Jordan: I’m technically allowed to go back into restaurants now where I live, to dine inside.
News Clip: You can now have a meal inside your favourite restaurant or get a workout at a gym. Ottawa and much of Ontario now officially entering phase three of reopening. For the first time since the start of the pandemic, diners can choose to eat inside restaurants.
Jordan: And I live near some really good restaurants and I am lucky enough that they’re still open. Hundreds of restaurants, of course, have closed already. But still, I can go. And they’re open. But I’m not going. It just doesn’t seem worth it to spend money for the privilege of giving myself anxiety about how far away the next table is, or what the ventilation system’s like? And is that person over there, did they take off their mask? This is the problem that restaurants are going to face, even as restrictions lessen and they reopen. Dining out right now, relaxing in a crowded room full of people and good food doesn’t feel the same. It doesn’t conjure up the same anticipation. So what do restaurants do? Well, anything and everything. They do take out, of course. They do delivery, if they can survive the app fees or find a way around them. They’ve started to do meal kits and groceries and cooking classes over Zoom. Margins are slim in this business and it’s already looking like perhaps a third of independent restaurants won’t survive COVID-19. So what’s on the table? Everything except the old way of doing business. I’m Jordan Heath Rawlings. This is The Big Story. Corey Mintz is a food reporter based in Toronto, and he has a book coming out soon about the future of restaurants, both before and after COVID-19. Hi, Corey.
Corey: Hey, how are you doing?
Jordan: I’m doing really well. My first question for you is, when was the last time you ate a meal inside a restaurant? And how did it make you feel?
Corey: The last time I went to a restaurant actually ended up eating it outside in my car. But it was amazing because we had just come home from Winnipeg, where we went after our baby was born to spend time with my wife’s family. And when we got back to Toronto, the thing I missed the most was Sri Lankan food. And we drove to Scarborough and got a big heaping portion of kottu roti, something I couldn’t get in Winnipeg. And I ate it sitting there in the car and I was sweating and it was just extremely happy. And I spent the afternoon with a friend actually, with him and the baby, going in and out of a few places. An Afghani place for some bread, another place for sweets. And it all just seemed so carefree, to walk in and out of businesses and touch people and things– not that I touched people, but you know. Doorknobs and things like that, and shaking my friend’s hand, or giving people hugs, and eating food and just not thinking about everything we have to think about today. It was a very liberated feeling that I took for granted.
Jordan: The before times.
Corey: The before times as we call them.
Jordan: Well, let’s stick to the before times, because this is kind of where your exploration of the future of dining out starts. And tell me, even before COVID, what is a Ghost Kitchen?
Corey: What is a Ghost Kitchen? A Ghost Kitchen, or also a virtual kitchen or a dark kitchen they were calling them for a while, is essentially a food business, hospitality, restaurant, whatever you want to call it, that operates through the online portals, delivery portals, the Uber Eats the Grub Hub, et cetera, but doesn’t have a physical restaurant location. Which, in my recent interviews, several Chinese restaurant owners have been quick to point out, you know, that’s what we’ve been doing for 50 or 60 years. It’s a very familiar model within that sub genre of restaurants. But the distinction here is, virtual first and being able to play with and take advantage of all the things that just having a virtual presence gives you.
Jordan: And why was that model proliferating so quickly?
Corey: Well, partly on the venture capital funding of the companies. You know, the multibillion dollar money losing companies that are constantly seeking a way to profitability. And I’m talking about the, you know, again, like the Uber Eats and the Postmates and the Skip the Dishes, most of those companies lose money, despite charging 30% commissions to the restaurant partners that they have, that typically have like a 10% profit margin. And they’re always looking for something new. You know, longterm, they hope that the driverless cars will lead them to profitability. But one of the advantages that they get out of this model is one, it enables them to set up a space where you could have multiple restaurants, multiple physical kitchens in the same space, right? Reducing the cost for everyone. And for some restaurateurs, that’s an advantage, right? They can expand their own restaurant into a new neighbourhood where maybe they couldn’t afford the rent. But on the marketing side, it allows them to multiply the number of actual businesses virtually. By which I mean, if you’ve got a sushi restaurant and their data, because that’s their key asset, right? Data. They can tell that their customers, based on certain times of day, want certain dishes. They can say, you can sell a hell of a lot of poke between 11:00 AM and 1:00 PM. And you’ve got all the ingredients, all you need is a few different things. And we’ll set up a second restaurant online through our portal with a different name, people won’t know it’s the same restaurant. And they can keep doing that. You know, many of them do that just to A-B test the different demographics based on gender, race, age, location where their customers are coming from, and really optimize the efficiency of those kitchens to have them seem to be 10 different businesses.
Jordan: These are really strange words to me to hear when we’re talking about, you know, independent restaurants. Like it doesn’t seem like the same thing.
Corey: Well, it all seems really abstract, but I always try to break restaurants down into a collection of different genres, because they operate very differently. You know, the virtual restaurant operates very differently from the family restaurant, from the chef-driven restaurant, from the chain restaurant, which is subdivided by franchise versus corporate owned, publicly traded versus privately owned. You know, they all have a lot of different social and economic levers on them. But when we think of restaurants, most of us tend to think of that place in our neighbourhood that has maybe 40 seats, that kind of feels like home, that has a menu under, you know, 200 items, and that we would care if they went out of business.
Jordan: And what has COVID done? I guess turned almost every restaurant, at least for months, until we just recently started reopening, into the kind of virtual restaurant? And what does that do to the industry at large?
Corey: Yeah, I think that’s a fair assessment. In the in between period, as I’ve taken to calling it, so many restaurants even, you know, up to and including some high end restaurants that were, you know, a hundred dollar tasting menus, are doing takeout and delivery and basically operating in that same model. What it’s doing to them is forcing them to rethink their business. Because traditionally you had delivery– I’m talking about before 10 years ago, you had pizza and Chinese and a handful of other things that typically you would expect to get delivered, and those companies did their own delivery. And some of the larger chains started doing their own delivery in the early 2000s, setting up their own online ordering systems. But when the apps all came on in the last 10 years, they really overturned in the industry into a delivery-first model. And the problem there is, as I mentioned, they all take a cut that’s larger than the actual profit margin of the restaurant. So many restaurants have been trying to play catch up and trying to figure how to make it work somehow. And they’ve all been told by analysts that in a five year timeline, they have to figure out their business for delivery first. And then in mid-March of this year, suddenly the reality was you got to figure this out in the next few weeks. And you know, most haven’t. What we’ve seen as a lot of businesses go under/ you know, I started hearing in my interviews in March and April, 10% than 15% of restaurants are gonna close permanently, and that jumped up to 25%. And every time I hear it again, it goes up and up and yeah. And you know, a lot of people are predicting that more than 50% will close. Part of that is based on in, if it’s six months or two years, most restaurants cannot operate at a loss or at a break-even point, which is what so many businesses are doing now. Particularly not for a timeline that includes no certain future. It’s not like you’re telling people if you can just make it to the end of 2021, we’ll have a vaccine, things will be back to normal and you just got to carry your water until then. There’s no promise like that. So it’s realistic for a lot of people to say, I’m going to cut my loss. Particularly when they just don’t have the savings to see them through even a few months.
Jordan: Yeah. We talked to, as you did in your piece for the Walrus to John Sinopoli of savehospitality.ca, back in the spring. And yeah, then he told us, you should be worried, because it’s 10 now, and it could get to 30 and 35. What happens to the rest of the economy, I guess is the way to put it, that surrounds restaurants if we see that a number climb above 50%? Because, to your point in your piece, there’s a whole model of business that’s not just the restaurant itself.
Corey: Well, I think that’s the conversation we have to be having right now. And it’s a real challenge to think and discuss this in both micro and macro terms. You know, in micro terms, I think most of us can think about, Oh, did you hear that restaurant that we all loved? It went out of business, right? And we’re connected to that emotionally. And we all say like, we should have gone more, or let’s all support this restaurant so it doesn’t go into business. It’s harder to think, but we have to at the same time, it’s like, what happens when tens of thousands of that situation replicate themselves across the country? And what happens when they close? What happens to the individual space? You know, previously you had landlords saying I can’t wait to flip this tenant because I’m going to double or triple the rent. Or that’s what I’ll do when their lease is up, because there’s no commercial rent protection, right? And now you’ve got landlords, you know, pretty eager to maintain their customers. But what we’ll see is a decrease in the rents, we’ll see a decrease in the property values, and it seems reasonable that we’ll see a decrease in the adjacent residential property values. Because you know, I’m theorizing here, but a lot of the value of homes in cities is about how attractive cities are. What happens when all those coffee shops, bars, and restaurants go out of business? And what happens when the tax base that’s generated by all those businesses diminishes? What happens to all the social services that depend on that tax base? So there’s a huge, as one economist, put it to me, cascading impact on the local economy in all these places that we have to think of at the same time as like, wouldn’t it be nice if that bistro is still around a year from now?
Jordan: So who has to be thinking about that and having these conversations now? I mean, it’s always nice to talk to you, and I’m glad that we’re talking about it. But if this is, you know, a problem on that macro level, what needs to get to the government here and is this on the agenda?
Corey: I don’t have access to what goes on inside the halls of power. You know, the best I can do is, I can relay something that John Sinopoli said to me, which is that he certainly, you know, as someone who’s been at the vanguard of the voice of independent restaurants and lobbying for some sort of industry-specific response from government, he said that he’s spoken with people in local government, provincial, federal, all of them being sympathetic. But all of them admitting they don’t really know what’s required and they were looking to him for cues, because they don’t really understand the hospitality industry. And that’s alarming on two levels. One, that the federal government doesn’t understand, you know, this $85 billion industry that employs 1.2 million Canadians. In that article, I set out to sort of answer that riddle and the answer I got from– because I contacted, you know, all these well known schools that pump out economists. I said, have you got economists that could talk to me specifically about restaurants? And they mostly said, we don’t really have anybody like that. And the answer I got from economists is that, well, we tend to learn in school about trade and energy extraction and manufacturing, and then those are the people who go on to work in government and advise government. So it’s no wonder they have a blind spot, so.
Jordan: But this is a huge industry.
Corey: Yeah. Yeah. And second alarming part of that is that like, okay. So if they’ve got this huge blind spot for a huge industry, and it’s sibling industry, tourism, when they admit that to someone like Sinopoli, who is trying to get involved in helping, why haven’t they listened to him and his Save Hospitality organization. They’ve outlined, you know, a series of proposals. Maybe some of them are ambitious. That’s up to people to negotiate, but there really hasn’t been a response beyond some of the initiatives of the Canadian government, which do deserve some credit, at least compared with America, where, you know, I talked to restaurateurs or workers who, you know, in late May were still waiting on employment benefits, or now are being, you know, forced back to work under threat of having their benefits removed, and being snitched on as is mandated in some States.
Jordan: So if we don’t really understand it or have a ready solution to this at a macro level, what’s happening at a micro level? What are some of the things that individual restaurants have come up with to keep themselves afloat until hopefully we get a vaccine and the tables are full again?
Corey: We got people juggling a number of different business styles and revenue sources. And, you know, in some cases they’re doing well, they’re doing great. And in some cases they’re breaking even. In most cases, restaurateurs tell me this is about keeping the lights on, it’s about keeping people employed, it’s about not losing my business, and it’s about maintaining a connection to customers who, you know, might forget us if we went away, even for six weeks. And the things we see them trying are obviously takeout and delivery, but also meal kits. In some cases, meal kits that are integrated with like a private cooking class on Instagram by the chef, which is a neat thing. Groceries, I’ve seen a number of restaurateurs do groceries at a small and big level, even at a large scale. Earl’s is doing groceries. I saw one place, it’s in San Francisco, but they designed this winch. It’s a hand crank system that opens a hole in the window for takeout so that you don’t even have it to open the door, and it’s sort of like a little cranked Ford assembly line that sends the burger out the window on a little sort of assembly line so the person can get it. But it just sort of highlighted a company that said, let’s use the tools we have to figure out, what are the ways we can change or change what we’re about or make things easier or safer? Safety obviously comes first, but, you know, without the government wide sort of safety net that certainly came by mid-April but wasn’t there right away, a lot of people had to choose the side of just closing down permanently, but gradually they’ve started to incorporate these various things. And we’re going to find out over time if they work that’s that’s for revenue. For safety, you know, everyone’s doing things from plastic divider shields, to eating outside as we’re all doing right now, but, you know, in Canada, there’s a limited window for that. I think in the United States, in Texas and California, that’s a solution they can work with for the next year and a half. But, in Ontario and Manitoba, as far as I can see, patio dining is going to dry up in October.
Jordan: Is this a situation where if they can hang on long enough till a vaccine does show up, the dining out experience goes back to normal? Or is this– cause you kind of touched on it earlier, like just a speeding up of what was already kind of a fundamental shift?
Corey: I think there’s both the speeding up of that fundamental shift, in terms of certainly the delivery first thing, because that’s a trend that’s not going away, but I think for you and me and for most people listening, life is not going back to normal ever. There’s a handful of people who will return to their jobs and do them as they did before. But I mean, the shift to people working from home is going to be a longterm impact. There’s many workplaces, we all know someone, whether it’s us or someone we know, that their employer is not only saying work from home for now, but they’re thinking of just letting go of the lease on their incredibly expensive commercial real estate when it comes due. And there’s another element we can’t ignore, the impact on restaurants, because you know, part of restaurants are community based, but part of restaurant’s revenue, and this isn’t all restaurants, but certainly a lot of urban places, is dependent on office and tourism, right? It’s the people who grab a bagel on the way to work. It’s the people who go out for lunch or salad or sandwich. It’s the people who stop for a drink after work. None of that is happening while people are working from home. And even as we transition to that, and gradually more people are going out, you’ve got local tourism, which is great, but there’s no international tourism. So all the restaurant revenue that depends on that, it’s just gone and it’s not coming back for some time.
Jordan: How do you write a book on the future of restaurants in the middle of this?
Corey: I wish I knew. Even though I’m doing that, I mean, you’re basically looking at something under a microscope, but the thing under the microscope is alive and has just been diagnosed with a terminal illness, so it’s running around on the slide and it’s hard to actually focus on. But I think there’s, you know, I’m trying to focus on the systemic problems that have long been part of the industry and how, you know, in this sort of peroxisome this cataclysm that’s happened, how it’s shaken everything up. It’s destroyed so much, but an even worse tragedy would be to return to the status quo as it existed before this. So I’m kinda trying to juggle the two timelines in my head. And hopefully by the time I file a manuscript, at the end of the year, it all still makes sense.
Jordan: What do you picture, and I realize this is obviously another instance of something squiggling around under a microscope, but when you think to yourself of, what’ll it be like to look around my neighbourhood at my favourite restaurants and what they’ll be doing and what they’ll be like in three, four, five years from now? You know, what do you picture?
Corey: Well, I think we have to acknowledge the human desire to return to normal is probably more powerful than the reality of our ability to do that. You know, like we crave the comfort of normalcy, particularly in North America where we’re not prone to civil wars, you know, and famines that disrupt our lives the way most of the world does. So I think there’s a strong emotional desire to like go out for a meal in a restaurant again. Certainly in the future, there’s going to be a lot fewer restaurants. This will wipe out a lot. I think the lower property values, the lower rents will encourage a new wave of entrepreneurial-ism after this. But at the same time, the lack of government support and the refusal or the inability for insurance companies to make good on interruption insurance claims, means that a lot of entrepreneurs will be less willing to stake their life savings on a restaurant business, because it’s been established that the money they pay to insurance companies to say, Hey, If there’s an emergency where we can’t open and we’re paying you money for this so you’ll bail us out when that happens, and the insurance companies have said, Ooh, we didn’t say pandemic. And with epidemiologists saying like, we’re likely to get in this situation again in the next five to 10 years, I think that’s going to scare off a good number of entrepreneurs. Either way, I don’t think we’ll shake the impact of this from us. So hopefully when we are able to go out and dine out again, we will acknowledge that it is what it always has been, which is a luxury, and not really a part of everyday life to take for granted.
Jordan: Since this pandemic began, what’s been the best experience you’ve had with one of your favourite restaurants in any form, be it delivery, outside dining, you know, what’s really been great about dining during this?
Corey: For me, it’s been home cooking. I love to cook and, you know, before my daughter was born, I started making all these purees and smoking a bunch of meat and filling my freezer with stuff that we then ran off to Winnipeg and had. So at the beginning of the pandemic, I had a full freezer of stuff and I had a great time cooking, and my wife enjoys my cooking. But even so, after, you know, like anybody else, after a couple of months of that, I was yearning for someone else just to do the cooking. And I had not ordered any delivery food, just based on my feelings about most of these delivery companies. But I started working on a story that uncovered some restaurateurs who had started their own online delivery systems, and were doing their own delivery, and so we’re not giving up the huge commissions. And we ordered food from one of them, a guy who’s doing Sri Lankan food, and he brought it to our home and we had it for father’s day and we ate a giant pile of the spiciest food in our home. And we, you know, like almost cried. It was so sweet. Not that either of us were like, Oh, my husband’s cooking is so terrible, thank God somebody else is doing the cooking. But it’s such a pleasure, it’s such a like treat. It’s like royalty to have someone else prepare a nice meal for you and to bring it, and just to experience also flavours that you wouldn’t work with normally. It’s just, it’s something that transports you outside of your regular everyday life. And it was, I dunno, it was such a thrill that moment and I didn’t take it for granted and I think back on it frequently, and I hope that I’m able to do that again.
Jordan: The first thing we ordered after doing the same thing for about two months was a big, greasy pizza. Like pure, pure delivery pizza. And you can’t make that at home.
Corey: Did it hit that spot? Did it like press that emotional button for you?
Jordan: Yeah, it took me back to a time when I never stocked up on hand sanitizer. And you know, that’s what I needed. Anyway, thank you so much, Corey. I hope there is a future of restaurants.
Corey: It’s a pleasure talking to you. Let’s assume that there will be.
Jordan: Corey Mintz, food reporter. That was The Big Story. If you would like more, head to thebigstorypodcast.ca. Head to your favourite podcast app and leave us a rating and a review. We just hit 800 reviews on Apple. We’re so proud of you guys. I read every one and most of them are quite nice. You can also talk to us on Twitter, where we get many more insults. Our address there is at @thebigstoryFPN. And of course, we have an email address if you’d like to send something our way. It’s thebigstorypodcast@rci.rogers.com. Thanks for listening. I’m Jordan Heath Rawlings. We’ll talk tomorrow.
Back to top of page