How high-end restaurant group Alinea pivoted to stay afloat during COVID-19
U.S. restaurants, especially high-end establishments that rely on reservations, are struggling to stay afloat as the coronavirus pandemic has effectively shuttered their businesses. Nick Kokonas, who runs restaurants including Alinea and the Tock reservations system, says it will take years for the industry to recover.
“Is it recoverable? Absolutely. What’s the time horizon? Who knows,” Kokonas says on the latest episode of the Ad Age "Marketer’s Brief" podcast.
Kokonas is co-owner and co-founder, along with Chef Grant Achatz, of Alinea Group. Their flagship restaurant Alinea, which opened in 2005, is Chicago’s only three-star Michelin restaurant and is consistently ranked as one of the world’s top places to dine. Other Alinea Group restaurants include Next and Roister.
Kokonas is also the founder and CEO of Tock, a reservation system that’s now used by restaurants worldwide, including Alinea, where diners prepay months in advance to reserve their tables. Earlier in his career, Kokonas was a derivatives trader.
“I was used to looking at big, big pools of data and looking for patterns, and also it really trains you to think, to see the world as it is, not as you wish it were,” he says.
As he watched data on the coronavirus unfold, he saw steep declines in reservations at restaurants in cities such as Hong Kong. In early March, he began seeing reductions in reservations in places such as Seattle that were usually sold out. And people were canceling reservations and seeking refunds because they were not traveling.
On March 8, well before the industry was forced to close dining rooms across most states, Kokonas wrote in a post on Twitter, “the hospitality industry is about to get crushed. 4-5% of GDP is restaurant sector and we're just beginning to see the effects of travel restrictions and quarantines.”
“It was, frankly, not that hard to see all this coming, unfortunately,” says Kokonas, who had been through 9/11 as a trader and then through the Great Recession while running Alinea.
Quickly, four contingency plans were established, which planned for situations ranging from a 30 percent decline in business to being forced to close. The direst plan was the one he enacted, which meant shutting down. He and other leaders eliminated their salaries.
“We wanted to lead by example and say we’re in this with you,” he says. All of the company’s roughly 300 Chicago employees were furloughed, with the exception of roles such as HR and legal. Each employee got a $1,000 stipend. When the company began offering carryout from its restaurants, some employees were brought back in, each of them being paid $15 an hour. The money made from carryout is being pooled and will be shared once the company can reopen. Kokonas says the company cannot distribute additional stipends now to those who are furloughed, or they won’t be able to receive unemployment benefits.
Plans were explained to managers about two weeks before restaurant dining rooms in Illinois were forced to shut down, says Kokonas. They included checking the temperatures of all employees before they came into the restaurants, monitored handwashing, and spacing people out as much as possible. Two people who thought the plan was too extreme were fired, he says. “I couldn’t have somebody in there not following those protocols and getting someone sick.”
Now, Alinea and hundreds of other high-end restaurants have morphed into takeout operations. Kokonas says the shift came in part because he saw Brian Canlis in Seattle shift his family’s fine-dining restaurant, Canlis, into a takeout operation as its reservations began to plunge. Canlis uses the Tock reservation system and wanted to be able to use the system for the new takeout model, but it wasn’t set up that way. Kokonas got the Tock team to work on the infrastructure, creating Tock To Go. Tech work that would normally take months to do took six days, says Kokonas.
Achatz and his team began coming up with ideas for foods they could make for carryout orders. Kokonas pushed them to tweak the ideas toward less expensive comfort food. Achatz wanted to do a Beef Wellington, which was going to cost too much, Kokonas said. Alinea’s first carryout menu featured a braised short rib Wellington, mashed potatoes and creme brûlée, all for $34.95 per person from a restaurant that charges north of $200 to dine in.
“Often, limitations give you creative solutions, right?” says Kokonas.
Alinea sold 500 Wellington meals on March 20. Days later, it was up to 1,000 meals per night. The carryout process is a no-contact method. People pull up to the restaurant, pop their trunk open, and staff with gloves and masks drop the order in the trunk.
Hundreds of restaurants have now switched to Tock To Go, including Los Angeles’ upscale N/Naka, which sold out of its bento boxes in a matter of minutes. Kokonas says that shutting down carryout from restaurants in cities such as Chicago and Los Angeles, where people can drive, would put additional pressure on the grocery stores.
Out of the 300 who were furloughed, about 100 people are back to work at Alinea Group.
So, how long does Kokonas expect it to take for the restaurant industry to recover? It depends on how the recovery from the virus goes, he says. If it’s a cyclical virus and there’s a wait for vaccines and herd immunity, “that’s years, probably. That’s the one that no one wants to really think about,” he says.
Even with government loans, restaurants will be under pressure, especially if restaurant capacity is limited. And many restaurants were already running with limited cash on hand.
“There is no good solution until demand comes back,” says Kokonas.