Rosanna Caira: Since the World Health Organization declared COVID-19 a pandemic, most restaurants have been forced to close their operations. Takeout and delivery has become the only viable option for a lot of restaurant companies. How has your company morphed to this new reality?
Ken Otto: It’s certainly been a time of pivoting almost every single day. Currently, at our Burger King and Pizza Hut [locations] in Alberta, we’re serving our guests exclusively through our drive thru. We’re one of the lucky ones — well over 90 per cent of our Burger Kings have the drive-thru lane and drive-thru window available to our guests. And we’ve relied on our partnerships with Uber, SkipTheDishes and, most recently, DoorDash to generate a substantial revenue stream through our delivery and aggregator partners.
We closed our dining rooms for takeout primarily [out of concern] for the safety of our crew in our stores. And, obviously, revenues are down. But we’re lucky to have the drive-thru lanes. We were very supportive of our aggregator partners from the get go and have quite a loyal following on the three platforms. Right now, about 20 per cent of our sales are coming through the aggregator partners. We’re making our way through this. It changes every day.
RC: How does that impact Pizza Hut, which doesn’t have the drive-thru capacity?
KO: The pizza channel is primarily takeout and delivery anyway, and our takeouts do remain. [Our Pizza Hut locations are] open in Alberta and we’ve designed new service techniques, but our delivery channel is growing rapidly. We’re happy with how Pizza Hut is performing and when people are cocooning, ordering pizza is a natural choice.
RC: John, how has this crisis impacted Hero Burger?
John Lettieri: It’s impacted us quite a bit. Our sales are substantially down, [so we’ve] intensified how we communicate to consumers that we’re open and about the health-and-safety aspect [with regard to] the delivery of food and also at the restaurant level. We’re working with our aggregators — we don’t have the luxury of drive thru, but there’s been a substantial increase on our online ordering. [For pick-up orders] we got explicit at the beginning, through social media, on the details and we’ve created signage within the store. We’ve put customer pickup and delivery on separate ends of the counters and we’ve indicated where they should be standing — they just pick up their food and go.
RC: How many people have you had to lay off in your stores?
JL: Of the 500 to 550 people in the system, I would figure 70 per cent.
KO: We went from a full-staff component [in March] and now we’re probably operating with 60 to 65 per cent of our staff. I say this from the bottom of my heart, we’re one of the lucky ones.
RC: What hurdles have you had to deal with in dedicating your business primarily to this area?
JL: We’ve ensured the franchisees stay open because, in most areas, there’s quite a bit of delivery. We’re now introducing home-meal replacements, introducing all our proteins in a special box that can be safely ordered. [It includes] cooking instructions, the description of the product and how it can be prepared at home. If you want French fries, we’ll include a small bag of French fries, or vegetables, and you can make the burger. We’ll provide bread, lettuce, tomato, onions. We have all that set up in different packaging formats.
RC: What made you introduce this concept?
JL: It’s always been there. We developed six or seven labels last year because we wanted to do some more grocery [sales] and now, with introducing our virtual kitchen, it gives us options to offer a different format. We’ve been working on this for the past six months as something we looked to do in retail — probably in Q4 of this year — but we accelerated it and it’s a great test for us to see how it performs.
RC: What new hurdles are you dealing with in this new in this new normal?
KO: We’re pivoting to larger orders. It’s really interesting watching the orders come in from the aggregator delivery partners. When aggregators first started, we would have people ordering, one burger or one shake ,but now we’re seeing people ordering five, six, eight, 10 meals because they’re feeding the household. I would strongly recommend people that have their menu on one of those platforms get out there and sponsor bundles, because people aren’t behaving as individuals.
We also have no-contact drive thru, so we’re working with Burger King and our franchisor partners on getting food in sealed bags passed to you in a tray. It’s just learning different ways of connecting with a guest and giving that guest a level of comfort that we’ve done everything humanly possible to make our food safe. Then it’s pivoting on marketing — working with your marketing crew or your social/digital-marketing people to really experiment with ways to connect with people differently.
RC: What are you doing to stand out on social media?
KO: Burger King and Pizza Hut have been great on this one and I give a solid shout out to my franchisor partners who pivoted very quickly to the first campaign; we’re all about safety and that was the key message people were most interested in. We’ve now pivoted into advertising the delivery and the drive-thru channels. It’s just being very specific. There’s a time on social to build a brand and there’s a time to simplify your message. There’s so much information coming to people these days, so keep your message simple, keep it relevant and easy to understand.
JL: You’ve got to keep it simple. It’s an opportunity to comunicate your message, what you’re doing, what you stand for and how you’re there to deliver safe food to their homes.
RC: How has your food supply chain been impacted?
JL: We have ample food and we do have our own distribution. Our warehouse is full and the suppliers seem to have enough food. It’s not a problem on that end.
KO: It’s very important for Canadians to know that first and foremost, our supply chain and our food-safety chain for every restaurateur and distributor in Canada has always been world class and that hasn’t changed. We have so many heroes out there working for our distributor partners. These are times where we rely on these people and they’ve stepped up. They’ve adjusted their shipping and drop-off procedures, they work on their own contingency plans to manage through this crisis and we have nothing but thanks for the whole supply chain.
RC: What kind of safety protocols are you implementing at the store level and through the delivery-chain process to ensure customers feel their food is being handled safely?
JL: On our end, it’s been our staff that’s concerned — it’s not coming from the customer’s perspective. At the store level, we have indicators on how far [customers] should stand back from the counter to pick up. And our back room is quite the distance from the customer. But it’s our staff on the street [saying] ‘I’ve got kids at home, I’m concerned’ and that’s the biggest challenge. But we’re really pushing on how the deliveries are dropped off at the store, what time it gets dropped off and how they’re receiving it and, in the kitchen, in minimizing the staff that will be able to accommodate the volume of sales.
RC: Are your employees wearing safety items such as gloves and masks?
JL: We’ve delivered all our masks and gloves, but they don’t want to scare the customer with the masks. The perception is there’s something going on [because staff are] wearing a mask. We’ve given that option to the franchisees, but they have it all in house.
KO: It’s important to know we’re not making our own rules here. Then again, our various government authorities have stepped up during this crisis with the level of communication on what’s safe and operating best practices coming from our health boards and authorities, at the municipal, provincial and federal level. Where people need to wear gloves, they are. There are no masks as they haven’t been deemed necessary based on [health] authorities. But, if our crew feels more comfortable [wearing masks], that’s okay. We’ve got to make sure they’re leaving their house every day to work in our stores a do what’s safe for them.
RC: How do you ensure third-party aggregators are following the same safety precautions?
KO: While working with Uber, Skip and DoorDash, they’ve told us what they’re working on and have stepped up. We’ve already been sealing our delivery bags so that hasn’t changed. We’re dropping food on your doorstep and not even knocking on the door or ringing the doorbell — it’s just the app that tells you it’s there. I’ve seen it myself while ordering food in and supporting our favourite local restaurant. They just drop it off and the app tells me it’s there. They give you instructions for no-contact delivery or pickup.
JL: They showed us they’re taking all the measures to practice proper health and safety. The little silver lining here is it’s going to continue after this. The whole system has cleaned up to the tip-top shape it should always be at. But now everybody’s been very, very cautious from all levels of manufacturing right through to the distribution end of it and it’s going to continue moving forward.
RC: There’s been a lot of talk about third-party delivery companies charging high commission rates, even through this very trouble troubling time. How do you feel about this?
KO: The industry is very competitive. We’re now entering year three or four of having our delivery partners with us in Canada. We’ve seen fees, as the industry has become more competitive, come down. I’m a big believer in our aggregator and delivery partners. If you look at managing delivery, I’ve been in businesses where you would manage delivery yourself — arguably doing it yourself is very difficult, if not impossible, and is equally expensive. I always teach our operators, myself and our people, there’s still profit in that bag when it leaves your door, despite the commissions. But we’re relying on these people. And I’m very thankful they’re out there trying hard to keep restaurant revenue coming in, putting revenue in your till — that’s what we need right now.
RC: In many cases operators offering takeout say they’re doing it to keep staff employed, or to do something in the short term. Is that the case, or is it profitable for operators to offer takeout and delivery right now?
KO: There’s two different scenarios. When your restaurants are operational, there’s a lot of incremental profit from a delivery order. Clearly, it’s different if that’s all you’re doing now. And I completely understand, if this was your only revenue channel, that the profit margin on that sale — just by the fact there’s a sizable commission attached to it — is a lot less. But this is an opportunity to be relevant, to support your community and to support your staff. We all want to keep our great staff with us — we want to keep great managers and a great crew. I know the industry’s been terribly impacted and we feel for every operator, but if you have great people, you still want to keep them and this is an opportunity to do that, both in your kitchen and through takeout.
The industry is going to [recover], but there’s no doubt behaviour will be different for the foreseeable future. There will be a day where people are dining out and getting together and sharing a burger or a meal or a glass of wine together. So, use this as a marketing opportunity: put a coupon in the bag, do some kind of bounce back, deliver a menu. It’s a very unique marketing channel. Connect with your people and see how you can message the guests and bring them back when things return to normal.
RC: We know not all food travels well. What are your thoughts on maintaining the integrity of the food?
JL: Food and coffee degenerate every second after they’re made. You’re compromising quality, and I [now understand] why my grandmother would scream at me to come downstairs when the food was on the table, because every minute after that, it was not of good quality.
We work on getting orders in [our office] all the time — from ourselves and from our competitors — to see how the food is arriving. And it’s not the same as when you get it at the counter, of course, so we try to minimize that as much as possible. And, as long as the aggregators are delivering in the timeframe and they’ve kept it in their bags properly, that’s the best we can possibly do.
RC: How is this crisis going to impact your sales in 2020?
KO: Someone taught me a long time ago, this is the kind of year that makes next year look really good. You know, when we’re reporting to your board and rolling over comps of 50 per cent, we’re going to say we’re just great leaders and heroes. But financially it’s terrible on people. It’s hard enough on myself and our people, when arguably we still have a sizable level of revenue coming in. There’s been some awesome initiatives out there, too, so we support restaurateurs the best way we can — by ordering from them and lobbying the government to help with wages and subsidies and loans. Everyone’s trying to do the right thing.
If anyone is fortunate enough to be open and serving food, this has to be considered one of the biggest brand-building opportunities you’ve ever faced. And, not to feel like you’re going to win and beat anyone, but just as an opportunity to build trust within your community and with your guests. The quality [of food] you serve, the standards of your operation, how you’re taking care of your people, how good the food is — this is the focus. We’re focused on the people still choosing to come to us, not the people who aren’t because if you focus on that, it’s a sad story. But, for restaurants like us that are open, it’s a chance to shine and to be better than you’ve ever been.
JL: It’s going to have an impact financially. If we’re able to survive and move forward…our virtual kitchen we launched about six months ago is really an opportunity for us to offer the industry some sustainability in their existing restaurants and to distribute our food in their areas. So that’s one thing we’re very much concentrating on and there’s a big opportunity. But Ken’s absolutely right, this is an opportunity for companies to make a difference out there, stay [true] to what they stand for and have that resonate well with the consumer. And we’ll see where the chips land once this is done. This isn’t going to go
RC: Are you happy with the financial-aid package the government has offered?
KO: The general answer is yes. The government has had to respond to different operating conditions that are changing. I applaud both Premier [Doug] Ford and our Prime Minister for the daily updates. Literally, the wage subsidy is very good news. It does mean you need to be working. If you happen to be employing people, you’d have an incentive to employ more, but that, arguably, means you’re open for business. We need to hear more about what happens when you’re fundamentally closed and don’t have an opportunity to keep your people on board. This is a story that still needs to be told.
JL: They’ve done a great job. There’s a lot of unknowns and they’ve really communicated well and frequently. And they’ve made decisions — the biggest thing is to make the decision and then see how it works out into the system.
RC: How can the industry work better in tandem to get where we need to go?
JL: People getting into the foodservice-and-hospitality industry should give thought to how they can maintain the integrity of it…Anybody that’s in this business or who’s considering being in the business has to look deeper into the hospitality sector and see how they’re going to contribute with great integrity moving forward.
KO: The power of restaurateurs in this country, the reputation we have with people — this is an opportunity for Canadians and consumers to look at this industry not as it’s been — as entry-level work. We talked earlier about our standards; we’ve always had amazing standards. The standards our [employees] have to learn and practice every single day aren’t entirely new right now, because they’ve been doing it every single day before this started. But the industry needs to band together and support ourselves when this is over…We employ hundreds of thousands of people and, as we see today, it’s integral to making society work. We need to come out of this remembering that and getting the credit for this.
RC: What advice do you have for operators about staying strong and getting to the next stage in this journey?
JL: This is almost like the first day of opening the restaurant. You’re excited, you’re nervous and you don’t know what’s going to happen tomorrow. If you keep that vision and that passion alive — don’t quit on the industry, don’t quit on what you believe in — you can really deliver to people. Be true to the industry as a whole and to your business; keep the lights on and fight through this. Because if it’s two months, it’s really only two months. The impact is great. Seconds will go by and the minutes will go by and we’ll get to the end of it.
KO: It’s about being true to our craft. We’ve been given the responsibility for those restaurants that are allowed to be open. We’re lucky to wake up every day, looking at it as a new level of responsibility for feeding Canadians. People are relying on us to help them get through their day. People are relying on us to treat them fairly and to keep them safe. Every day is just day one again, so everything you make has to be perfect. Your smiles are bigger, your good mornings and goodbyes are louder. It’s an opportunity to build your brand. For people who are struggling, control what you can control. Reach out to your partners, be honest with everyone around you — communicate, communicate, communicate. Don’t hide. Face everything head-on and when we get back to normal, because we will, this industry will thrive once again.