This article is part of a Fortune Special Report: Business in the Coronavirus Economy—a look at the impact of the pandemic on more than 50 industries.
As more cities mandate the closure of restaurants and bars in response to the current coronavirus pandemic, the restaurant industry stands to lose $225 billion in sales over the next three months, according to the National Restaurant Association. However, many operators hope new relaxed laws around alcohol sales will provide a much-needed lifeline to their businesses.
In mid-March, local and state officials in California and New York announced restaurants and bars could start selling wine, beer, and cocktails for takeout and delivery. Businesses could deliver goods themselves, employ a third-party platform, or provide takeout for guests willing to pick it up. The new measure is meant to provide a bit of cushioning for these establishments as all seating and dining rooms have been forced to close. It was a rapid shift—and a giant learning curve—for many businesses that closed in-room operations in order to help “flatten the curve” of COVID-19.
However, the loosened regulations aren’t as simple as just adding a cocktail to a mobile app menu. Restrictions still vary by state, and operators find themselves combing through knotty sets of laws. Also, delivery services such as Grubhub, Seamless, and Uber Eats may not carry the proper license in certain states to deliver booze with a meal, compounding confusion for owners. Furthermore, although the visibility and convenience of being on a delivery platform may seem beneficial for some, the fees associated with the services render them ineffective for others.
A day before the State of Oregon mandated a statewide restaurant closure, seasonally focused Quaintrelle, in Portland, decided to convert to takeaway, and immediately applied for an off-premise license, as well as a same-day delivery license. Emily Everett, co-owner of Quaintrelle, says they haven’t done much delivery—despite being on Caviar—and even though bottles are listed on their website, people are slowly coming around to the idea of takeaway wine.
“A lot of people are placing to-go [food] orders online,” Everett says. “When they get here, we let them look at the list and make a decision when they pick up their food. For phone orders, David, our general manager, talks to them and asks them if they would like a wine pairing suggestion.” At the moment, approximately half the orders placed include wine, but as awareness grows, Everett expects the number to increase.
At 37-year-old Backstreet Cafe in Houston, Sean Beck, the sommelier and beverage director for H-Town Restaurant Group (which owns Backstreet Cafe), quickly started promoting wine to-go when the state relaxed its complex laws. However, just offering the service wasn’t enough; he had to reconfigure pricing in order to stay competitive with bottle shops and grocery stores.
“We’re regarded as having one of the better-priced wine lists in Houston,” says Beck. “My typical markup would be 2.2 to 2.5 times [the wholesale cost]. So I’ve knocked it down where it’s much closer to retail. It’s essentially 40% off normal list prices. It’s obviously a lot less money you’re bringing in, but on the flip side, right now I have somewhat lower operating costs because I can’t do dining and service.” Beck is also leveraging relationships with customers to sell six-packs of beer and cases of wine. He’s focused on selling current inventory but is “judiciously restocking,” as he puts it, and taking it day by day.
Cocktails are stirring up the most confusion with these new, relaxed laws. Beck notes that Texas law prohibits the sale of pre-batched cocktails, and limits the size of bottles that can be sold. He created some cocktail kits, but notes that fulfilling the 375-milliliter (or smaller) bottle size is challenging without ordering new product. In cities like New York and San Francisco, ready-to-drink cocktails are allowed, but need to be sold with food.
Despite restrictions, chef and owner Anthony Strong of San Francisco’s Prairie is embracing his customers’ desire for something fun with his pre-batched concoctions. He portions each order as two drinks, and “sends the garnishes separate and a couple of easy instructions,” he says. “For the Black Manhattan or the olive oil washed martini, there’s no shaking or stirring necessary; as long as they’re ice-cold, you just pop it to drink it. Others, like the Becky With the Good Hair—a sea buckthorn cocktail—we send with a bottle of sparkling water.” Strong adds that in the first two days of offering the drinks, he received approximately 20 to 30 orders per day, and when he starts delivery, he hopes the momentum will continue.
At Harlem Hops, a beer-centric bar in New York City that features products from African-American–owned businesses, brews provide a bright spot. Along with selling bottles of beer, the venue has always sold draft beer in crowlers—32-ounce cans that bars can seal shut—so the business was already modeled for takeaway. The bar team recently started delivering within a 10-block radius and is looking to expand.
Co-owner Kim Harris says the neighborhood is embracing the pivot; sales on Tuesday, March 24, were 25% higher than on a regular Tuesday, she estimates. Coupled with what Harris calls a simple business model with low overhead—“inventory is our most expensive thing,” notes Harris—they’ve been able to keep their staff employed. Their next endeavor is finding a way to support more local and black-owned purveyors, such as bringing in different food items to sell to their clientele.
For some, this policy change is making them consider alternative revenue streams. At seven-year-old Eastwood, a wine-and-beer bar and restaurant on Manhattan’s Lower East Side with a loyal following, co-owner Sivan Harlap said the new regulations have opened up opportunities for future business. They’ve always done a brisk takeout food business, but never capitalized on their ability to sell beer to-go, normally permitted by the New York State Liquor Authority. Once things return to normal, Harlap plans to continue to sell cans and bottles through delivery platforms.
However, not everyone feels the new options are worth the effort. Grand Army, a cocktail bar with a seafood-centric menu in Brooklyn, closed its doors for the near future. Co-owner Noah Bernamoff—who also owns the quick-service New York chain Black Seed Bagels—says a number of barriers prevent the conversion to takeaway from being profitable. Reassigning tasks and retraining a team to work in a completely foreign manner is the first big hurdle, he says.
While using an app is easy for the customer experience, “it gets pretty complicated on the restaurant side,” Bernamoff explains. “On our end, it means opening accounts, linking bank accounts and providing corporate documents.” And once you’re on the platform, there’s no guarantee people will want to order from a place where their previous experience is so rooted in the venue.
While the financial risks didn’t seem to pay off, Bernamoff’s biggest concern was preserving the integrity of the guest experience. “Grand Army really is a four-wall experience, as I like to call it; you need to be here to get Grand Army,” Bernamoff says. “You need to be in our space. You need to be with our people. You need to be interacting very intimately with our products for the whole package to come together.”
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