Pre-pandemic, roughly 90% of restaurants in America captured 90% of their revenue using just a single method. Said another way, a full-service restaurant only really made money when a diner came in and sat at one of their tables. Because of that, when our industry was forced to suddenly shut down, hundreds of thousands of restaurants lost the only meaningful revenue stream they had. What did they do?
They made the pivot. Many in the industry have come to despise this word, and I understand why. In fact, over the past few months I’ve replaced “pivot” with “evolve.” The restaurants that survived the pandemic simply embraced their evolution: “We used to serve our audience in this way, but now that we can’t do that anymore we’re serving them in this new way.” [Editor’s Note: check out our free virtual Evolve series here to see how operators around the country adapted during Covid-19]
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In an interview with podcast host Tim Ferriss, Nick Kokonas (co-founder of the Alinea Restaurant Group) suggested that the operators who learned to pivot during the pandemic would be the big winners in a post-pandemic world. Why? Because they learned more about their audience and more about themselves. They got scrappy, creative — and discovered what they were made of. Those lessons will put them ahead of their competition simply because they learned to flex an important muscle.
Diversifying Your Portfolio
When it comes to your retirement savings, I’m sure you understand the importance of diversifying your portfolio. A financial advisor might suggest it as a way of mitigating risk and safeguarding yourself against some unanticipated disaster. Sound familiar?
In “the new normal” the restaurants that succeed will make money in a variety of different ways: in-person dining, takeout, at-home meal kits, ghost kitchens, private parties, off-site catering, cooking classes, cellaring services, consumer packaged goods— I could go on, but you get the point.
Over the past year restaurants have learned to do more with less, and have developed all kinds of new revenue streams to help defend against an unknown future. There are lessons we can learn, and hopefully apply to our own businesses. I’m thrilled to share some of my favorite stories from restaurants all across the country:
Alinea
Chicago, IL
In that same interview I mentioned earlier, Nick Kokonas explained how Alinea pivoted quickly at the start of the pandemic — going from a carefully curated 3-star experience to selling a casual at-home meal kit. He also said that in late-April the restaurant enjoyed their single biggest day in their fifteen-year history… then went on to break that record just a week later. Once their regular operations get back up and running, you have to imagine that they will keep this as a revenue stream in some way. Perhaps a new concept?
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Olmsted
Brooklyn, NY
This gem of a restaurant is located on Vanderbilt Avenue in the heart of Prospect Heights, Brooklyn. The brainchild of Chef Greg Baxtrom (a Chicago native and alum of Alinea), it’s one of the most beloved restaurants in the city. At the start of the pandemic, they did what most restaurants did: shut their doors and laid off nearly their entire staff. But then just a few short weeks later, the team decided to turn the restaurant into a food pantry for displaced restaurant workers. Recently unemployed individuals could come by for groceries and a gourmet meal to take home to their families. In time, that gave them the idea to turn their private dining room into what they now call the “Trading Post” — a curated market with fresh breads, cured meats, artisanal cheeses, as well as local packaged goods like jellies, jams, and homemade pasta sauces. Moving forward the owners have admitted that it’s a great way to generate revenue. Market by day, PDR by night?
107 State
Madison, WI
Billed as a “modern, Wisconsin tavern” 107 State took some time to catch on. They opened just about a year before the pandemic and struggled to find a consistent audience. Strangely it took a pandemic for them to find their identity. How? By launching two ghost kitchens: The Burger Lab and The Pasta Bar. More than anything it gave the Chef/Owner, Nathan Mergen, the cover he needed to start experimenting. What he discovered was the identity he had been looking for all along. Within weeks the ghost kitchens began outpacing the regular menu in daily sales. Moving forward Nathan and his have recognized the value in offering choices to the community, and the importance of diversified revenue streams.
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Barcito & Bodega
Los Angeles, CA
What began as a local watering hole in downtown LA quickly morphed into a sort of pop-up grocery store and craft beer shop early on in the pandemic. Andrea Borgen Abdallah had only opened her restaurant a few years prior, but knew that the business model was no longer sustainable. And she was thinking long term. Patrons will now find that same cozy dining room, except you order at the counter and then the food is brought to your table. Quirky organic wines and craft beers line the shelves. Half the customers come for the in-person experience; the other half are just looking for an interesting brew to take back home. Oh, and get this — they also do online ordering. As of a few weeks ago, they now deliver to just about anywhere in California. How’s that for evolution?
Gotham Bar & Grill
New York, NY
For thirty-five years Gotham was an institution in New York City. The recipient of an unprecedented six 3-star reviews in The New York Times, it was devastating when they closed in March 2020. Under the leadership of Bret Csencsitz, the restaurant had long pursued other revenue streams including their line of curated pantry items called Gotham Selections, plus their own high-end chocolate label, Gotham Chocolates. Over the past year they took aim at building a name for their bean-to-bar chocolates with a pop-up at Nordstrom, as well as a partnership with a variety of specialty shops around the country. As they look to reopen later this year, it’s obviously that the Gotham name will continue to grace the packages of specialty items and sweet treats for many years to come.
Chip Klose is based in NYC, where he runs the marketing agency Chip Klose Creative, working with chefs and restaurant owners to help them grow their brand presence and increase revenues. Klose is also the host of a weekly marketing podcast, Restaurant Strategy, where he talks about many of the strategies and tactics he uses day-to-day in marketing restaurants. To learn more, visit ChipKlose.com.
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