Coping with Covid with Dawn Lafreeda
Covid-19 has dealt a heavy blow to Dawn Lafreeda, Denny’s largest individual franchisee, and one of the largest female restaurant franchisees in the U.S. At the outset of the pandemic, her restaurants experienced business drops as much as 90 percent. She’s had to close some locations temporarily, and permanently close others. As she works to stretch every penny, she also must deal with the different shutdown rules and reopening schedules in the various cities and states where her Denny’s are located.
How has Covid-19 affected your business?
We are down anywhere from 75% to 90%. We had locations that were further down, which we chose to temporarily close as it was just too costly to keep them open. We also sadly have some stores that will never reopen.
What are you doing right now to get through this?
We are monitoring our business on a daily basis and making decisions as to hours of operation, number of staff to retain, and whatever other survival tools we can use. Each city and state has different rules, so we are constantly strategizing to make sure we can stretch every penny as far as we can until we are permitted to reopen and at a capacity that is sustainable.
Is your franchisor helping keep you afloat?
Our franchisor is helping where they can, but they are in the same boat we are in. We have gotten some royalty and advertising relief and rent deferrals for locations that we lease or sublease through them. They have been aggressive in doing all they can to help us to stay in business and stay safe during this unusual and unpredictable time. They are available 24/7 and have been fast thinking and fast moving in navigating through all the areas of the restaurant business we need to tend to—from keeping us up to date on PPP info, new product initiatives, a less complicated and more flexible menu, an increased digital messaging platform, signs and banners to notify our customers, sourcing new safety products we now need, and new technology enhancements, to name a few. They have developed reopening kits and tools and have been very involved and proactive in communicating with us and our management teams about all the new government policies and changes, so that when we do get permission to reopen we are ready and fully informed to open safely.
What are you doing to help your employees through this?
We are trying to be as sympathetic and flexible as we can. If employees are uncomfortable coming to work, we encourage them to do what is right for them and their families. We are taking all the proper safety precautions, and we are keeping as many employed as we possibly can, even though we are on limited hours and resources with our dining rooms on limited capacity (while now finally starting to reopen in many states). We are paying for their insurance so if they become ill they will not have to worry about coverage, and we are keeping their tenure and benefits intact while they are on furlough. We are trying to save our company so they have a job and security to come back to.
What are you doing for your customers?
We are re-engineering the way we do business to make it easier for our guests to dine with us and to make them feel safe in the process. We have enhanced our online ordering, our delivery methods, curbside pickup, and we have even added a drive-up option in some locations. Additionally, we are adding new items like bundled meals and family packs to make it affordable to still order food while having to dine at home. We are mindful that a lot of people do not have money right now, and we are working on some special discounted food offerings.
How are you working with your suppliers?
We made payment arrangements or deferrals with every supplier we could. Most all have been cooperative, understanding, and patient in waiting for their checks. A big problem we are going to have is that when we reopen, all these deferrals come due. With opening at limited occupancy in Texas for now, reduced capacities in other states that have not even been announced yet, or a resurgence of cases in states that allowed reopening, we are going to struggle. There is no way we can make money with these limitations, so we will have current bills due, as well as the deferred bills, and extremely limited sales to pay them with.
What are you doing about cash flow, PPP?
We applied for the Payroll Protection Program (PPP), contacted all of our lenders to get forbearance for 90 to 120 days, reached out to all of our landlords and creditors to work out arrangements and payment plans, filed a claim with our insurance carrier, and stopped all discretionary expenses.
What else would you like to see from your franchisor or government?
What I would like to see from the franchisor, and I think we will see it, is post–Covid-19 sensitivity going forward. We cannot be held to all the same rules post–Covid-19 that we were pre–Covid-19. What I mean is that they need to be flexible with hours of operation, staffing levels, menu size, remodels due, and capital expenditures for a period of time so we can recover. They need to remember we have no money when they want to roll out new initiatives that may not be a high priority at this time. Just the cost to reopen after all of this is a huge expense to every franchisee in a time when there is no business or very little business. They need to be cutting edge, resourceful, and innovative to drive traffic into our stores.
From our government, we needed the recent revisions to the PPP program. With only 8 weeks to use the funds and our restaurants still closed or at limited capacity, it was insufficient help. Fortunately, the time frame was expanded to 24 weeks from disbursement, so our restaurants hopefully can open with enough customers to bring our employees back at a full-time rate. I believe December 31 is a good and fair date. They also needed to revise the 75/25 rule—which I believed should have been changed to 50/50, but is better at 60/40. So now 40% can be allocated for utilities, rent, and interest payments. In my company that number is far greater than 25%, so it was going to be impossible after not making any money to take on a new note payment when we already were playing catch-up on rent and all the other arrangements we made with our vendors while closed. I need government to understand that we cannot make money at partial capacity. We have to find a way to be able to put butts in seats because we cannot keep our employees and pay our bills if it costs more to be open than to be closed. I would like our government to force the insurance companies to pay the business interruption claims for Covid-19 shutdowns.
Last, I would like to say that we do not know what is in store for us, as there has never been a disaster like this in our lifetime. We survived 9/11 and were down significantly in sales, but our restaurants were open so we could strategize, cut back, and decide how we were going to survive. With the financial crisis of 2008, we couldn’t borrow money, Americans lost a large portion of their retirement accounts, and we lost sales—but we were still open, so we could get creative with discounting and in our offerings to try to build traffic. In 2020 with Covid-19, it has all been 100% out of our control. It is one thing to have a restaurant closed for a fire or a tornado, it’s another to have every single business you own closed down with no real idea of when you’re going to reopen, what capacity you’ll be allowed, and how many guests will want to come through your doors. Meanwhile, your rent, utilities, property taxes, mortgages, insurances, etc. all still must be paid. We are going deep into debt and financial loss over no fault of our own.
I think the media has frightened people in their attempt to educate, and I think we have been closed so long that people have changed their patterns. It is going to take time for Americans to feel comfortable going out again. I am sure we will emerge stronger, but it will not be without a lot of hard work, financial setbacks, and, sadly, a loss of many of our businesses. In my fleet of 90 I am going to lose several to keep the health of the others (4 so far). My big concern for franchisees and business owners in 2021 is that while we’ve made all these arrangements to survive while we are closed, we eventually have to repay all that money—in a year with no profits, on top of going deep into debt to survive. There is only the faintest glimmer of hope we will see business interruption insurance money, and I already am seeing property taxes go up when I am quite certain my property is worth less than last year. There are going to be huge inflationary consequences from all of this, and it is going to take a long time to catch up and recover if we do not have sales. We need to be prepared that the hard times are nowhere near over yet. The methods for determining essential services was inconsistent and unfair. Grocery stores were packed with no distancing while dining rooms sat vacant. We have lost key seasonal opportunities that carry us through the lean times: spring break, Easter, Mother’s Day, Memorial Day, Father’s Day, and July 4. Without travel, I expect summer sales to be dismal. There are no festivals, concerts, or sporting events, etc. to help drive traffic. It is going to be a long, hot summer, and with the threat of a fall return of Covid-19, a long cold winter. We need help, lots of help.
How are you planning to reopen and rebuild your business post–Covid-19?
We are looking at all options, with the number-one priority being keeping our employees and guests safe. We are putting new practices in place for social distancing and safety for all. We want people to feel good coming to work and coming to dine. I think once everyone starts to feel safe, we will get back to some kind of new normal. We realize our business is not going to rebound the minute we open the doors, and we must be prepared to make rapid adjustments, whether it be our menu, hours of operation, employee flexibility, etc. We have a new training piece that is being implemented so our employees know how to handle this new way of life post–Covid-19.
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