The restaurant business is ‘not making money’ with limited capacity dining and closures: Atlas Restaurant Group CEO
Alex Smith, Atlas Restaurant Group CEO, joins Yahoo Finance Live to discuss how its restaurants survive COVID-19.
SEANA SMITH: Congress is passing a COVID-19 relief bill this weekend. The bill contained more PPP with provisions that the catering industry had been pushing for. But one thing is not included in this bill.
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To learn more about this and what this means for the hospitality industry in the future, we would like to include Alex Smith. He is the CEO of the Atlas Restaurant Group. And Alex, nice to have you on the program. Thank you for taking the time to join us.
I know you have been forced to close some of your restaurants. It was a challenging time for you and your colleagues in the industry. But let's just start with the relief bill we got from DC this week. Will this package help you and others in your industry over the next six to twelve months?
ALEX SMITH: You know, it's like that for a business owner. I think it helps us a lot. It basically allows us to get through the dead of winter, January, February, March - no outdoor dining, no indoor dining in Baltimore. We're pretty much back to normal in terms of revenue at our Texas and Florida properties. So we're doing great there.
But Baltimore is about getting through the next three months, during which we are currently not allowed to operate. And so a second PPP loan will certainly help us. We are now working as a team through language. It looks like restaurants and hotels are getting 3.5 times instead of 2.5 times, which should certainly help.
You know my concern is how owners and operators do what is done for employees? And we in Baltimore were closed two weeks before Christmas. And we obviously had to take people off. And you know what do we do for these employees, these bartenders and waiters and the kitchen support staff and everyone else - how do we get them through? That is my concern while we are down and until the PPP comes in.
BRIAN CHEUNG: Hey, Alex. This is Brian Cheung. My understanding is that, in my opinion, the company had to lay off or take leave of around 600 employees. Is that correct?
ALEX SMITH: That's right.
BRIAN CHEUNG: Yes, I mean, first of all thanks for the transparency. But secondly, I mean, what was it like to have this conversation to unfortunately say that we have to let you go. Here are your options for now. But to say yes, I mean hopefully we can get you back on board when we get that PPP money. How does the company deal with this financial package and says: How can we possibly re-staff or expand our business activities to ensure that we really support as many employees as possible during this time?
ALEX SMITH: Sure, I mean, it's absolutely heartbreaking. Probably the hardest thing we've ever had to do since we closed in March. We had people with rent. We had people with mortgages. And we've moved on to grocery giveaways on a weekly basis. We help what employees can.
We have kept all of our employees on a reduced salary to ensure they are compensated. We pay the entire health insurance of all our employees - including those on leave - during the entire shutdown. We hope to come back - we filed a lawsuit with the Maryland Restaurant Association to try to reopen in some form in Maryland.
And we hope that this at least eases the situation, because here in Baltimore it's interesting that gyms and casinos are allowed to open, but restaurants are not. So we feel like we are being attacked a little bit unfairly. But of course, PSA, when this happens, which will likely be another month, it will help us get everyone back on the payroll and get back on the job. But from a local point of view we have to be able to operate. And so we're just doing our best to be open again and get people back to work as quickly as possible.
SEANA SMITH: Alex, focus on that - when you can open up and get back to work. How do you prepare because at this point there are still so many unknowns just about constraints of what your capacity will be, what your workforce will be. I mean, show us exactly how you plan on doing this as CEO of the Atlas Group.
ALEX SMITH: Yeah sure. When we closed three weeks ago we were at 25%. Our sales volume was below 50% of the previous year. Obviously, if you are in the restaurant business, especially if you eat well like us, you are obviously not making money. And PPP is obviously going to be very helpful for that because it will allow us to suffer losses for three or four months and somehow put this thing off.
And hopefully we can reach a level of normalization by May. But we do other things too. We try to make Atlas at home, that is, prepared meals that consumers can pick up. We set out to try, like many other people, to keep people - busy as many people as possible.
However, our concern is how to get people back to work. It's holiday season. People have to pay their rent. You have to pay bills. And PPP will surely help us get people back to work. But by the time it's said and done, it could be a month before this thing comes out. What are we doing in the last two weeks? What are we going to do in the next few weeks? We will do what we can from a local perspective. But I think at the national level, the Feds need to step in and think about what they can do for these workers and how they can help.
BRIAN CHEUNG: So you mentioned that you were working on some other things. I understand that you are actually working on maybe opening new restaurants early next year. But I think something a lot of people are wondering, what does commercial real estate look like right now as you try to negotiate these new places to set up these restaurants? Is the rent cheap? Are many of these CRE landlords looking for tenants right now? How does that differ in Baltimore from, for example, New York or DC?
ALEX SMITH: Sure. So we are currently receiving offers that are COVID offers. And we haven't seen anything yet because our number one priority is getting back on track and getting people back to work. But you know people are throwing rates of $ 300 per square foot at 6% and 7% occupancy costs. We have landlords offering to build entire rooms for us, with no capital and no equity, just to go open and make sure their centers are viable.
I think right now we're a group that will have 22 restaurants open and operational by March. We hope that all of our employees can work here again in the next few weeks. We believe, on the other hand, that there is a tremendous opportunity to expand the business and seize some opportunities and some good developments where people only need restaurants to drive traffic to the retail trade and their centers.
And besides, they obviously want convenience for tall office towers and things like that when office workers come back. So we look at everything we can. But obviously it's difficult to grow out of a pandemic. And priority number one is just to get what we have and get everyone back to work.
BRIAN CHEUNG: Well, a little light at the end of this very long tunnel. But thank you again for letting us know. Alex Smith, again the CEO of Atlas Restaurant Group.
ALEX SMITH: Thanks for your time folks.
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