Hi, I'm Jeff Rea, your host for Economic Outlook.

Welcome to our show.

Each week we take a deep dove into the regional economy and the people, the companies, the communities and the project helping our region grow.

The covid-19 pandemic has devastated the travel, tourism, leisure and hospitality industries, with restaurants being among the hardest hit as a result of mandated closure and capacity limits.

We'll take a closer look at the pandemic's toll on the restaurant industry with local restaurant workers dynasty coming up on Economic Outlook.

In 2020, food service and drinking places lost two hundred and forty billion in sales compared to the previous year, lost two point five million jobs and more than one hundred and ten thousand establishments closed either permanently or long term.

To take a closer look at how the industry has been impacted, our restaurants have reacted and what lies ahead for this critical industry.

We're sitting down today with restaurants to Kurt Janowsky, the founder and owner of the Novar Hospitality Group.

Just one other note before we get started here, WNIT, we're respecting social distancing and as such, both our hosts and our guests joining us today virtually instead of in person.

Kurt welcome.

Thank you for joining me today.

Thanks, Jeff.

Thanks for having me.

Yeah.

So it's a sort of tease of what was happening.

Obviously, you've lived this for the last year or so, so we're going to kind of dove into the industry and how it was impacted.

Before we kind of talk, though, I'd like to go back in time maybe.

So talk about pre pandemic time.

What was life like in the restaurant industry?

Jeff, I'd like to go back in time.

So 2019 was a really strong year for us and the industry as a whole.

And we started out 2020, just gangbusters.

We were up about 15 percent across all of our segments, all our platforms, which is fantastic.

In January and February, of course, March was when it really hit a fan and then the world ended.

But we were flying high.

And all of us, my colleagues that I talked to, we were really optimistic about the future.

So so this, I think, came as a little bit of surprise, a lot of folks, I don't think anybody in their wildest dreams and as you mentioned, sales were going really good.

Talk about what happened, how all of a sudden you hear about this pandemic thing.

How do you and your restaurant end up reacting to that?

Well, like everyone first started out, just some murmurs.

You saw some stuff on the news and no one really understood how serious it was going to get.

Well, health professionals might have some of them, but, you know, it came really quickly.

We you know, in March, we got real bad and the news was starting to report more and more cases and a couple some some deaths.

And it started to look pretty bleak.

And we we voluntarily closed on March 16th, which was only one day before the state then made itself closed.

So from March 17th till May 11th, of every restaurant state of Indiana was closed, along with most other businesses that were deemed essential.

You know, we we didn't know it was how long it was going to be for.

We we most of my colleagues and we were no exception, furloughed everybody that worked for us on March 17 because we didn't for all we knew, we were done.

I mean, it was a it was definitely a possibility at that time that this could be so in our in our operation, we would gather all the food and all the walk ins because we have 11 operations at that time.

And, of course, a lot of food on hand.

And we set up like a little grocery store at the armory, one of our venus, and had all our team members that we just laid off come and take what they need until it was gone.

Then we we we took all the money in the safe that went via gift cards and we gave those out to our team members because they don't need change in the Safeway.

So it was it was really surreal to do all that.

Now, as time went on and started to prepare from what we could reopen, what reopening might look like, how many people we could serve, what kind of steps we were going to have to take to keep our guests and our staff safe.

So as you're closed with sort of this uncertainty about how long I might close, at some point you start to make this decision about when you're going to start to get even guidance on the mandated period when you can open back up.

So so help us walk through the the the opening back up and maybe even some of the steps you had to take to do this.

I think of your industry, for example, already highly regulated with, again, a like a new set of regulations on it.

Now you're thinking about how do I open how do I keep talking to us about how that went?

So there's a bunch of things.

The Indiana Restaurant Association was helpful.

I got for some reason chosen to represent the hospitality industry in writing the guidelines for the state of Indiana.

So Governor Holcomb put a little commission together and I was the representative for hospitality.

So I was in a little bit different position.

So when the guidelines came out, I knew what they were going to be or I had a good idea.

All right.

So there was a lot of competing measures.

Of course, there was some table size limits and table distancing, seeing how far apart you could be and then capacity limits.

Those are the most important things.

The other thing is, is that luckily this was this was May when we reopened.

And so the weather's getting better.

So outdoor dining had a large role.

And it's been funny over the last eight months, nine months, to see how things have changed as far as what we know now versus what we thought we knew then.

Right.

You know, it's almost all through through droplets in the air.

And and so many of the adjustments we were making were to mitigate something that was probably didn't have as much effect as we thought.

Then, of course, mask wearing was part of it immediately, the biggest part of it.

So there are still some murmurings about masks effectiveness.

But since April, we've been in everybody in our company has been cautious.

So it was just you know, it's challenging if you don't know how many guests do you don't know if people even if allowed to dine out for coming.

So you don't know how to prepare, how much food to buy.

In the beginning, we couldn't get food because the distributors, of course, were so disruptive that they had tried to get rid of their inventory or sell it to grocery stores.

And then when suddenly we were able to open in place orders.

But much of that those orders weren't filled.

So we were on a day to day what's on the menu tonight kind of thing, and all across all of our concepts based on what we could get.

Now, that didn't last real long, but it was really challenging for a while.

So, you know, and then a Mother's Day and a half of what's Mother's Day going to look like if it does happen.

You know, we did Easter as a carryout only meal and two of our restaurants.

And that was interesting.

Right.

How are people going to respond to that?

How much food you buy, how much staff?

How do you keep everyone safe?

How are we packaging?

How are we to touch this delivery?

So everybody in our industry had to learn how to do things that they previously hadn't done.

But it's a really resilient and, you know, a lot of entrepreneurial spirit in our industry.

And people figured it out quickly, know I'm really proud of the folks in our business who who pivoted so quickly for survival.

So let's talk about some of that pivot.

So I think of if I'm back in time, I'm in May and and offices are still closed.

And although the economy is opening back up a lot, not as many people are downtown working.

There aren't lunch meeting like there used to be before.

The news still says stay away, stay home if you can.

All that that kind of stuff to talk about, maybe some of the steps you or others took to sort of help pivot to kind of reestablish business after after your interruption.

So we were all in survival mode.

So one of the things that happens is some of the things you do because you want to do them or because you're guests like it, that you do those things that you might not think are too profitable.

But it's just part of kind of table stakes, part of what you have to do.

All that went out the window.

So all of us now are looking very hard and making every decision based on can will this make us further behind?

We're not thinking we're going to make a ton of money, be profitable, put money in our pocket, just not lose so much money because you don't want to run out.

Right?

You've got a few bucks in the bank account, January, February or, you know, in our part of the country, the best restaurant months of the year.

So some of us, you know, a lot of operators were pretty depleted at that time.

Right.

When you're thinking it's going to start picking up, it doesn't add.

And you go the other way, this is before PPP loans are being funded.

So we didn't know that was happening yet.

And so every for us, we close for lunch instantly.

Right when we reopen, we didn't there's nobody downtown.

There's no reason to be open for lunch.

Nobody's coming in.

Lunch is already a difficult shift to make money on, we think.

And so that was one of the instant kind of adjustments.

A lot of operators reduced their hours closed earlier.

We created carryout platforms ChowNow and Doordash Grubhub and Ubereats.

All became household words.

And you're trying to figure out how to do delivery.

Those guys are taking twenty five or thirty percent of the top.

You've got to decide whether that makes any sense, which it doesn't, except for if the alternative is not having anybody work at work, you know, and then you're making decisions on what we did think, or at least I thought we're going to come out of it.

This won't be forever.

How hard?

We don't know how long and hard, but not forever.

And what we didn't want to do is lose the connection with our people.

I'm going to need those people.

Yes.

I don't have enough work for them right now or any work, but I'm going to need them.

I don't know if it's going to be in two months or six months or a year, but I'm going to need those people or I'm not going to be able to survive and I'm not going to be able to do what we do.

So then you start making decisions.

We did.

All right.

What's going to keep.

As much of our team intact as possible and how long can we do that for?

So we're we're right in budget saying, you know, payroll of one hundred thousand dollars a month across these concepts or taken in 50 plus 50 grand a month.

How long can we do it type of thing and just try to schedule out and say, can we make it till Christmas or can we make it so football season?

At that time, we still had unrealistic hopes that maybe it'd be a football season.

So, you know, it was just a really interesting time in business.

I'm I'm really think that will come out.

You've heard this a lot.

We're going to come out stronger.

Most of my colleagues in the business say the same thing.

We've learned so much navigating this pandemic that if we take those lessons learned and apply them, the future will be better.

Business people will run better operations and our our guests will be happier.

We're going to serve them better and safer.

Our employees have learned to do things they never thought they'd have to do.

So some of the little things we ask them to do are going to be a little easier.

And, you know, we find out what's important.

Right.

Your your your colleagues that you work with, your family, your guests.

And we're.

We're happy where we're at because we've won so many great lessons,.

Sure, you mentioned PPP and I'm just curious.

So your again, your industry, one of the hardest hit and early round of PPP dollars and then a second round here recently, has that help sustain many restaurants in the industry through these difficult times?

Does it help you keep those employees plugged in or cover the that the adjustments that you've had to make inside your restaurant to accommodate?

Absolutely.

It we I can't say we wouldn't be here.

Some of our concepts would be here.

We probably likely would have closed others, possibly permanently.

But I think for most restaurants, they would have never made it like the number you gave one hundred ten thousand closings.

I would say without PPP, that would be five hundred thousand five times as many restaurants were closed.

And I can tell you that two and a half million jobs still gone right in the restaurant industry.

Hospitality employs about 15 million people in this country larger than anybody else.

That's the airline industry gets a lot of attention and they employ about seven hundred and fifty thousand.

So we employ 20 times more people than they do.

The PPP program kept us afloat in the spring and summer.

And then we were many of us ran out of money and closed.

PPP was two and a half times on average month's payroll.

So that's not a ton of money.

And we burned through it.

Everybody burned through it.

And then we dip into savings or we make adjustments.

Without PPP, I would say just in locally here seventy five percent of the restaurants wouldn't be open, so it was essential.

And then the second draw the was the first thing that was slightly targeted towards hospitality.

If you're if you're a food service operator, you got three and a half times a month's payroll instead of two and a half.

That's the only thing that's been targeted to restaurants, is that little bit of an increase in that there hasn't been any other targeted relief.

So there's a lot of people in Congress who have who have introduced bills that would target the hospitality business.

And, of course, you know, selfishly, I hope that that happens.

We we need it still.

We're still two and a half million people below our peak employment.

And at one time it was eight million.

So out of fifteen million people that worked in the industry, over half had been furloughed at the peak of us.

So that's an incredible number that nothing that history has ever matched, anything like that, where eight million people in one business got you know, it's a it's a big news when an auto plant with twenty five hundred employees is going to close.

This was eight million overnight.

So, yes, we needed the aid from the government and we're thankful for it.

I don't take it for granted.

And I recognize that that's somebody's money.

You know, I don't think of it as coming from outer space.

This is people's tax dollars and it's borrowed money.

I recognize that, too.

However, it's an investment in what makes our communities what our communities are.

And without restaurants, specifically local restaurants, things are different.

I don't think it's just the quality of life just isn't the same.

If they can't go to the places you like to go to Jeff Rea.

You mentioned restaurants and everybody, restaurants even after that or event businesses.

And that's about half of our platform.

But think about photographers and florists and cake makers and anybody who supports the wedding industry.

There haven't been any weddings for a year.

Lots of those folks have been hit way harder even than the restaurants.

I mean, our event business was down seventy five percent last year.

And the only reason it wasn't more is we did a little business in January and February and then we got a little we opened up for a little while about August and September before it went south.

Again, we got a few events and but if that doesn't come back soon and we need even more help with the business.

Sure.

So let's look ahead a little bit and think about there's still some in our neighbors to the north, still have some limitations on on capacity in restaurant.

There's still some limitations on it.

Then size is in Indiana.

What's the next few months look like?

Are you hopeful that that that those things start back up?

Are there signs that is starting to tell you that things may be more normal by summer?

Well, I certainly think more normal by summer.

In Michigan, they're still at twenty five percent capacity.

The state of New York, which has the most robust contact tracing program in the country, concluded and it was published in The Wall Street Journal and The New York Times that they traced all spread in the state of New York.

And what they found was seventy five percent of it was in your living room.

It was small social gatherings and homes was three quarters of the spread of COVID.

I, I don't know if you saw the report, but what do you think?

Restaurants and bars included bars, which I always want to separate bars and restaurants, because I think bars probably spread a little more than restaurants.

But combined restaurants and bars accounted for one point four percent of the covid spread in the state of New York.

That tells me that closing restaurants are limited to twenty five percent.

It makes no sense.

It just doesn't make any sense.

So I'm I respectfully disagree with the people that make the decisions to have these places still be closed or at such reduced occupancy.

There just isn't any data to support it.

In fact, there is hard scientific data to refute it.

Events in the state of Indiana has event capacity, depending on what color your county is, either 50 percent capacity or one hundred percent capacity when you're in blue, which Elkhart County Niles in blue.

However, those two counties, St. Joe in Elkhart County, have much, much, much stricter requirements.

I think in St. Joe County now we can have that for up to one hundred people.

And this is the thing.

So if I have, say, for instance, the Pallay Royale Ballroom at eight thousand eight hundred square feet and I can only have one hundred people in there, which is about 20 percent of its capacity, I don't understand how that makes sense when I can have, say, one hundred and fifty people in Cafe Navarre, which is half the size, so.

I understand the need to have some guardrails, right, and we're trying to keep the population safe, which I support sometimes I think we might be going farther than science supports and.

Maybe making decisions that seem that it might be a little populist, right?

So it sends a message that, OK, we're not there yet.

We want you to still wear your masks, which I absolutely support.

But I can't support sacrificing industry entire industries to help to help with messaging, so, you know, when I am around town or the region, there's plenty of places that I think this doesn't feel really safe to me.

There's a lot of people in a tight space and they're considered essentials.

They can do what they want.

And then I have people 10 feet apart.

My restaurants masked up.

Plexiglas barriers between tables and all the things that we're doing, it does make it very safe and I support doing it.

I just I want there to be some some science and some balance behind some of these decisions.

I am hopeful that we're going to that we'll start opening up.

Right.

It'll get better.

Great.

So I continue my conversation with the Kurt Janowsky, Kurts the CEO over at the Navarre hospitality.

Kurt we got about four minutes left here.

And I really appreciate this is a terrific conversation.

So let's look ahead.

You mentioned that the industry will change significantly going forward.

You've learned a lot of lessons throughout this that that may change.

So you and your peers.

So let's just focus a little bit on what are some of those things that you've learned most from the pandemic that will influence how you operate going forward?

Well, well, dining, dining trends, you know, everybody's obviously doing a lot more carryout than they ever did.

The industry predicts that that will continue.

I personally don't think it'll continue at the level that they think it is.

I I don't believe our product is food.

I believe our product is a hospitality experience that isn't something we can deliver in a carryout format.

So, yes, some some platforms make sense.

Right.

They're going to Chick-fil-a.

Doesn't matter whether you get the chicken sandwich you need in the dining room or in your car.

So obviously, that makes a little more sense.

A restaurant like Cafe Navarre, we're doing a tremendous amount of carry on now.

I think that will subside.

I can't see us doing that level because I don't know that there's that that's going to satisfy what it is people are looking for.

That's not really a cafe Navarre experience.

So the fine or dining it is, the more that's going to go away.

But I don't think we'll go away as outdoor dining.

And we've always been a little bit under behind the curve, a little bit now for people like it.

But if it's just a little bit too cool, a little bit too windy, a little bit too warm, a little bit too much sun, people will opt out and go inside.

I think that's over forever.

I think people that might have used to have a window 70 to 80 degrees when no higher than 10 miles an hour.

They're better not be any bees in the area.

Otherwise, I think that's over forever.

I think it's going to be fifty five degrees.

I wear a jacket outside.

I think eighty five adds that I can still hang in there.

The sun's bright that I just enjoy outside dining.

I think that's here forever.

I think that will will change even in this part of the country.

Great, appreciate about two minutes there, unless I'm interested on the technology side, it feels to me that because of carryout and different things, that your industry had to make a big pivot on the technology side.

Talk about maybe those challenges or some of the things the restaurant needed to do to to be ready for customers.

Online ordering.

Everybody had to get that.

They didn't have it before.

And we were one of the companies that didn't have it before, although we knew there were platforms out there that did it.

We just didn't have enough volume to make it make sense to pay the fees.

So we added online ordering from our websites directly through a third party.

It just makes more sense to.

But but a good company we like partner with.

But the fees are fair and then if you get a delivery option, they partner with a different third party.

So for us Chownow is the online ordering platform and then they partner with Doordash to deliver and we find those that to work really well.

And then when we all talk to each other, those of us in the restaurant industry, we're all friendly competitors, very few colleagues that I have our keep hold their cards to close to the vest.

Are there really people share information.

So, you know, most of us have made adjustments, read on our websites.

And of course, all this costs money.

And then when we're delivering it or if you order a meal from any of our restaurants, Rocky River Tab and Table, say, you know, some of what your pay is going to be to third parties.

And of course, they're adding fees that the consumer picks up.

So we're kind of splitting the cost a little bit, which is probably the most fair.

And we're all trying to figure out how it works.

You know, and personally, I think the I question the delivery models.

They can't seem to make money even charging us what they're charging.

I don't know what the answer is there.

I just don't get that.

But but we're all trying to figure out the way to make it right for some food, keep our cooks busy and serve our guests and keep our customers, our guests happy.

Kurt Janowsky, my guests from Nevada has to tell you, this is a fantastic conversation.

I really appreciate you helping us understand and and and good luck as we go forward.

We're hopeful that very soon we'll be back enjoying your great restaurant there.

We can't wait to see ya.

We can't wait to feed ya.

That's if our show today.

Thank you for watching on WNIT or listening to our podcast to watch this episode again or any of our past episodes.

You can find Economic Outlook at WNIT.org Or find our podcast on your podcast platforms.

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I'm Jeff Rea.

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Thank you.