Why the restaurant industry is slower to come back in NY

Danny Meyer, Founder and CEO of Union Square Hospitality Group, joins Yahoo Finance’s Alexis Christoforous and Kristin Myers to discuss the outlook on the restaurant industry and job openings.

Video transcript

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KRISTIN MYERS: Welcome back. The restaurant industry has been hard-hit by the coronavirus pandemic. But as we turn the corner, what can we expect going forward? And is outdoor dining here to stay or not? All of the answers to those questions and more.

We're joined now by Danny Meyer, Founder and CEO of Union Square Hospitality Group. Danny, great to have you with us. So let's just start with how the restaurant industry is doing right now. We keep getting a lot of data about the economic recovery. How is the restaurant industry recovering right now?

DANNY MEYER: Well, great to be with you. And I think when you ask that question, let's divide it into a couple of different areas. First of all, different segments of the industry. And then secondly, different geographies within the United States.

So from a sector standpoint, the fast casual and fine casual parts of the business are really beginning to come back right now in a big way. They were hit a little bit less hard than full-service, because they didn't demand indoor dining in order to pivot to pick-up and delivery businesses. And many, many of the fast casual businesses also had digital ordering opportunities way before the full-service industry. So that segment is moving a lot more quickly.

And then within the-- the full-service industry, it's coming back. It's coming back for sure, as cities and states permit an increase in the amount of indoor dining. And many, many places, finally, in the Northeast, which had a pretty cold winter, are now able to serve outdoors. And what that's doing, both symbolically and actually, is sending a message that we are open for business. You don't even have to look in the window of a restaurant and you can see the activity. And that feels really, really good.

Finally, I'd say, in New York, we're probably a little bit slower to come back than others for a whole host of reasons. I think because we got the-- the experience of having the virus sooner than many, many other places-- and worse, because no one really knew what had hit us back in March and April of a year ago-- I think that the city experienced quite a bit of post-traumatic stress disorder and was slower to come back. And of course, because of our cold winter, we couldn't even serve outdoors to-- to much capacity.

So now it's happening. You can feel it on the street. There's hope in the air. People are moving back to the city who had moved away. People are starting to visit the city as tourism again. And I think we're going to have a really good summer.

ALEXIS CHRISTOFOROUS: I certainly hope so. And it feels different, even as I walk the streets here in New York City, to your point, Danny. And I know that Governor Cuomo here in New York has said May 19 is the day restaurants can open at full capacity. But I'd imagine it's not going to be business as usual. Tell us what it might feel like, especially for those of us who haven't been inside a restaurant in months. What's it going to feel like, even though they're going to be open at full capacity?

DANNY MEYER: That's a great question. And I think it's an important thing for restaurant lovers to appreciate, that they'll go back to their favorite restaurant and a couple of the things will look different. You'll probably see Plexiglass partitions between tables. You may not see a full bar of people, because they're still distancing at the bars.

You will likely see all servers wearing masks. You'll probably see most guests wearing masks when they're away from their table. You'll probably have your temperature taken when you walk in the door from a restaurant that really cares. You might even still see restaurants giving you a QR code that gives you the opportunity to help a restaurant do contact-tracing should there be another breakout.

All of that, that I just described, doesn't in the least bit interfere with having a great restaurant experience once you're at the table with your guests. And so that part will feel really good.

I think the thing that restaurant-goers should be aware of, however, is this-- that especially in a place like New York City, where we were not able to be in business for many, many months-- which meant that our staff members largely dissipated or left or had an exodus, some of them from New York City to move to areas that they could make a better living in an industry that was actually vibrant during this past pandemic here-- some of them never moved back.

And so when you come to your favorite New York restaurant, even though it's going to look pretty much like it always looked, you're going to notice a lot of new faces Maybe your favorite maitre d' is no longer working there, or your favorite waiter or waitress or bartender may no longer be working there. You might even find that the menus are somewhat shorter.

And here is the next big challenge, is that because there's been a really, really dramatic and real shortage of talent to come back at this point, restaurants are-- it's almost a little bit like spring training before the regular season. And I don't say that is a reason that restaurants should not be on their A-game, because they're charging you full price to come. But it's going to take several months, probably, for restaurants to fully staff up, fully train their new staffs, and make sure that their staffs get to know the regular guests at the restaurant and be the restaurant that you fell in love with the first-- in the first place.

ALEXIS CHRISTOFOROUS: Danny, I think you bring up an excellent point, and one we've been talking about a lot here at Yahoo Finance, is the challenge of finding workers. A number of people don't want to go back to particular jobs, including the service industry, either fear of getting sick, or perhaps they're making more or just the same with those enhanced unemployment benefits. What are you hearing in terms of the reasoning why people aren't coming back to those jobs? And how can the restaurant industry entice them to come back?

DANNY MEYER: I think that your point is a good one. It's not specific to the restaurant industry. If you look at offices across the country, it's going to take a while for offices to be fully populated.

Let's just face a fact. For the past 14 months, people have lived a very, very different life. Instead of going to work, you did work from wherever you were quarantining for the longest time. That made you get into new habits with your family. That made you get into new habits with your life, maybe with your small pod of friends that you could see. And for a lot of people, they actually liked that kind of life.

So now when offices are calling people back and saying, we're going to open for good at a certain date-- in our case, we've let our team know that for our home office, starting after Labor Day, we will expect people to come back. And we're going to try to begin with what we call a two-three-two schedule, meaning three days in the office, two days working from home, and two days off.

And why are we doing that? We're doing that because we acknowledge that there's an anxiety about coming back to an old way, an old kind of transportation in many cases-- some people have avoided public transportation. But we've just learned new habits.

So now, transpose that to the service industry, and you have people who, as you just said, may or may not want to go back into a role where you're coming face to face with people until we get even more of the population vaccinated. We're making good strides there. But the answer is vaccinations.

The only reason we're able to open to the degree we are right now is that the vaccinations have driven the infection rates dramatically lower. And that's made it feel safer. So I think once we get a couple months under our belt, our industry is going to be in much better shape.

KRISTIN MYERS: Danny, I literally only have, like, 15 seconds left with you. But I do want to quickly ask you what you think the fate of that outdoor dining is going to be, as we saw a bunch of sidewalks and streets becoming extensions of the restaurants.

DANNY MEYER: Yeah, I think it's going to be permanent. And I'm doing everything I can to advocate for that. It's been a great, great advance for cities to show that we're alive. And it's also great for the restaurant industry, because it's helping to rationalize real estate prices that have gone so far up that it's been impossible to have the kind of margins we need indoors. So adding this icing on the cake is a really good thing.

KRISTIN MYERS: All right, Danny Meyer, Founder and CEO of the Union Square Hospitality Group, thanks so much for joining us today.