The State of New York Restaurants in 2020

As the Head of U.S. Operations for 7shifts, I have been based in the New York technology and hospitality space for years (including a leadership role at Yelp for nearly a decade). Never before has our local market experienced such a massive disruption to the restaurant industry as we are experiencing with the Coronavirus pandemic. Every restaurant has been forced to adapt their operations in order to survive and ultimately grow for the future.

Based on my conversations with dozens of restaurateurs and operators, as well as other technology providers over the past few months, this article will quantify how the New York market has been impacted, and what forward-thinking operators are doing to adapt and thrive.

How New York restaurants have been affected by COVID-19

Every state has been gravely affected by the COVID-19 health crisis, but how has New York been affected specifically?

According to 7shifts’ Restaurant Data Hub, New York restaurant sales recovery has been slower than the overall United States (and Canadian) average. Data from Restaurant365  backs up our own findings, showing that the sales recovery of New York is trending below the average (with New York sales remaining 52% below pre-COVID levels, whereas the average is 22%).

• New York State restaurant sales dropped 77% by the end of March, and remain 38% below pre-COVID levels as of October 1st

• 78% fewer shifts were being scheduled by mid-April, and the number of shifts being scheduled is still hovering around 35% below pre-COVID levels

• The New York restaurant industry could lose over 150,000 jobs in the next 6 months
• 9 out of 10 restaurants, bars, and nightlife venues could not pay rent in August
• New York State Restaurant Association predicts that up to 66% of New York restaurants may have to close by January 2021.

The state of the restaurant industry in New York is grim, but restaurateurs are rising to the challenge and adapting.

What support is available for New York restaurants

1. The Indoor Dining Blueprint

Governor Cuomo recently announced their new blueprint for indoor dining, which somewhat opens up indoor-only restaurants to the public.

Cuomo also asks New Yorkers to help enforce these regulations by self-reporting any restaurants they see breaking the 25% capacity rule, a program titled “New Yorkers Protecting New Yorkers.” Anyone can anonymously call or text in tips about restaurant violations to Cuomo’s state task force. (Call 833-208-4160 or text a violation to 855-904-5036.)

“A restaurant is not just the restaurant owner, a restaurant is the kitchen staff, waitstaff, the whole industry around restaurants. And restaurants also pose possible risks, concentrations of people inside [for] indoor dining. But there’s also great economic loss when they don’t operate.”  

— Governor Cuomo

2. The Restaurant Revitalization Program

The Restaurant Revitalization Program focused on the 27 communities hardest hit by COVID-19 and provided grants of up to $30,000 to subsidize wages of $20/hour for at least 6 weeks. The program ultimately supported 95 restaurants and 1,000 workers in the industry.

The restaurants who received the funding agreed to pay all employees non-tipped minimum wage, plus their tips as the restaurant returns to regular operations, and agreed to serve at least 500 free meals to New Yorkers affected by COVID-19.

“The Restaurant Revitalization Program is a reminder of what can be achieved when the public and private sector come together to help strengthen communities by addressing inequity with reforms and bolstering struggling businesses. This initiative will help restaurants get back on their feet, and preserve the culture and warm, personal connection these familiar spaces provide in our neighborhoods.”

— First Lady Chirlane McCray

3. Local Law 1932-A

Local Law 1932-A has been met with some controversy in the New York restaurant scene. The law temporarily  suspends personal-liability provisions for restaurants impacted by mandated closings or service limitations. With 75% of restaurants unable to pay full rent in June, and nearly 90% unable to pay in August, Local Law 1932-A was a life saver to many restaurateurs.

“Rent is the only thing that’s a constant burden on the business. If this doesn’t get extended, I think a lot of people will be more willing to close. I think it’s the one thing allowing people to say, Let’s just push through; let’s see what happens and where we come out of it.”

— Fabián von Hauske Valtierra, Chef and co-owner, Contra, Wildair, Una Pizza Napoletana

The issue is that, while it did help businesses get some breathing room from landlords for rent, the suspension was only meant to last through September. Now, the City Council of New York City has voted to extend local law 1932-A until March 31st, 2021. But who is to say the situation will be alleviated by then? The major concern is that this is just prolonging the inevitable.

The future of the restaurant industry in New York is still unknown, and largely depends on what happens in the coming months. Local Law 1932-A will at least buy restaurateurs some additional time and leeway to adapt their business and bring in the money to pay back the sums owed.

4. Organizations supporting & advocating for restaurants

Thankfully, many organizations have come out in full force to support the struggling restaurant industry. These include, but are not limited to,:

• New York City Hospitality Alliance:  Not-for-profit association founded in 2012 to represent and serve restaurant and nightlife establishments throughout the five boroughs
• New York City Hospitality Group: Serves NYC’s hospitality industry by hosting educational and community-building events for its members and a centralized source for services essential to hospitality professionals.
• New York State Restaurant Association: The trade association for New York restaurants, who works to further the business interests of restaurant owners and to provide valuable support services to members.
• Hoboken Hospitality Alliance (HOHA): An organization dedicated to serving the restaurant and hospitality industry in New Jersey.
• Relief Opportunities For All Restaurants (ROAR): Partnered with Robinhood to raise donations for a New York City restaurant relief fund.
• Independent Restaurant Coalition (IRC): Formed by local restaurant and bar owners around the country to save the small restaurants and bars affected by COVID-19 and the subsequent economic shutdown. The IRC was founded on the simple belief that our small businesses have the power to affect legislative change if we unite our voices.
• Rally For Restaurants: Helping support your favorite restaurants that are suffering as a result of the COVID-19 health crisis.

The Future of the New York Restaurant Industry

If I know anything about the restaurateurs here in New York, it’s that they’re resilient. While the future of the New York restaurant industry may look very different than it does now, I know that restaurateurs will adapt and overcome the current situation.

Here are some predictions for the future of the restaurant industry in New York.

1.Higher barrier to entry 🚫

The cost of running a restaurant in New York has always been higher than other cities in the US, and costs are just going to rise with new COVID-enforced requirements.

Before COVID, land in Brooklyn and Manhattan already cost more than double LA’s priciest neighbourhoods, and food costs coming in at 2-3 times more than that of what restaurants in California are paying. With New York restaurants before COVID already needing a 10% profit margin to survive, how will the small, mom-and-pops cope with new, pricier accommodations around COVID?

“Fortunately, though limited indoor seating is possible now and luckily for us, we have a pretty sizable floor, so we can comfortably distance customers. But if there’s another change and we can’t dine indoors again, the winter will definitely be more challenging and any modifications needed will cost more money, which we are seriously out of. Though we need to consider what’s coming, honestly, with everything we’re trying to balance, it’s difficult to plan ahead of today.”

—Tomoyuki Iwanami, Kaikagetsu NYC

David Chang, Founder of Momofuku and other restaurants, thinks that the future of restaurants in New York will skew towards more big brands and chains.

“I think for restaurants and the service industry, there is going to be a morbidly high business death rate. My fear is the restaurants that survive are going to be the big chains, and we’re going to eradicate the very eclectic mix that makes America and going out to eat so vibrant and great.”

— David Chang

Regardless of whether it’s national chains or independent restaurateurs who are making the hurdles, the barriers to opening a restaurant in New York post-COVID just got higher. That doesn’t necessarily mean the loss of independent restaurants though—it may mean the rise of more unique and scrappy restaurants that pop up in place of more generic eateries.

Takeout & delivery are changing the way restaurants operate 🥡

It’s no surprise that takeout and delivery channels have become critical for restaurants worldwide as COVID regulations force restaurants to close their dining areas. Even now, restaurants in New York remain at 25% seating 8 months after the crisis first began. So the question is: how will off-site dining experiences change the future of NY restaurants?

Restaurants like Kaikagetsu NYC have already experienced a change in the fundamental structure of their business and have begun to focus more on takeout and delivery efforts.

“Before the coronavirus pandemic, Kaikagetsu was a fine dining, course-oriented Japanese restaurant in the Lower East Side with absolutely zero to-go offerings. Aside from not being able to serve food, we had to create a to-go menu and take-out system, which was extremely challenging as the delivery groups were adamant on taking 30% commission despite posing as “pro-small business.” Despite our sales being a fraction of what they used to be, we still had to invest in sanitizers, sanitation stations, new gear, new outdoor seating, etc. to comply with new and changing regulations. Our entire business model has changed also from fine dining courses to take away bento boxes and limited delivery options.”

—Tomoyuki Iwanami, Owner of Kaikagetsu NYC

Kaikagetsu isn’t alone in switching to a delivery-based restaurant model. Since COVID began, 7shifts data shows 46% more delivery-related roles added to restaurants’ schedules (as of October 1st). With indoor dining demanding occupancy limits, temperature checks, no bar service, and mandatory masks, it’s no wonder that restaurants and diners are both gravitating more towards delivery and takeout for their dining experiences.

“I thought that shift [towards delivery] was going to happen over the next 10, 15 years, and no one would have noticed because it would’ve happened gradually. This change is now going to happen instantaneously.”

—David Chang, Momofuku

Check out our webinar with ChowNow to learn how you can make more money through takeout and delivery at your restaurant. 👇

2. The rise of outdoor dining 🌳

One certainty about the future of restaurants in New York is that parklets and outdoor dining will become more standard. With capacity set to rise slowly, and outdoor dining proving to be safer when it comes to the spread of COVID, restaurants will continue to need to supplement indoor with outdoor to make ends meet.

The mayor of New York City, Bill de Blasio, recently announced that the Open Restaurants Program would allow restaurants in the city to extend seating into the streets, sidewalks, and public spaces permanently.

Restaurants are taking advantage of new outdoor dining areas to test their creativity and provide amazing experiences for New Yorkers. Restaurants like Sushi Lab are accentuating their outdoor dining spaces with greenery and decor that helps emphasize their aesthetic appeal.

“While providing social distancing, we want to give people pleasant things to look at. We’re focusing on our guests’ safety, health and well-being. It goes beyond the food.”

— Jeremy Poon, Managing Director, Sushi Lab

Another unique outdoor dining experience is the one you can find at DANIEL, one of our own 7shifts clients. One of the top fine-dining spots in New York, they’re now redeveloping their entire concept to a South of France-inspired pop-up allowing luxury brands like Lavazza Premium Coffee, Evian water and Daou Vineyards to sponsor the temporary restaurants.

“During a challenging time for the restaurant industry, we are excited to be a part of an innovative dining concept by a chef who has risen to meet the moment” said Davide Riboni, president of Lavazza Americas, one of the concept’s newest sponsors.

3. A new restaurant tech stack 👨‍💻

A keyway for restaurateurs in New York to reduce overhead costs and save profit margins is to review their restaurant tech stack. The right combination of integrated software tools can significantly boost operational efficiency in restaurants.

Here are 6 types of restaurant tools to consider to reduce restaurant costs.

• Use a labor management tool like 7shifts to take the scheduling, overtime, and compliance costs out of your budget

With restaurants spending roughly 30% of revenue on wages, overtime, payroll taxes, and healthcare costs, using a labor management system can help optimize your schedules to reduce overtime and other labor costs.

Keep your staff safe with Employee Health Check to ensure nobody is coming to work sick.

Examples: 7shifts: Restaurant Scheduling

• Decrease restaurant costs with order management software

By owning your order management system and providing direct delivery, you can avoid the 30% cut that third-party tools take from your orders.

Examples: ChowNow, GoTab, Ready, Lunchbox

• Cut costs with inventory management software and cloud based solutions

Inventory management software allows you to use demand-based data to order the right amount of inventory—and cut any excess inventory costs.

Examples: TouchBistro, Toast, MarketMan, XtraCHEF

• Boost customer loyalty with guest management and marketing software

The more return customers, the more reliable profit! Using guest engagement platforms.

Examples: SevenRooms, Resy, BentoBox

• Promote efficiency with contactless payment solutions

Contactless payment solutions boost restaurant efficiency by speeding up table turnover—taking closing a tab from nine minutes to instant.

Examples: Lightspeed Mobile Tap, Toast Tap

• Save time and labor costs with payroll software

Streamline your restaurant accounting & payroll by investing in the right payroll software.

Examples: Gusto, ADP

Checkout our post on the Restaurant Tech Stack for more ideas on how to optimize your restaurant operations with modern technology.

4. Boo! Ghost Kitchens & alternative options for kitchen space on the rise 👻

In New York (and across the country), we’re seeing the rise of ghost kitchens like Zuul, as well as fractional commercial kitchen or on-demand commercial kitchens options. Prior to COVID, ghost kitchens and alternative kitchen space were already starting to gain traction—so much so that companies like Kitch have been created to provide a marketplace for hotels, restaurants, and other organizations with commercial grade kitchens to offer up the usage of their kitchen space during specific days or hours for supplemental revenue.  In addition, some of the biggest leaders in the food service space, such as US Foods, have developed specific programs to help bring ghost kitchens to life and add new revenue streams for restaurants.

On the other side of the marketplace, chefs, concept creators, or restaurant owners looking to decrease overhead costs, create new concepts, expand their services, and/or become more prepared for takeout, delivery or catering are presented with access to these kitchens at a fraction of the cost of a fully-loaded commercial restaurant lease.

Now, the new COVID-19 and offsite dining landscape have accelerated the growth of ghost kitchens. According to The Washington Post, ghost kitchens have been the only category of restaurant that have seen growth during COVID-19. While ghost kitchens don’t have to pay for additional rent, staffing, or utility costs, Jeff Crivello (BBQ Holdings’ chief executive) projects that ghost kitchens will produce $6,000 – $12,000 additional sales per week.

How New York restaurants are adapting (and you can too)

The New York restaurant landscape is changing faster than ever, and we’re seeing in real-time how adaptable and hardy New York restaurateurs are. While change is hard for everyone, we believe that the new landscape of off-site and outdoor dining will push restaurateurs into some unique and creative solutions to keep the industry alive.

That’s not all. Restaurants are still opening in New York, even during the COVID-19 crisis, which just goes to show how resilient this industry is.

Eric See, founder of Awkward Scone in New York City, has now returned to the city to open Ursula. At the start of the pandemic, See returned to Mexico before realizing that New York City still had his heart.

“I realized that leaving New York wasn’t going to fix anything for me,” says See. “There was just this energy I could see when I came back and it made me realize that New Yorkers always find a way to push through.”

—Eric See, Founder, Ursula

Check out these resources to re-open your restaurant:

• Employee Health Check
• Sanitization & cleaning
• Follow social distancing regulations (bars who don’t are losing liquor licenses/)
• Build your own direct delivery

“Some folks may have been wondering how restaurants will fare during the winter months. The answer is, nobody knows, but they’ve been incredibly resilient thus far. I’m bullish on the restaurant industry as a whole, not just because they’re our customers, but because of many of the reasons listed here. Once we get past this pandemic, I believe there will be a new wave, a “next gen” of restaurateurs opening up shop, looking for new and creative ways to run their restaurant. They will do their homework. They’ll buy a new POS, new inventory management system, new accounting system, and new labor management system. They will expect them all to integrate. We will be there, integrated with their POS to provide a seamless experience that simplifies labor management and improves performance for their entire restaurant.”

—Jordan Boesch, CEO, 7shifts