Q&A: How the pandemic could change Houston’s restaurant industry long term

This interview has been edited for length and clarity.

How would you describe the state of Houston’s restaurant industry today versus what it might have looked like a year ago at this time?

When we think about restaurants in December of 2020 versus restaurants in December 2019, we see a lot of changes. We had a little bit of concern even before the pandemic because oil prices were going down, and we were already being told that our hurricane season could be really bad this year.

The good side is we had a lot of restaurants opening their third, fourth or fifth units and starting to spread out more. With [the Grand Parkway] being finished and a lot of that construction wrapping up, were seeing more folks willing to get their next unit and move it out from just midtown. We saw some new national brands coming into town like In-N-Out Burger and Hurts Donut.

Fast forward to 2020, one thing we know is that we’ve lost quite a few restaurants. When we first had to close our dining rooms in mid-March, we could still do delivery, but for a lot of restaurants that didn’t make sense or they weren’t really set up to pivot as quickly. We lost both independents and chains because they said, “You know what, this is a really hard time and it’s costing us more money to do business because of the personal protective gear and some of the costs associated with using third-party delivery services.”

Overall, we think we’ve lost between 14%-16% of the restaurants across the state. That’s pretty consistent when we put the focus down to the Greater Houston area. That’s a bit of a challenge, but at the same time, we did open a lot of restaurants this year. In a normal year if we hadn’t had the mass closings, we would have actually seen our overall restaurant count increase.

If you would have asked a restaurateur in 2019 about their biggest challenges, they would have said workforce. As we look at 2020, so many things that have gone into our adaptation to the pandemic has just made it even harder for us to find workforce. We’ve also had supply chain issues, so it’s just been a really, really challenging year.

When you become a restaurateur, you have to become good at logistics, human resources, health inspections, real estate, financials and all these things. So now they’re adding disease specialists to their list to interpret [Centers for Disease Control and Prevention] guidelines and make sure nothing’s getting spread.

What are some specific challenges the smaller, mom and pop shops have had to face?

When you think family-owned businesses, a lot of times the whole family works there. If your revenue flow that was supporting four or five members of the family now all of a sudden drops 75%-85% overnight without a predictable [trajectory] for coming back, it’s tremendously scary. Everybody in the family is suffering at the same time, so it’s a little bit different if you have a problem with your job and your spouse may still be working.

Restaurants have always worked on a very lean margin and had high labor needs, so it didn’t take much interruption to cash flow to impact not only small businesses but even multiunit chains. But small businesses felt it much more.

When you lose a national brand on your corner, you just say, “Well, this coffee shop or burger joint wasn’t doing well enough,” but when it’s the Millers from up the street, and that’s where you had your son’s graduation party, it feels so much more personal. We’re seeing that ripple across our community.

What are some trends you’ve seen as restaurants adapted to continue meeting needs this past year?

Some of the innovations that have really helped us keep our heads above water involved being able to do delivery. The restaurants had to get much more savvy about what items can withstand the travel time. We see people getting more innovative with delivery, and the consumer has pivoted—they’ve gotten more comfortable with ordering and going and picking it up.

Like a lot of businesses, everything costs more for restaurants now. A restaurant may have made $50,000 in revenue in August of 2019, and in August of 2020 they could make that same $50,000 but costs are considerably higher. Food costs have gone up as well as having to provide your employees with masks, gloves and sanitation.

The alcohol to-go waiver has been great for profit margins, but it’s been great for the consumer too. There’s something nice about being able to sit down with a margarita from your favorite Tex-Mex place with chips and salsa on your back patio. It’s not quite the same, but there’s that sense of comfort.

We’ve seen some restaurants add grocery service where they’re selling boxes of groceries directly to consumers, and that’s been very popular for folks who have done that. We also see grocery stores buy premade meals from restaurants, so you can walk into Kroger and take home food from a local restaurant.

We have also seen family packs at places like Luby’s and Torchy’s Tacos. Those are some innovations I think people really enjoy and I hope will stick around.

When the pandemic came in we quickly identified 51 cents of every dollar spent on food was being spent in restaurants. Grocery stores have really stepped up, but if you think back to early this summer, you couldn’t get beans or canned food. Every week there was something different that disappeared off the shelves.

Restaurants being able to continue to provide food for the community is critical and becomes even more so true when we look at some of our areas of food deserts. A lot of areas don’t have easy access to grocery stores, and they really depend on restaurants for quick meals. That’s an ongoing challenge, which the pandemic has made worse.

What are some things your organization might be advocating for at the state or federal level coming up in 2021?

At the federal level, a lot of our work with Congress is about stimulus money for both individuals and for businesses, forgiveness of certain debts and loans, opportunities to kind of make things right all around [with] money for the pandemic.

With the state, we are working on several things that the governor was able to do through executive orders we would like to be made permanent—alcohol to-go being one of them. With the way the rules are laid out, it is very safe, so we’d like to see that.

Something as simple as the definition of a restaurant is really important. When the governor shut bars down to prevent the spread of the disease, the marker he used actually shut down quite a few restaurants. We had 900 restaurants across the state close because more than 51% of their business was in alcohol.

We also want to work with third-party delivery services right now, but there are some trade practices that are being used that are not very transparent. The fee structure is really aggressive on their part, and it’s very hard for restaurants who depend on that service.

What are some changes enacted in the last year that might stick around beyond the pandemic?

When we look at restaurant design, depending on the concept, we will probably see smaller restaurants with more to-go menus and more design in the kitchen that supports a to-go offering whether its curbside pickup or delivery.

I would expect here in Houston more patio dining as people have felt better about eating outdoors.

Delivery’s going to be the big thing. It was already happening, and I think we’re going to see a lot more food being eaten away from the restaurant—whether it’s being bought at the grocery store or you came and picked it up or somebody brought it to your doorstep.

We’re already seeing this trend, but we’ll see more of these ghost kitchens where there’s nowhere to go in and dine, and you can’t go pick it up yourself. You might love this one restaurant that’s only downtown, but maybe they have a kitchen that’s delivery only with a subset of their recipes that travel well so they can meet the demand in other parts of the city. We knew that trend was coming, but I think that’ll probably speed up a lot.

And then efficiency—just like anything, we’ve had to learn to do a lot more with a lot less people for different reasons.