For restaurant industry, bouncing back in 2021 is a tall order

In March, Scratch Food & Beverage owner Don Mahaney developed a "pay what you can" menu and local market model to help customers who had lost their jobs or couldn't find groceries because of early pandemic shortages. 

By May, he was running up the hundred-some-step staircases along Rialto Street in Pittsburgh's Troy Hill neighborhood to raise money for safe food deliveries to needy customers. 

Before the end of the year, the restaurant changed its name to Scratch & Co. and launched a retail brand, Scratch & Co. Made Brand. The goal is to cut through the global supply chain and offer locally sourced provisions such as pickles, lunch meat and sauerkraut while ensuring local farmers and commercial ecosystems have an advantage over global and national supply chains. 

"If I hadn’t been taking that approach I’d be talking to you as a former business owner," Mahaney said. "The only reason we’re still in business now is because we changed our entire business model." 

By pivoting weekly, Scratch & Co. became an outlier in the restaurant industry – a 2020 success story.

Now, as the restaurant gears up for several initiatives in 2021, the hospitality industry as a whole sits between catastrophe and recovery. 

The initial COVID-19 wave  

When the pandemic hit in March, few believed it would last as long as it has. It forced restaurants – an industry accustomed to pivoting – to either take a pragmatic approach or an innovative one.  

Some fine-dining restaurants such as The Left Bank in downtown York, Pennsylvania, opted to close before the initial shutdown. Ride this out in the short term and sort out the damage later. 

Others, such as Scratch, overhauled their menu and concept. “One of my goals was to keep my people employed," Mahaney said. 

That grocery model was emulated in York through O.N.E. Hospitality’s website, and later the RIG-A-TONI food truck would make neighborhood deliveries.  

But even before the stay-at-home orders hit, restaurateurs swiveled in any and every direction. Patreon accounts were created, GoFundMe campaigns were launched, and distilleries stopped making alcohol just for our gullets.  

The beginning stages of the pandemic saw Michelin Star restaurants stop serving $75 plates and opting to serve $35 takeout – just to keep the lights on. Some, such as Alinea in Chicago, have found a way forward. Other nationally recognized restaurants such as the Gotham Bar & Grill in New York haven't been so lucky. 

The fallout of the pandemic has shown that while some restaurant owners may have the savvy to keep pivoting, the industry remains in choppy waters and, in some aspects, is on the verge of capsizing. 

Rural towns, cities navigate struggles differently

The scope of the pandemic will be dissected for years to come.

Travel and tourism figures have hit historic lows. And for every restaurant that can sustain itself, more have closed.

The concept of traveling to a new town or city neighborhood has been erased. The notion of falling in love with a hole in the wall only locals know about or trying an almond torte at a local cafe that the hotel concierge recommended are lost luxuries, as are the out-of-towners many higher end restaurants have come to rely on.  

John Longstreet, president and CEO of the Pennsylvania Restaurant & Lodging Association, expects that the "new normal" will see more than 50% of restaurants close. The restaurant spaces will likely remain vacant, unlike years past when a new eatery may have appeared. 

"Banks will be less likely to provide loans for restaurants in states like Pennsylvania with the threat of more government shutdowns and capricious mandates forcing them into bankruptcy," Longstreet said. "Boarded-up spaces will be particularly prevalent in downtown areas, where restaurants are typically the lifeblood of revitalization, so we can expect increased urban blight, crime and mass exodus, like we are seeing in New York City. 

Instead, without foot traffic, lovable watering holes leave the communities where they’ve become staples over decades. 

In other communities, such as Delta in southern York County, Pennsylvania, a single restaurant like Delta Pizza can find a way to survive.  

Delta Pizza has built a reputation by paying it forward, though in a time of pandemic the lack of competition around Delta (a town with fewer than 1,000 residents) may help, not unlike the way Scratch found a way to sustain itself and become a resource for its community. 

It’s where this notion of travel and gatherings comes into play. Urban areas like Chicago, where Alinea resides, have the population size to sustain themselves even through several pivots. As does Pittsburgh – depending on the neighborhood and the restaurant's scope. Philadelphia is undergoing its own challenges with local authorities instituting additional restrictions, but the city may begin to resume indoor dining soon.

Longstreet expects corporate travel, which has historically been customer fodder for fine-dining restaurants, will not return to pre-pandemic levels. He expects to see a decline by at least 10% even after business returns to normal. 

Continued mandates and restrictions on gatherings pose additional risks for a return to normal in states like Pennsylvania where executive orders have come in greater frequency, he said. 

"On the positive side, states like Pennsylvania, within driving distance of major population centers, will receive a quicker return of leisure travel," he said, adding that the state saw an initial bump in the summer of 2020 before additional stay-at-home orders came. 

It’s the in-between areas, such as York or Harrisburg, Pennsylvania, where the direct competition may hurt smaller businesses because the local population size may not be large enough to contribute to a takeout-only model. 

In York, for instance, independent restaurants are as well-designed for takeout as franchises such as McDonald's or Burger King. A simple trip down Route 30 at 9 p.m. versus Restaurant Row in downtown York highlights the difference in the number of vehicles waiting for takeout outside eateries.

In addition, delivery services as UberEats and GrubHub have been notorious for gouging service fees for restaurant owners. Yet, in areas where it's a 20-minute drive, the trip to pick up directly from a restaurant can be burdensome. That is no fault to either the restaurant or customers, it's the nature of smaller commercial hubs and rural areas. 

In a downtown area such as Pittsburgh or Philadelphia, you can order and walk to several independent restaurants. Both the convenience and the urge to pick up directly and not from a delivery service are present. Granted, some towns and cities such as Baltimore have begun to consider tapping delivery and service charges from third-party apps to help restaurants offset costs. 

Some issues for the restaurant industry remain shelved 

"The survival part doesn't much alter our path from most of 2020. We'll be working to gain financial help for the industry, and as distribution of the vaccine picks up its pace, we'll push for a return of certain business rights such as the ability to seat patrons at bar tops," Pennsylvania Licensed Beverage and Tavern Association executive director Chuck Moran said. 

Between unemployment filing fiascos and working for a temporarily or permanently closed restaurant, front-of-house staff were hit hardest this holiday season. And some industry advocates believe the recent $900 billion stimulus doesn't provide enough relief for the industry, especially with PPP loan forgiveness for independent restaurants, the $120 billion bipartisan RESTAURANTS Act remains shelved. 

In addition, some restaurants continue to defy COVID-19 mitigation efforts.

Yet, while state and federal aid is needed to help sustain the industry, the pandemic has highlighted shortcomings that have long plagued the industry. 

After the first shutdown when restaurants began to reopen, several restaurant owners said they had employees who didn't want to return because they were making more on unemployment than they were serving or bartending under dining restrictions. 

The argument for an increase to both minimum and tipped wages has been ongoing. Anyone who has worked as a server or bartender understands that volume is your best friend. If restrictions continue for the foreseeable future, there could be a mass exodus for hospitality staff. 

Historically, 13% of tipped wage workers are at or near the poverty level.

In addition, before the pandemic hit, the #MeToo movement was running rampant in the hospitality industry – a correction to the culture was needed. If a solution is found for either issue, it is often at an individual restaurant or within a specific restaurant group. Progress across the board has still been slow. 

As restrictions and limitations continue, survival is the main concern for the restaurant industry. Yet as the industry continues to pivot and reinvent itself, the progress made toward fairer wages and eliminating sexual harassment can't be lost in the shuffle. 

As Scratch & Co.'s Mahaney pointed out, in order to evolve, he and his staff have consistently involved all stakeholders within the restaurant's ecosystem – staff, customers, neighborhood and the supply chain – as they've continued transitioning and repositioning themselves for the future. 

Neil Strebig is a journalist for the York Daily Record and curator for the York on the Move newsletter. He can be reached at nstrebig@ydr.com, 717-825-6582 or via Twitter @neilStrebig.