talking now, and we haven’t even started winter. Talk to me in January; that’s when it will really become clear what we’re facing.”
As I said on :screams: March 16, the industry needs relief and a bail out from the federal government. What these businesses need to survive is cash. What these workers need to survive is cash. But without it, we’ll keep seeing more restaurants hibernate in hope that lasting through the winter can mean lasting through the pandemic.