Tom Colicchio Spent 19 Years Building a Restaurant Empire. Coronavirus Gutted It in a Month.
By: Aaron Gell
Tags: Tom Colicchio, Coronavirus Diaries, Food Supply Chain, Restaurant Business, Restaurant

I’m a news junkie, so I was aware of what Covid-19 was doing to China, and about a month ago I started to realize it had a real potential to spread around the world. I had seen Bill Gates talk about this, and it was clear we weren’t prepared, especially given how contagious this virus seemed to be. Meanwhile, we saw the leadership of the country in total denial. Listening to the president downplay the danger, I thought, “We’re screwed. We’re not going to have the response we need.”

About a week after that, we saw a huge drop-off in reservations for large parties. Our Vegas restaurants do a big conference business, and within a day, they all canceled.

Cash flow is our lifeblood. We look at that more than any other metric. When we bring in revenue, we’re using it to pay bills from 30, 45 days ago.

I got my executive group together — myself, the COO, director of HR, director of finance, the executive chef over all the restaurants — and we started making adjustments. We stopped purchasing wine and any nonessential items and started talking about staffing levels.

Cash flow is our lifeblood. We look at that more than any other metric. When we bring in revenue, we’re using it to pay bills from 30, 45 days ago. Anything extra we’ve been putting into the business. In the past 12 months, we opened a restaurant — that cost close to $1 million — and we renovated our private dining room at Craft to make it a breakfast and lunch spot. That was about $350,000.

The night of March 12, I realized we were probably going to have to shut everything down. I called Danny Meyer the next morning. We’re ex-partners, but we’re still close, and whenever there’s something big going on in our industry, I like to bounce ideas off him. He said they were thinking the same thing. The day after that, the government shut down the whole industry except for takeout and delivery.

That didn’t seem like the right move for us. There’s that picture of delivery people waiting outside Carbone. I think you’ve got to ask yourself a question: Are you willing to put your staff at risk? Because that’s what happening here. Look, if you’re feeding health care workers, people providing essential services, I think that’s fine. If you’re serving $60 veal parmesans, maybe not.

Between four restaurants in New York and one in L.A., we employ 300 people. There are also two Craft restaurants in Las Vegas, which we manage but don’t own. The initial plan was to bring as many staffers as possible into the East 19th Street space and tell them personally. It didn’t feel right to do it by email. But I woke up the following morning and just thought, “There is no way I want all these people in one big space. It’s too dangerous.” We wound up calling people instead.

The impact is way beyond us. It works its way through the food chain: You’re talking about fishermen, farmers, suppliers.

We have a policy where staff members get gift certificates to eat in any of our restaurants in exchange for offering feedback. That Sunday night, I showed up for our last service before closing, and a bartender who has been with me since the beginning — 19 years — was sitting there with his wife and his young daughter. I got choked up. I realized I couldn’t fall to pieces in front of his little girl, but it’s really emotional. Especially at Craft, we’ve all known each other for a long time. Telling your employees you’re closing is the hardest thing in the world.

Nobody was angry. They were scared; they were emotional; they were worried about each other. But there was a real sense of, “Hey, we’re in this together.”

Plus, the impact is way beyond us. It works its way through the food chain: You’re talking about fishermen, farmers, suppliers. I was talking to an oyster farmer on the south shore of Long Island. He doesn’t know what to do. He’s scrambling to put together a home delivery service. There are crops in fields that just got picked — what do you do with them? Some farmers markets are open, but you set up your tables, and people aren’t coming out.

As for our staff, we made the last payroll, and that was it. I kept a handful of my senior people together, because if we reopen — when we reopen — I’ll need them to make it happen. But they all took 50% pay cuts. There was no way around it.

One thing that’s not well understood about the industry is that the profit margins are so thin. If you’re doing 10%, that’s good. Of course, we try to pay shareholders and partners as best we can, but when you’re running a restaurant, there’s a certain amount of upkeep you can’t neglect.

I think we were in better shape than some. We’d paid off most of our debt. But because money has been cheap over the past couple years, and it’s been like grow, grow, grow, a lot of restaurant groups went to banks and took out big loans, figuring, “Well, the money’s coming in. We’ll be okay.” Then the cash flow stops dead. A lot of companies are in big trouble.

People started talking about setting up GoFundMe pages, doing fundraisers, and all that. But this is no time to pass the tip cup. I’ve been working on hunger issues for a long time, and I’ve seen how the charitable response winds up masking the need for government intervention. This problem was too big for charity. Our government needs to step up.

This exposes the limits of our system and what happens when capitalism is unchecked. Even CEOs of big companies are starting to recognize something’s off.

I made a few calls, and we pulled together a bunch of people, knitted a few groups and constituencies together, created a working group, hired lobbyists and a comms team, and got to work. Within two days, we launched the Independent Restaurant Coalition. I think there are 500 members so far. The main objective is to make sure independent restaurants would be able to tap into whatever stimulus Congress puts together. I’m not saying the National Restaurant Association doesn’t represent us, but they’re also looking out for big chains. We needed our own group.

The Senate just passed the CARES Act, and it contains all the key provisions we pushed for, including four months of unemployment and loans to restaurants, with forgiveness to cover expenses and payroll.

The optimist in me looks at this as an opportunity for the country to examine its priorities. This is devastating for so many people, but on the positive side, it exposes the limits of our system and what happens when capitalism is unchecked. Even CEOs of big companies are starting to recognize something’s off. The focus on quarterly earnings — we need to see the end of that. All the outsourcing of manufacturing to China, now we see the pitfalls of that. Maybe it’s okay to make a little less profit so the economy can survive shocks like this. Because it will happen again.

For years, we’ve been fed the idea that big government is bad. And I agree, dumb big government is bad. What we need is smart government that’s going to understand the needs of real people and be responsive. And we’re seeing that now. People are starting to realize the role government has to play.

I’ve spent the past week doing interviews and organizing the response, eight in the morning till 10 at night. But I’m stuck at home like everyone else. I’m at our home in Brooklyn, working from a makeshift office set up at the dining room table, trying not to kill my kids. We have three boys—nine, 10, and 26. My wife and I are trying to keep things as normal as possible. We had a birthday party for one of my sons the other day on Zoom. We play card games. Sushi Go! and Exploding Kittens are the current favorites. And, of course, I’ve been cooking. I started getting into sourdough a few months ago. I’ve got my starter going, and I probably bake a loaf of bread every other day now.

As for the future, I think the industry will survive. People are always going to want to come together to celebrate and share meals. Restaurants aren’t going away, but I do wonder what they’re going to look like. I’ve been asking my staff to think about how we can reinvent things. It will change for sure.

I think the bigger question is what does business look like, period. Does this grease the skids for national health care and finally move the burden away from small businesses? What we’re seeing now is how fragile the whole system is. Hopefully we’ll come out of it and build something stronger and better for everyone.