Doug Houser:
From Rea & Associates Studio, this is unsuitable, a management and financial services podcast for entrepreneurs, tenured business leaders, and others who are ready to look beyond the suit and tie culture for meaningful, measurable results. I'm Doug Houser. On this weekly podcast, thought leaders and business professionals break down complicated and mundane topics and give you the tips and insight you actually need to grow as a leader while helping your organization grow and thrive.
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Working towards normalcy is what we're all striving for, but it may take a little bit longer than we all anticipated. You can say that the next big thing is to be proactive, manage your funds, and create new strategies within your business because unfortunately, there is no timeline for what we are all experiencing.
Today, Matt Long, director of client advisory services at Rea & Associates, and Matt Fish, restaurant, entrepreneur, and owner of Melt Bar and Grilled are here to share their experiences, working with the restaurant industry and how you can be proactive during the current economic crisis. Welcome to unsuitable, Matt Long and Matt Fish.
Matt Fish:
Thank you very much for having me and Matt.
Doug:
Yes, I have. Yeah, we're going to have to do the full name as I said. Thankfully you both have a one-syllable last name so we can do this. I wish we were together in the room and it'd be easier, but such is life right now.
Matt F.:
We're up against challenges nowadays. So we're adapting as we need to.
Matt Long:
Yeah. Matt Fish knows all too well about some of these challenges.
Doug:
Oh, my gosh. So Matt Fish, first of all, I love Melt. I love your place. I go to the one at Easton quite often but talk a little bit about this journey for you beginning when COVID hit here. You've been in a nice growth and expansion mode. Success has been coming. So what did you do? What were your immediate thoughts in that time?
Matt F.:
Well, I mean, we've been thrown many, many challenges at us since day one when we opened the restaurant in 2006. So, we've made it through the first economic struggle back in '09 pretty well. And yeah, we've had our financial ups and downs and worked with our P and L's to get our expenses way down over the last couple of years. We were coming into 2020 with real high hopes. And actually, the first period was starting to look really good, January and February. As Matt long can attest to, we had really worked all of '19 on our expenses and getting everything in order, getting our house in order to say, to kind of charge forward in 2020.
And then obviously, the big bomb dropped on us. And that was March 15th, which was a Sunday, when Ohio got the announcement that all restaurants and bars were going to be closing and we were going to have to go to takeout and delivery. So March 16th was a Monday, and that was the day that we reopened as takeout and delivery only, all 10 locations that we have here in Ohio. You know, we adapted, we made it happen to start on March 15th, 16th. It ended up being a hundred percent of our revenue. So, a lot of challenges, a lot of things we had to do. We, unfortunately, laid off about 240 employees in one day.
I kept myself on obviously, and about 65 other employees, our key managers, our key upper managers, some very key hourly people that we needed to run the restaurants. And we just got down and dirty with it. I went back to being a line cook. I went back to being a phone answerer. I went back to being a delivery guy. I went back to sourcing products from anywhere we could find it, but we made it through. Fortunately for us, business slowly increased throughout the pandemic. It was about 14 weeks that we were on the takeout and delivery scenario.
We reopened again all stores for in-house service on May 21st, 50% capacity, roughly for all locations. We saw a nice uptick in business when that happened, but it's really been a week to week. It's been up and down. We really can't predict what's going to happen tomorrow unfortunately in the restaurant industry especially, because there's a good amount of people that are not going out right now that are not even getting takeout and delivery. So we went from budgeting and putting projections together six, eight, 12, 14 months out to literally living day to day, living month to month, week to week. So that's where we're at right now.
Doug:
How do you pivot, Matt Fish, in terms of adapting to that with... Luckily, as you said, you've got experience doing take out and that your menu hopefully is adaptable to that, but how do you really pivot with delivery and mobile apps and things like that? Was it pretty rapid that you tried to move into that space?
Matt F.:
Well, fortunately, like I said, before the pandemic, not that we saw this coming, but we saw the importance of partnering with some key delivery services, and we implemented an online ordering system for the company back in 2018. Fortunately, we were pretty poised to jump into the takeout and delivery time fairly well. I mean, I know other restaurateurs in the greater Cleveland area that I know very well and a lot of them weren't able to pivot, weren't able to change direction. I mean, if you're a fine dining, white tablecloth type restaurant, your food is not designed to travel well. Your food is not designed for takeout. So, that was a lot of the struggles that I saw in the industry.
But our food from day one has always been big comfort food. It traveled very well. Our packaging was always good. Our staff was ready to take on the challenge. I mean, it was long hours, lots of work for myself and my team. I certainly do not want to do that again, but if need be, we will and we'll have to, we have to pivot. I mean, fortunately, we didn't have to change the menu too much. We didn't run into any supply issues. We're actually seeing more supply issues now than we were during the pandemic, believe it or not.
Doug:
Interesting.
Matt F.:
Because there's a lot of processing plants, meat plants, just a lot of... They're just not back to a hundred percent capacity yet. So we were working off of what they had in stock and then what they could come up with. We're starting to see a little bit now, but when I say a little bit, it's probably it's one or two or three components of this or that and the other thing.
Doug:
Gotcha.
Matt F.:
So it's not affecting our day-to-day operations too, too much.
Doug:
Yeah. So, Matt Long, I know Matt Fish had touched a little bit on the modeling and projecting out. Obviously, in your role, client advisory services, a lot of what you do is take a look at those periodic financial reports, whether it's weekly, monthly, et cetera. What's the biggest takeaway for you with the uncertainty and what you're trying to help clients as Matt Fish do?
Matt L.:
Matt Fish and I and our team here, we have just a really, really good working relationship, and we're in constant communication just talking about how were the sales for that day, for that week, what do they look like at the store level, what's going on within each of the cities that he's in. And so we've been in constant communication. I think probably the biggest thing is, with the unknown of the sales and really that being so uncontrollable at this point and so day today, we've really been focusing on, let's make sure our labor is tight. Let's make sure our costs are tight, so that way we can make sure our margins aren't getting squeezed any more than they have to be.
We've been speaking with Matt's banking relationship partners regularly and making sure we're in constant communication there. Not that he wasn't previously, but we're making sure we're staying on top of things, being proactive, sending them financials on a regular monthly basis for every period, and also doing a lot of, like we said, some modeling and we're updating that modeling every single week for what happened last week. And trying to predict what's going to happen in the future, but it's just so much uncertainty. It's too tough to do. So instead of anticipating what sales are going to be, we're being a little bit more reactive to what does that mean from an expense standpoint?
Doug:
Gotcha. So, Matt Fish, when you think about that, you know I've talked to a lot of bankers that said the biggest thing they appreciate is the transparency and continue to try to update projections and models and tell us what's happening as frequently as you can with your businesses, has that been your approach with your financial partners?
Matt F.:
Oh, for sure. We partner with Huntington Bank exclusively and I've got some SBA loans out with them, and we do all of our banking with them, and I've won personal contact at Huntington. We have a lot of contacts in Huntington, but I have one main person that we're in constant contact with. I wouldn't say every day, but at least a couple of times a month, we're updating each other on what's going on, what we're seeing in the industry, what she's hearing on her end, what we're seeing, but unfortunately, their hands are tied, too. They're holding a lot of notes for a lot of people, and us including, so we don't know what's going to happen. You know, the PPP loan was great. We had some loan forgiveness through the CARES Act, through our SBA loans that we have through Huntington, but that's going to run out. That's going to run out in two months.
I actually was on a phone call earlier today with the SBA, the Cleveland office today. And I'm actually meeting with someone from Washington in two weeks to have a conversation about what are we going to do? What is the SBA going to do? What's the federal government going to do to help not only bail out us but everybody else. Or help us out, not bail us out, but just give us some more assistance, because once the PPP loans are run out and then once this SBA loan forgiveness is gone, a lot of people are going to be in some serious troubles here if business levels, not only for us but everybody else, don't increase.
Doug:
Well, you make a great point there because the restaurant industry is so much a fabric of our society. It's generally very entrepreneurial, it's local, it's a small business and you're supporting a lot of families. We can't ignore that.
Matt F.:
Right.
Matt L.:
If we take a step back, and we talked about how proactive we're being with Matt's banking relationship, but Matt's also been fantastic reaching out to his other vendors, his landlords, just letting them know where he stands. It's all restaurants, so none of this is news to them. A lot of these vendors, a lot of these landlords, it's a partnership. It's a long-term relationship. So there's been some give and take. I think what we found is the more proactive we can be and transparent and just laying out our situation, the more willing they are to work with us versus waiting until after the fact for them to contact us or reach out to us about where we stand with them.
Doug:
Yeah. That's good advice for obviously any owner-managed business.
Matt L.:
I'll also just throw in that Matt's right. There's got to be some additional relief specific to restaurants and a lot of other industries, but specific to restaurants, because they've been impacted so hard. I know that the NRA, the National Restaurant Association is lobbying and fighting hard to come up with some additional provisions there, but it's such a volume-driven industry. They're so tight to begin with that it just makes it so tough to really manage and make it out of this. That's why you're seeing so many restaurants close and shutter their doors for good.
Matt F.:
Unfortunately. I mean, we have so many fixed costs. I mean, we can only affect so many line items on the P and L, but there are so many fixed costs, especially in the restaurant industry. You know, I signed leases years ago based on this much volume that we need for this store to work, and this is how much utilities. We have liability insurance. We have health insurance. We have a lot of these fixed costs that unfortunately don't go away and there's no sort of forgiveness for those.
Doug:
Right. So Matt Fish, how do you... Let's talk about employees a little bit and staff and morale and all that. How have you seen the reaction of your folks, your team members through this, and how do you try to manage that?
Matt F.:
Well, they all understood what had to happen back in early March when we had to do the unfortunate layoffs. Our store managers and our upper management team and the few people that we kept on staff to get through that period, we all worked our tail off and they would do long hours, and you started to see some cracks in the armor with a lot of people, but we got through it. We were able to bring back a good amount of people. I'd say we're probably back to about 65%, maybe 70% from when we... employment levels before the pandemic hit.
I mean, the people that are with us are happy to be back for sure. We lost a decent amount of people along the way. Some we couldn't find, some just flat out said they're not coming back to work. The bonus unemployment certainly didn't help from the government, and we saw a lot of people that were just flat out saying, "I'd rather stay home and collect unemployment than come back to work." So, we have to deal with those people on a case by case basis through our HR department. But in general, the morale is good in general.
We're taking every step obviously to maintain the safety levels in all of our stores not only for our guests but especially for our staff. Our staff has to be there every day, especially our managers. So we're taking everything the CDC is saying, everything the Ohio Department of Health is saying, and then we're adding to that. We created a reopening manual that we're sticking with and we're actually adding to it along the way. So I know our staff feels safe. I know our guests feel safe. We've gotten a lot of comments and positive reviews from the safety measures that we put in place where the majority of people are coming into the restaurant, see what we're doing, and appreciate it.
Doug:
That's great.
Matt F.:
So in general, I guess to answer your question, positive. The restaurant industry is very transient. As you know, there's typically 80% or more turnover within a restaurant group. Our percentages are slightly lower than that, but we're no stranger to turn over for sure. So we had a huge rehiring and retraining segment right after we reopened the dining rooms back in May 21st. We're kind of just coming out of that now so... Our labor numbers, unfortunately, have been a little higher than they should be because we had a mass hiring. We had a mass training. If you hire three line cooks, you might still end up with one of them after a couple of weeks. So you're always rehiring and hiring, hiring more people than you potentially need, knowing that some people are just going to fall off or just maybe not make the cut.
Doug:
Yeah. That's interesting. Yeah. I know because you have obviously much like Rea, you have various locations around the state of Ohio, Cleveland, Akron, Canton, Columbus, Dayton. I'm curious. Have you seen different reactions or responses from the communities across that footprint, or has it been pretty consistent? In other words, I asked that on two fronts. Some communities have gone the extra mile and tried to open up streets for dining and be more flexible with outdoor availability, things like that, as well as the comfort of the residents in those communities to get back out and support. Have you seen differences across the footprint in those places?
Matt F.:
We have, and it's been a very different week to week, honestly. During the takeout and delivery segments as we'll call it only, some of our slower stores actually turned into some of our busiest stores almost overnight, and some of our busier stores turned into some of our slower stores overnight. And then we've seen that go back a little bit more since we've gone back to in-house service a little bit. Like, our neighborhood stores, the stores that are not in any major retail area that are surrounded by rooftops, those did much better during the pandemic than the mall locations. Easton is a good example that you're very familiar with down in Columbus. Easton has always been our number two store. Every year, tried and true, it's there for us as our number two top seller. They dropped to the bottom during the takeout and delivery section.
Why? Because there's nothing around Easton except for Easton. So when Easton is open and thriving, there's a ton of people going there. So we benefit along with everyone else at Easton when times are great, but when every single business at Easton was closed down, except for us and a couple of other select restaurants, nobody was going there. We were getting minimal takeout and we were getting some delivery services, but the majority, all of our walk-in business obviously was gone, because no one was going to shop at Sak's and then come over to Melt for dinner. Everyone was hunkering down.
We've seen it balanced out a little bit more now that it's gone back to a little bit of a normal business level across the board for our 10 stores that are open and operating. Going back to where we were, not sales-wise, of course, but just the hierarchy of what store is the best and what store is the worst performer. The mall stores are doing better actually than they were even before the pandemic, not sales-wise, but we're just seeing volumes. We're seeing more people out and about. I think a lot of that has to do with the fact that there's really nothing else to do. You can't go see a movie. You can't go to a sporting event. The majority of the high school sports are going to be canceled probably this year. So you have people just going to the mall because that is one of the only things that they are able to do right now.
So, we are seeing a little bit of a boost in business at our... Canton is at a mall, Dayton is at a mall, Easton is at a mall, but fortunately, each store is holding its own and the communities have supported us. We saw tremendous support throughout the company from every community that we're in during the takeout and delivery section. Because if you think about it, 50% of the restaurants in Ohio closed on March 16th. We were open and operating at 10 locations. So, I mean, I hate to say it, but we cut 50% of the competition down. So, we obviously got some business from that. We saw a lot of people that had just, "Hey, I'd never been to Melt before. So we wanted to try you guys out because you're open."
We think we gained some loyal followers through all that. We saw people from out of the woodwork that we hadn't seen in years that were coming in and supporting us even back at our original location back at Lakewood, which has been open since 2006. And we saw people we haven't seen in years coming in and be like, "Wow, we haven't been here in a while" and "happy to be back and thanks for being open." So we got a lot of thank-yous, a lot of pats on the back from our community but...
Doug:
That's great. One last question for each of you. I'll start with you, Matt Fish. As you're getting further along in this period, has it caused you to take a step back and rethink your model at all in terms of, say, real estate, location, or how you deliver the product to the consumer? Have you gone a big picture with any of it thus far?
Matt F.:
Oh, for sure. Nothing's been set in stone, but those conversations have been started internally within the company, even with some of our advisors outside, our real estate brokers. I'm sure this pandemic is going to... I mean, who knows what the effects are going to be, how many decades that this is going to affect not only us but the industry in general but the economy of our country in general. So, it is certainly changing the way that we approach every single thing. Whether it's producing food, hiring, it'll definitely affect future expansion.
We will take all of these things into consideration because now this is a huge factor. Will this happen again? My gut says it will. When will it happen? It's not even an if anymore, it's a when. So how do we navigate the new world here? Are we going to be at 50%? For how long? Fortunately, our restaurants are on the larger side. We average between 4,500 and 5,000 square feet per location, and some stores are a little bigger than that because we have party rooms and a couple of spaces and outdoor seating in a couple of places. You know, maybe we'll put more of an emphasis on outdoor seating.
Two years ago, we were planning our expansion out for the next couple of years, and we were planning on downsizing. We looked at our locations and said, "They're all too big. We need to downsize. We need to cut our seating down, go lean and mean, and make sure that we're full all the time instead of having potentially empty seats during the week." I don't know. If we had downsized, if we had cut our stores down by a couple of thousand square feet, our seating capacity would be near zero. Do you know?
Doug:
Yeah.
Matt F.:
We average about 140 seats per store. So, now we're around about 70, 75 maybe per location. So if we have cut down two years ago, three years ago, we would have been down to 40 seats, 30 seats. I mean, that's rough. That's rough.
Doug:
Oh, yeah.
Matt F.:
You know? And fixed costs, we'll take that a little bit more into consideration, too, because that's really the uncontrollable right now is fixed cost.
Doug:
Sure.
Matt F.:
Besides asking landlords and insurance companies and lenders for some sort of relief, we might just not write the check for the rent or the insurance. That doesn't happen and that doesn't work. Do you know?
Doug:
Yeah, absolutely. That's sage advice.
Matt F.:
We could have a separate podcast on just what the future is going to look like and how businesses like Melt are going to have to adapt and change.
Doug:
Right. Absolutely. So, Matt Long, what are you seeing from a big picture of client advisory services? Obviously, we get down in the weeds with what you and your group do. What do you see from a big picture perspective? What are we trying to do to help clients think about that?
Matt L.:
You know, I think in the past, we've put a lot of emphasis on what does the future looks like? How can we take these financials and use them as a tool? How can we make sure we're doing projections and forecasting and looking at budgets very closely. And to some extent, some of that's out the window right now. Some of it is how can we stay nimble? How can we stay lean, because of not knowing what tomorrow really holds, and be able to have that flexibility? And then I think restaurants specifically all need to be taking a hard look at their delivery services that they're offering, their curbside pickups, their online mobile apps. I think that that really is the future. I think that we've seen that shift over the last couple of years and the importance of that, and I think this expedited all of that.
I will continue to say that the financials are a tool, and Matt Fish can attest, we use those as our benchmark. We were [inaudible 00:25:36] closely where we got line items within those. I think that'll continue to be the case, but how can we stay nimble with just all of this uncertainty and making sure that we're not putting ourselves in a position long-term that we can't dig ourselves out of.
Doug:
Yeah. As you said, it's good to have that information timely and to be able to communicate so that the business owners can be transparent with their partners and make the right decisions. So, that's sage advice. Well, thank you both for being on. I know time is precious. Matt Fish, certainly appreciate you taking time out of your busy schedule, and I encourage everybody to visit Melt if they haven't before. You'll have a wonderful experience. Matt long, of course, I always appreciate you as a guest, and we'll look to have you on again as well. So, thanks to you both.
Matt F.:
Thank you. Thank you very much.
Matt L.:
Thanks, Doug. I appreciate it. Matt, thanks for joining us and participating. This was really insightful.
Doug:
Yep. And certainly, if you want more business tips and insight, or to hear previous episodes of unsuitable, visit our podcast page at www.reacpa.com/podcast. And while you're there, sign up for exclusive content and show notes. Thanks for listening to this week's show. Be sure to subscribe to unsuitable on Apple podcasts, Google podcasts, or wherever you're listening to us right now, including YouTube. I'm Doug Houser. Join us next week for another unsuitable interview from an industry professional.
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