Subscribe to Fortune’s Outbreak newsletter for a daily roundup of stories on the coronavirus and its impact on global business.
This was supposed to be the week that Grant Smillie opened his second restaurant in Los Angeles—his first, E.P. & L.P., is a sprawling, critically acclaimed three-story Southeast Asian joint that can accommodate up to 470 customers at once. Instead, rocked by the COVID-19 pandemic, the 42-year-old co-owner of the Botanical Group, a hospitality firm with bars and restaurants in L.A. and Melbourne, found himself telling his 125 employees that there would be no shifts for the foreseeable future.
With a “shelter in place” law blanketing California until April 19, bars and restaurants can’t serve dine-in customers, and Smillie had to weigh the costs of pivoting quickly to a takeout and delivery model or ceasing operations altogether. In 2019, California bars, restaurants, and nightclubs grossed $90 billion in revenue, according to IBISWorld. Smillie, like hospitality professionals all over the country, is grappling with questions he can’t answer. How will he pay his rent? What about his staff? When can his places reopen? With a recession looming, will customers come back?
Fortune spoke with Smillie for a new series, The Coronavirus Economy, to find out how COVID-19 has affected his business and how he thinks the pandemic could change the landscape of American dining. The following Q&A has been condensed and lightly edited.
Fortune: When did you realize that this pandemic was going to impact your business?
Smillie: I was in Japan, the second week of March, for a good friend’s 40th birthday. It was supposed to be a ski trip, but every time you got on a chairlift, all you’d end up doing is refreshing your phone going, “This is bad, this is bad, this is very bad.” I left two days after I arrived.
By Sunday [March 15], there was a lot of speculation about what was going to happen. When one of my colleagues rang me and said, “We’re going to close, are you going to close?,” I realized that we had to make some decisions. The worst part was thinking about, Are we closing because the law is forcing us to, or is it a moral obligation? I don’t want to put anyone at risk, but I also don’t want to put my people out of work.
It turned out—as we found out when the mayor announced all Los Angeles restaurants had to stop dine-in service as of March 16—that we were in the same bucket as gyms and business centers. It’s awful—if you’re an upwardly mobile person in Southern California, this is what you do—work, train, go out, eat, and drink.
Was E.P. & L.P. set up for delivery and takeout?
It was, but it wasn’t a decent revenue for us. It wasn’t of any significance.
Did you make any changes at the restaurant before you had to stop dine-in service?
We’re an Asian eating house. It’s a shared dining experience. By March 12, we had converted the entire menu to be non-sharing. Certain dishes couldn’t comply, so we figured out new ones. But we could see the drop-off in reservations. The math wasn’t adding up. If you’re used to 150 diners coming in, then all of a sudden it’s 35, how long can you sustain?
Are you offering delivery and takeout now?
No. The task of trying to overhaul the restaurant again, it was too much. It’s not going to be worthwhile, the labor cost versus the sales. If this thing drags on into July, my position may change.
What about your staff?
The hourly people, unfortunately, have no shifts. Our management and office staff is still on salary at this stage. We’re trying to get everyone working remotely, whatever that looks like. But how long can we sustain without any revenue coming in? How are we going to pay our rent? We’ve got huge overhead. If we knew it was going to be May 2, we could plan for it. But we don’t know.
How did you end up participating in the dining bonds initiative, where people can pay $80 for a “bond” that will be worth $100 when the restaurant reopens?
It was just a good idea. A friend of ours, Meghan Patke, who does our public relations, suggested this was a way to get some value back into the business. I don’t think any of us are going to retire off of these bonds. But it’s a great way to get people back into the venue. The whole thing comes back to, when are we reopening? That’s the million-dollar question. Of course, the sad truth is that some people are going to buy a bond to a restaurant that doesn’t fucking make it.
Whatever the outcome is here, it may well change the landscape of dining. Will there be this enormous bounce-back where it’s back to party time? Fingers crossed, but right now, I really don’t know. I think consumers are going to be driven by value. Maybe it’s a chance to pivot some items, dishes, and service models. We’ve been going about things the same way because it’s the way they’ve always been. I’m going to use this time to rethink how we operate.
More coronavirus coverage from Fortune:
—This famed economist doesn’t think we’re headed for another Great Recession
—South Korea has the most comprehensive coronavirus data. What it’s taught us so far
—10 questions about the 2020 election during the coronavirus pandemic, answered
—6 steps to sustainably flatten the coronavirus curve
—How hackers are exploiting the coronavirus—and how to protect yourself
—Hong Kong launches a surveillance operation to track suspected coronavirus patients
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEOs
—WATCH: The race is on to create a coronavirus antiviral drug and vaccine
Subscribe to Fortune’s Outbreak newsletter for a daily roundup of stories on the coronavirus and its impact on global business.
