Firstly, tell us about the new opening and what to expect of the fast-casual service model.
I already have roots in Charleston with Martin’s, so it has very much become a second home. Personally, the comfort there is extremely strong, and I have a ton of relationships with chefs and folks in the industry. On the professional side, my long-term COO John Haire lives there, and I have an immense respect for him as an operator—I sleep well at night knowing that John is going to maintain the brand standards. Really what that means is a base culture and identity on all the little things—are the pickles even on the burger or are they bunched up? If they are even on the burger, the guest gets the same bite each time. Looking at Hugh-Baby’s in Charleston, it was a natural fit. We have been planning on it for a few years now and COVID obviously shelved it. This past summer we were finally feeling like we were actually coming through COVID on a restaurant standpoint, not a society standpoint, therefore we felt comfortable going ahead and moving forward.
It’s been a while since we last spoke, in August of 2020. Back then we were talking furloughs, 100 percent off-premises switches, and how you had to put your apron on at each store and re-rack the model. When did the comeback begin and what did it look like?
The comeback from a societal standpoint felt like it was well over a year. From a restaurant standpoint, we are still not completely out of it. The domino-effect was as follows: COVID hit and we shut down, we then had to change our business model or adapt. It wasn’t just the restaurant business that did that, it was all industries. The manufacturing facilities also had the same dilemmas so we quickly got into a supply and demand nightmare because a lot of these manufacturing facilities would cut their staff back to at least 50 percent, and some shut down. Later that year, in 2020, we began seeing the beginnings of the next wave of difficulty. There was a time where we didn’t know if we could buy pork shoulders. If you can imagine, pork is the backbone of this restaurant and brand, and I had to think about taking it off and not serving it.
After that, we had to deal with stuff like chemicals—the ones we utilize to clean our locations i.e. random stuff such as the company that makes a cap for a degreaser shut its plant down so the company that makes the degreaser couldn’t get the caps to be able to sell it. An itty bitty thing like that had an immense trickle effect. Then, of course, we come to the issue of labor, which was so far reaching and is a whole day's worth of conversation right there. The restaurant industry kind of evaporated and people decided this was their chance to follow their dream, to go back to school, and not live this restaurant lifestyle, because it is a lifestyle.
Management dried up and people started thinking we would forever be in this environment of being able to work from home and not come in to work. The fact is, that just didn’t work out. Eventually people still want to leave their homes and go eat, and that requires the human element there to enable it. Wages adjusted and shot up enormously and we had to adjust in terms of our price—that’s what happens in normal economic cycles, but this was not normal. It was very abrupt and was difficult to manage a business, like getting a right hook, then a left hook and another right hook, then a body shot. You look at COVID in its initial phase and then we came back and couldn’t get any labor. When we could get labor, the supply and demand was so off kilter, and the wages were so incredibly high as opposed to how we all were in the industry from a price standpoint. At the same time, we were coming up against raw materials and manufacturing facilities shutting down, operating at 50 percent capacity, and with limited access, prices shot way up. Still if I were to go to construction right now, we are slowing down our growth because we can’t get what we need. For example, garage doors have a 9–10 month lead time and that’s a big part of the brand at Martin’s. So we are still not out of it, but it feels a lot better than it did a year ago, or even six months ago.
How has business at your concepts settled? If I recall, you had to adjust facilities for the drive-thru push, basically the café started to look like a kitchen with a storage unit. What COVID pivots stuck around and which left? Mainly, what does dine-in service look like these days?
People want to dine out, they just do. It’s in our blood, it’s humanity. We like going to dinner, we like going out. I would say everything has settled back into the original restaurant model for the most part, however, our off-premises sales, our ratio of sales has shifted and has grown as opposed to before COVID and that is permanent, I think. Anything that is not eating within the dining room is considered off-premises. That includes DoorDash or third-party pick up and you driving to the restaurant to pick up or you driving through the drive-thru. As a result of COVID, that ratio really shot a spark into UberEats, DoorDash, and third-party deliveries, fully establishing them and giving them permanence. We are all guests and diners, and we dine at home way more than we did before. It is just inconvenient. There are still some things that need to be cleaned up on that end, but it’s just inconvenient. The only thing that COVID brought that is still sticking around is a higher percentage of off-premises sales, but the dining rooms are for the most part full.
How are you playing the balancing act between dine-in and off-premises?
If we had 35 percent off-premises leading up to COVID, it is now like 45 percent so it’s more of a simple adjustment. Supply costs are now higher because of that. The balancing act of having to figure out one or the other didn’t apply to me because I was already deeply involved in the off-premises business. When you have a drive-thru, you are involved in the off-premises business. The adjustment of completely going off-premises was an adjustment, but I didn’t have to learn it from scratch. For me going up 10–15 percent as opposed to what it was pre-COVID doesn’t move the needle that much as far as our lifestyle and how we run the business.
Let’s get into labor. How has that come back and has the model shifted?
A large part of the folks that work in the restaurant industry have come back. The biggest thing that has come back for us is management. There was a time where you couldn’t hire a manager, you had people that were hourly employees applying for manager jobs because the supply was so low—they just didn’t have nearly enough experience to make it worth it to hire and that was very difficult. The supply has come back, the wage escalation is still there and it’s not going backward—in my opinion. Personally, I think it’s here to stay, prices have adjusted and we’re no longer talking about minimum wage anymore, our average wages jumped 30–50 percent and are still there.