Now Is the Time to Start a New Restaurant

By Robert McGarvey | Wednesday, 02 June 2021 | Feature, Business, Food & Beverage

Call this the ultimate counterintuitive path to riches: right now, across the continent, tens of thousands of entrepreneurs are moving ahead with restaurant startups. Crazy? Maybe just crazy smart.

The crazy part is this: the country is littered with dead, closed restaurants, casualties of the pandemic. Food industry research firm Datassential has a gloomy obituary report. Its numbers show that 10.2% of all restaurants in the US closed permanently since the start of the pandemic when health policies in much of the country required restaurants to eliminate indoor dining. For many restaurants, that prompted them to shut down. Almost all had planned to re-open, but as the pandemic continued to play out — it’s now 15 months and counting — quite a few have just walked away from their leases. How many? Datassential says its count is 79,438 that have closed for good, and that’s as of late March.

Probably another 10,000 have closed since.

That’s why those who are jumping into new restaurants are thinking differently. The old playbook just won’t work today.

Chicken and Donuts in Connecticut

What’s in the new playbook? Meet Scott Kluger, a financial services worker who walked away from that industry in the Great Recession ten years ago to open a bakery in West Hartford, CT — “I knew I wanted to do something entrepreneurial, something with food,” he recalls. That business — Hartford Baking Co. — had become a success.

Even in the pandemic, he was still making a go of the bakery — and then a lightbulb flashed in his head: maybe the pandemic is the ideal moment to open a new concept restaurant in West Hartford.

In February 2021 it happened: Kluger opened Citizen Chicken & Donuts which offers a small menu built around chicken and donuts and don’t snicker: that combination is fast emerging as a must eat taste sensation and West Hartford did not have it. “Fried chicken and donuts appeal to everyone,” says Kluger.

In the morning, Citizen Chicken serves donuts and coffee. Around lunch, chicken is added to the menu, and it comes with traditional sides (such as mac and cheese or fries). A sandwich version is offered, including one served on a sriracha glazed donut. It’s comfort food and well-suited for takeout.

Kluger says he has “under $100,000” in the restaurant and get this: he was able to hire Southern raised celeb chef Van Hurd, a veteran of “Hell’s Kitchen,” who happened to have been out of work for several months, another casualty of the pandemic. When Kluger called, he was ready to get cooking. He couldn't turn down the combo of chicken and donuts and Hurd’s bet is that the dining public too will be hungry for it.

Thinking About Technology

Just keep thinking differently — that’s the mantra for 2021 restaurant success. Timothy Woods, owner of Carnivore Style, a resource for grillers and meat lovers, elaborates: “One reason more restaurant startups are popping up is that so many old restaurants went out of business during the COVID lockdown period, and they left behind their rent packages, their equipment, and their spaces. New entrepreneurs in the food space see this and are taking advantage of the great deals.”

But don’t plan just to repeat what the failed restaurant did. Doing it the old way didn’t work for the restaurants that closed. Doing it a new way just may work for today’s startups.

Start by thinking tech. Thomas Fultz, CEO of Coffeeble, a website for coffee mavens, explains: ''More and more startups in F&B [food and beverage] decided to apply technology in their restaurant. During and after COVID, the landscape of this industry has changed much. Many restaurants don’t need to pay for a big space. Instead, they can do it online or do take-away using their own app or food delivery app. This is not a big investment of capital, while you can see revenue and income coming back quite quickly. Also, because people are caring more about sustainable food and drink, there are many ways to start a restaurant, with an ethical brand, to bring an edge to strengthen the startup."

Salads and a Ghost Kitchen in Toronto

As for the how-to of implementing that counsel, meet Mark Holowaychuk, a longtime ecommerce veteran and CEO of Vitamarkt.ca, who says: “Never did I think in a million years I would be starting a restaurant, but here we are and in under 60 days I will do just that.”

His restaurant is SaladNation.

Holowaychuk continued: “Our restaurant is 100% online/app-based. You don't need a space for people to walk into to enjoy your food and this has leveled the playing field and even made it an advantage to not have a customer-facing location.”

What Holowaychuk is centering his restaurant around is what’s called a ghost kitchen. That’s a space created to prepare food — period. Typically there’s no front-of-the-house seating because it is designed for takeout and delivery.

It gets sweeter still with one final plus of the ghost kitchen formula: “Scalable distribution. Doordash, Uber eats, Grubhub...etc give a newbie restauranter the scalable workforce to distribute my food,” says Holowaychuk.

As for what he will feed customers, it’s salads with a high-end twist: “They are 100% custom-built. We have 50 to 100 different premium salad ingredients. You choose exactly what you want. We quickly build it and deliver it to you.”

“All drinks are pre-made and sold in glass, paper or aluminum cans and no plastic bottles. They are natural and locally sourced. Packaging is compostable and/or biodegradable,” he adds.

That formula ticks a lot of boxes: healthy, sustainable, good for the diner, and good for the planet.

Here’s the best part of Holowaychuk’s play: he estimates his startup costs, which he is self-funding, at under $75,000. He elaborates: “This includes a fully built custom app, brand/logo graphic development, food research/tastings, chef consultants, space and startup staff. Similar startup costs of a brick and mortar selling the same thing would easily be $250k+. We will ‘open’ our doors for a fraction of that.”

That formula — tech and slim funding — is why many experts expect the number of restaurant startups to multiply.

That just may include franchised locations.

Franchising Italian in the Middle East

Chef Anthony Russo, founder of Russo’s New York Pizzeria and Italian Kitchen, could not agree more. His company is a blend of corporate owned locations as well as franchised outlets and he has been busy in recent months. He has already opened two new locations for the company, which now operates in Texas, Oklahoma, and Florida. Also opening are three franchised locations in the Middle East (one in Dubai and two in Saudi Arabia).

When so many restaurants are shutting, how can Russo be so busy amid the pandemic? “We were quickly able to pivot. Our brand is thriving with sales up,” says Russo.

As for that pivot, the new Russo’s restaurant is a smaller footprint, as snug as 1200 sq. ft. which is ideally suited for a world where food takeout and delivery are emerging as new norms that most experts believe will last long beyond the pandemic. A smaller footprint also means a smaller rent payment — another plus for restaurants opening now.

Russo added that in the pandemic, our culinary tastes have shifted: “Winners include pizza, wings, burgers and the types of food that travel well.” That’s the essence of Russo’s menu.

He continued: “So, in a horrible year for most of the restaurant industry, the pizza, wings and burger segments grew same-store sales and added new startup units.”

How hungry are you now?

Know this, however: 60% of new restaurants fail in the first year. That’s a pre-pandemic stat, but nobody thinks today’s openings will record greater successes. It will take smarts, grit, and a solid plan to succeed today, even with the easing of pandemic lockdowns in much of the country.

Running a successful restaurant never gets easy. Don’t forget that. Even when starting a new one has gotten so much easier.

Recommended:

• Learn how to start a restaurant today by following our comprehensive guide.
• Are you a foodie looking for the perfect business idea? Check out our list of startup ideas for food lovers.

About the Author

Robert McGarvey

Robert McGarvey, a veteran journalist who has long covered startups and small businesses, created and hosts the CU2.0 Podcast for credit union and fintech executives which is at 120 episodes and counting.