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Can Austin’s restaurant sector bounce back?

Shonda Novak, ; Lori Hawkins
Customers are spaced apart in an outdoor dining section of Juliet Italian Kitchen off Barton Springs Road. The restaurant has been seeing sales rebound despite the ongoing pandemic.

The day before Texas Gov. Greg Abbott ordered restaurants to close in March due to the coronavirus pandemic, Juliet Italian Kitchen already had decided to temporarily shut its doors.

"We didn't feel it was a smart decision to stay open at the height of the pandemic," said Emily O'Connor, general manager of the popular Italian restaurant on Barton Springs Road in Austin. "We did not feel it was socially responsible for us to continue to be open, but we also were looking out for the safety of our staff and guests."

Now, just more than six months later, it's almost as if Juliet has been rewarded for its stance.

Although a few employees have moved on, the restaurant has managed to retain most of its staff of 80, including some new hires. Sales have rebounded, with August revenue higher than the same month a year ago, O'Conner said.

And in February, Juliet will open a second location in the Arboretum shopping center, taking over the former Brio Tuscan Grille space. The new Juliet location will have 80 to 100 employees, O'Conner said, as well as an outdoor patio, a popular option in the coronavirus era.

Juliet is among the positive stories to emerge even as the pandemic has decimated sales and staff at restaurants across the country, including in Texas. It’s unclear how many will be able to survive.

A recent National Restaurant Association survey found that half of the 3,500 Texas restaurant owners who participated say they'll likely have to close in the next six months, unless more financial help from the federal government is forthcoming.

That's the predicament Theresa Mertens finds herself in. Mertens owns ALC Steaks in Austin, with her husband, Christian. A mainstay on North Lamar Boulevard for decades, the steakhouse is a favorite among state legislators, lobbyists and loyal regulars.

“The outlook is grim if we don’t get any federal money in the next three months,” Mertens said. Without more federal aid, “we can maybe stay open through Christmas,” she said, adding: “I don't know if we'll make it through the (upcoming) Legislative session” that begins in January.

“If we do get more money, hopefully we can stay open until we get back to some kind of normal, but I don’t think our normal sales will be back up to those numbers for years. It’s very, very difficult,” Mertens said, noting the restaurant has removed half of its tables and revenue has plummeted 85% from a year ago.

“We are hoping and praying we are able to get more federal funds to keep open,” Mertens said.

Moving cautiously into fall

Nationwide, monthly restaurant sales hit their lowest point in April, when they plunged to $30 billion, according to the U.S. Census Bureau. That was less than half the amount restaurants made a year earlier. Sales steadily improved as lockdowns ended, carryout demand picked up and states allowed to-go alcohol. U.S. restaurant sales hit $55 billion in August, but that’s still $10 billion less than last year.

Restaurants in Austin, in Texas and around the country are moving cautiously into fall, hoping their slow recovery persists despite the challenge of chilly weather and no sign of additional relief packages from the federal government.

That could spell trouble for an industry that has already lost nearly 100,000 U.S. restaurants — or 1 in 6 — since the start of the pandemic, according to the National Restaurant Association. The future remains uncertain for thousands more.

In Texas, 14%, or 7,000, have closed since the virus struck, according to the Texas Restaurant Association.

Austin has already watched a number of beloved local restaurants shutter for good this year, including Threadgill’s, Magnolia Cafe on Lake Austin Boulevard, Shady Grove and, by the end of the year, Maria’s Taco Xpress, a fixture on South Lamar Boulevard whose owner has sold the property to a local investment company.

The list of closures is expected to continue to grow, industry experts said.

“People are definitely scared that they’re about to lose their livelihood,” said Anna Tauzin, chief revenue and innovation officer at the Texas Restaurant Association. “A lot of people are in a family business and everyone works in the restaurant. The idea of closing is terrifying to them.”

Adapting to change: “We’ve all had to pivot”

Texas recently loosened coronavirus-related restrictions on restaurants’ seating capacity, going from 50% up to 75%. But for many restaurants, that bump still doesn’t allow them to serve more customers because they don’t have the space to spread out tables far enough to meet requirements.

“Restaurants are being very creative — from curbside service to meals you can finish at home to turning parking spaces into dining space,” Tauzin said. “But for many, that won’t be enough.”

Nearly 70% of 3,500 restaurants surveyed in September by the National Restaurant Association said they added curbside takeout during the pandemic; 54% added delivery.

For most, though, pivoting hasn’t been sufficient to make up for traditional restaurant service. Eighty-eight percent of Texas restaurant operators say their total dollar sales volume in August was lower than in August 2019, according to the Texas Restaurant Association survey. Overall, sales were down 33% on average

Like some other restaurants, Juliet has added more tables outdoors. Chuy’s Tex-Mex restaurant also has added tables in a tree-shaded outdoor area in the parking lot behind its original restaurant on Barton Springs Road.

ALC has added a couple of tables for outdoor dining, and may add more, along with additional landscaping, but is holding off on spending the money until Mertens knows if more federal relief will be available.

ALC also is looking at offering pre-packaged meals, although Mertens said all the details haven’t been worked out yet.

In addition to having reopened for in-person dining, ALC is continuing to offer delivery and curbside service, which has helped save jobs, Mertens said, and “our customers have been wonderful" in their support.

Unlike some restaurants, ALC is able to accommodate larger parties of up to 30 people, because its private dining area can seat three tables with the maximum limit of 10 people per table, Mertens said.

Mertens said ALC has held on to about 85% to 90% of its staff. But instead of working full time, their hours have been reduced to two or three days a week instead of four or five. Managers have taken pay cuts as well.

Nationally, restaurant employment rose by 3.6 million people over the four months ending in August, according to government data. But there were still 2.5 million fewer U.S. restaurant workers in August compared to February.

At Juliet, the restaurant shifted from in-person dining to take-out and curbside service during April and most of May. O'Connor said some employees opted to go on unemployment, while 25 or 30 people chose to stay on and help with the curbside and take-out delivery. The restaurant lost 75% of its revenue when it was open for take-out only, O'Connor said.

When Juliet reopened to in-person dining May 25, all employees who chose to return were given a job, even as revenue fell 25% to 30% in June and July, she said.

But by August, as Austin's coronavirus cases declined, sales from the restaurant started rebounding as people started feeling more comfortable coming out.

"The revenue we lost we quickly gained back," O'Connor said. However, she said, Juliet continues to take a big hit in sales from its large group events, such as rehearsal dinners and other gatherings, due to mandatory crowd limits.

September sales have been about even with the year-ago September, she said.

Under normal operations, Juliet seats up to a combined 275 people indoors and outdoors on its large patio. Even though it is now allowed to be open at 75% capacity, "we don't feel comfortable seating at more than 50%," O'Connor said.

Currently, the restaurant is seating, at most, about 70 people inside, and about 150 outside, she said.

"We've really reconstructed the patio and added tables outside to make as much room as possible for more guests," O'Connor said.

Even with colder temperatures ahead, O'Connor thinks the diners will continue to keep coming. A large part of the patio is covered and has heaters, and the uncovered portion also has heaters, she said.

O’Connor is optimistic the local restaurant industry will continue adapting and meeting the challenges it faces.

"We've all had to pivot and figure out how to survive and how to be resilient," O'Connor said. "Unfortunately, some haven't (survived) but a lot have, and that is due to the people of Austin supporting their local restaurants. We hope they continue to support locally and that restaurants are able to get back to some sort of normalcy."

Chuy’s bounces back

When the coronavirus began forcing restaurant closures in March, Chuy’s, the Austin-based Tex-Mex chain, reacted as revenue plunged.

The company furloughed 80% of its hourly workers, about 40% of store management and 40% of corporate and administrative staff, and made temporary salary cuts for those remaining, according to the company.

Chuy’s, which operates 100 restaurants in 19 states, streamlined its menus, added family meal kits and beverage options, and enhanced its contact-free curbside services. It teamed with national partner DoorDash for delivery.

Now, combined with the reopening of most of its dining rooms, sales are rebounding, the company says.

Thanks to that performance, Chuy’s executives said that by the end of June the company had rehired a majority of its furloughed employees and restored salaries.

“Our entire team has done an exceptional job during the second quarter as they successfully transformed our business, and subsequently reopened our dining rooms,” Steve Hislop, Chuy’s CEO, said during Chuy’s second quarter earnings call.

Shareholders appear to be gaining confidence, with Chuy’s stock recently trading around $20.30 a share, almost triple its pandemic-era low of $7.28 in March. Still, the stock remains down more than 20% from $25.92 a share to start the year.

This article contains material from The Associated Press

A sign at Juliet Italian Kitchen requires customers to wear masks before entering. Juliet has been recovering, but a recent survey found that half of 3,500 Texas restaurant owners who participated say they'll likely have to close in the next six months without financial help.