1 in 5 Fort Collins restaurants could close amid coronavirus pandemic

As some Fort Collins businesses start to reopen, life looks much different than before the COVID-19 pandemic took hold: One-way aisles. Limits on customers and employees at any given moment. Faces covered. 

For many retailers and offices, the partial reopening of the past two weeks, while stressful, provided a clear path forward.

The future looks more murky for the city’s more than 600 restaurants, which have already borne the brunt of the economic havoc caused by the coronavirus and still have no estimated date for reopening.

Dining rooms were the first to be shuttered and will be the last to reopen, leaving many restaurateurs to navigate staffing issues, supply chain disruptions, catastrophic loss of revenue, meager cash flow, evolving business models and shaken consumer confidence.

According to the National Restaurant Association, more than 8 million restaurant employees have been laid off or furloughed since the pandemic began, 3% of the nation’s approximately 1 million restaurants have already closed permanently and the industry was on track to lose $80 billion in sales by the end of April.

While many Fort Collins eateries have managed to stay open by offering curbside pickup and delivery, revenues have plummeted — as much as 80% to 90% — especially at those geared toward dining in.

Most restaurant workers have been laid off and staffing is expected to be significantly reduced when restaurants reopen, said Steve Lauer, owner of Rally 5 and Simmer in Fort Collins.

How many restaurants, with already slim profit margins, can survive is still in question when no one knows when or how they’ll be allowed to reopen.

“A lot of restaurants are holding on with everything they have to get to dining rooms opening,” Lauer said. If business doesn’t come back within the first 30 days of reopening, “people will realize it will be difficult to move forward. That will be when people start to see how their cash flow projections might be looking.” 

Larimer County commissioners are pushing for a state waiver that could allow the county health department to set its own guidelines and come up with a targeted reopening date for restaurants.

Restaurant casualties

When it all shakes out, what will Fort Collins’ crowded restaurant scene look like?

The Colorado Restaurant Association estimated in April that 2% of restaurants had already closed permanently and another 22% anticipated they would close by the end of May. 

At this point, the restaurants being allowed to reopen by Memorial Day seems unlikely. The state restaurant association said restaurants would need a couple weeks to ramp up staff and supplies. Gov. Jared Polis said he’ll give restaurants about a week’s notice before he’ll allow them to reopen.

Thus far, no Fort Collins restaurants have publicly announced they will not or cannot reopen. But if statewide estimates hold true, about 140 of Fort Collins’ 637 restaurants, bars and food trucks could close, taking hundreds of jobs with them and leaving dozens of buildings vacant.

“The uncertainty of the future is about as stressful a thing as I have ever been through, but I’m not alone,” said Nick Doyle, owner of Nick’s Italian, 1100 S. College Ave. “People have to eat, so that is hopeful. My motto has been ‘fight to live another day.’ It’s all I can do.” 

The five-year-old restaurant scaled back its menu and reopened two weeks ago with curbside pickup of take-and-bake items such as pizza and lasagna that can be made in advance. Doyle’s staff during the shutdown consists of himself, his daughters and a nephew. Pre-COVID, he had about 40 employees.

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Going forward, Doyle told the Coloradoan, his concept will be “simpler, with less labor and easier to run.”  

When he is allowed to reopen, he anticipates a 50% reduction in sales and seating capacity to achieve social distancing and about a quarter of his current staffing.

“I’m not super confident that many people will be coming out,” he said. “States that have opened show people are still being cautious. Opening up is not being well received by the public.”  

A Washington Post/University of Maryland poll released last week indicated 78% of respondents would be uncomfortable going to a sit-down restaurant. Who knows how long it could take for people to be comfortable being served by a person wearing a mask and gloves?

Lauer, a veteran restaurateur with two sit-down eateries in Fort Collins, expects to see 20% of the normal volume inside the restaurants when he reopens. “Curbside, online and delivery will still be the majority of ordering for a few months until people get more comfortable with going out.”

Until now, Simmer had less than 2% carryout business and no delivery while Rally 5 had about 5% delivery and 5% carryout. 

“The value in a Simmer visit was in the ambiance itself,” Lauer said. “It’s more about the vibe and sitting and relaxing and having a glass of wine with dinner.” 

But unprecedented times call for unprecedented action.

When restaurants were ordered to close, Simmer and Rally 5 shut down for a day and immediately signed up with NoCo Nosh, a locally owned third-party delivery service. They added online ordering within 48 hours. 

Lauer has already cut his seating in half in preparation for the day he can welcome customers inside and is bracing for the loss of revenue.

Some restaurants are faring better than others

While the pandemic has devastated most restaurants, those who already had a strong drive-thru or delivery presence are faring better than those like The Regional, which relied more on a dine-in crowd. 

Sales at Culver’s, a fast-food restaurant, are down about 25%, compared with 75% at The Regional.

Independent full-service restaurants have been the hardest hit, said Laura Shunk, communications director for the Colorado Restaurant Association. “These restaurants often run the tightest margins even in flush times, and they may not have had delivery operations well-established before the closure — many have struggled to pivot.”

Culver’s dining room typically accounts for about 52% of its business during normal times, but the drive-thru has helped buffer the blow during the shutdown, said Jason Stentz, who owns the Culver’s franchise in Fort Collins and Longmont.

“At times the drive-thru line is wrapped clear around the building and onto Lemay,” he said. “It’s been pretty neat to see. It’s a testament to our guests’ loyalty to us. They want to help.” 

He’s been able to keep everyone on payroll, although some part-time hours have been reduced and he’s awaiting word on a loan from the federal Payroll Protection Program, or PPP. “That will definitely help and alleviate a lot of stress and concerns I’m dealing with now,” Stentz said. I’m just trying to keep my head above water and that will help.” 

Restaurants are eligible for PPP money equal to about 2½ times more than their monthly payroll based on the last 12-month average, or about $300,000 for Stentz. 

“We’re probably spending more on labor now as a percent of overhead, but we understand the value of taking care of our crew. They’ve been good to us and we need to make sure we take care of them.” 

When Culver’s can reopen its dining room, Stentz anticipates reducing his seating capacity from 110 to between 50 and 70. 

Whether business rebounds fully when he reopens is hard to predict, Stentz said. Before the shutdown, the Fort Collins location had its busiest week since opening in 2006. “We were riding a great wave,” he said. “It’s so weird when this happened we went from our best week ever to having the dining rooms shut down. It was somewhat surreal and has been ever since.” 

It could be 2021 before he sees that kind of volume again, Stentz said.

Kevin Grossi, owner of The Regional, 130 S. Mason St., went back to his early roots when the pandemic closed down his Old Town restaurant. He ramped up curbside pickup and “went straight to comfort food: fried chicken, mac ‘n’ cheese, fried mushrooms,” he said.  

His to-go business was a minimal part of The Regional’s orders before the shutdown. “Every once in a while we’d get a burger to do. Now it’s like the burger is crazy.” 

He’s not optimistic about reopening any time soon.

“Unless there’s a vaccine or antibody testing, there’s going to be zero point of opening the dining rooms. It would be nothing but awkward the entire time. I would like to have my guests back and give them a hug, but I’m not optimistic.”

Going all in on ramping up its to-go business will pay off even when the pandemic is over and The Regional is welcoming customers again.

He’s getting by thanks to PPP money and a national grant from the James Beard Foundation and confidently says The Regional will be OK, at least through the end of the year. Few can predict what happens after that. 

“We feel really good where we’re at,” Grossi said. 

Tina Mooney, owner of The Fox & the Crow, 2601 S. Lemay Ave., shut down completely for a month before reopening May 1 with curbside pickup and a modified menu more adaptable for a “to-go” model.

Thanks to money from the PPP and Economic Injury Disaster Loan Program, or EIDL, she hired her eight full-timers back “so we could change our model and change our standard operating procedure so my employees and customers would feel safe. That takes a lot of work.”

The Fox & the Crow, in the Scotch Pines shopping center, offers cut-to-order meats, cheeses, sandwiches and salads as well as personalized meat and cheese boards. Its small inside dining area is complemented by an outside patio that’s typically full afternoons and evenings. 

When she reopens — a date she’ll determine based on the number of coronavirus cases and not just when the county says she can — those community tables will be put away so she can separate customers. She doesn’t see that happening until the end of July at least. “I want to see some hard numbers before we open up the doors. We have a small establishment, and I want to protect the staff as much as possible.” 

Employees and unemployment 

Even when dining rooms are allowed to reopen, they’ll likely have fewer employees by choice or necessity. Some former employees may be too afraid to go back to work until the crisis subsides.

Others may be collecting more on unemployment through the federal pandemic unemployment compensation program — which provides an additional $600 a week in unemployment benefits — than they did working.

It’s an unintended consequence of the federal aid, according to a new report from Colorado State University’s Regional Economic Development Institute, or REDI. The report, written by Gregory Miller, cites the wage replacement rate with the additional federal funds is greater than 100% for most recipients. 

In Colorado, jobless benefits typically replace about 50% of wages up to $618 per week. Workers in the leisure and hospitality industry in Larimer County, including food service, average about $431 a week working 40 hours a week. With the added $600 a week in federal money, they are receiving about 189% of their working wages, or nearly twice what they were making while employed.

It’s not much of an incentive to get back to work and it penalizes low-wage workers who are considered essential and stayed on the job, like janitors or grocery store workers, Miller said. 

It’s also the next challenge facing restaurateurs like Lauer and Grossi, who want their employees to return but understand their dilemma. 

“It’s a Catch-22 and I can’t blame my employees for staying home and making more money,” Lauer said.

The downside, he said, is that hiring and training new people is expensive.  

Employees will have to make their own calls, Grossi added. “They understand when we open back up no one is making the same amount of money. There are a lot of larger conversations with everybody.”  

According to the Colorado Department of Labor and Employment, workers who don’t go back to work when called could jeopardize their jobless benefits.

Those who are afraid to go back or have an underlying condition that puts them more at risk if they do return are protected under an executive order issued by Polis. 

The Colorado Restaurant Association has no projections on what percent of employees would be hired back when restaurants reopen.

“But since more than 20% of restaurants may close permanently waiting for dining rooms to reopen, and many more will run skeleton crews to contend with reduced capacity, we expect it will be low,” Shunk said. 

Restaurant business in Colorado after coronavirus

Source: Colorado Restaurant Association

Pat Ferrier is a senior reporter covering business, health care and growth issues in Northern Colorado. Contact her at patferrier@coloradoan.com. Please support her work and that of other Coloradoan journalists by purchasing a subscription today.