Q&A: Stan Harris, president and CEO, Louisiana Restaurant Association

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The New Orleans restaurant industry was hit with a significant loss this week as K-Paul’s Louisiana Kitchen said it would be closing permanently after operating in the French Quarter in 1979. It is not the only local restaurant to make that decision – Semolina in Metairie and Cake Café, a bakery in the Marigny, closed in June. Others have reopened only to close again until further notice, including The Country Club, a popular restaurant in the Bywater.

Restaurant owners say they expect more to follow suit. Stan Harris, president and CEO of the Louisiana Restaurant Association, spoke with CityBusiness about the industry’s fight for survival in the COVID-19 pandemic.

What are the factors that make it difficult for some restaurants to survive?

First is just limited capacity. Restaurants are typically built on exceeding their seating capacity. If a restaurant seats 100 people, then it typically needs to serve 100 to 150 lunches or dinners to make money. When you’re limited to 50% capacity .. then it’s hard to make money. Another part is that there have been some programs that have been very supportive of helping the workforce, and those have made some people reluctant to return to work. It’s kind of been a two-fold thing. The third area is that we’ve been really focused on trying to practice good hygiene and good sanitation and appropriate spacing and wearing masks to rebuild the guest’s trust, and going out to eat is not as high-risk for them if they and the operators do the right things.

How do you think some of the “grande dame” restaurants such as Galatoire’s, Antoine’s or the larger restaurant groups will make out?

Several of our French Quarter restaurants have not reopened yet or have reopened on a very limited basis. They’re only operating four or five days a week. Some of them are not operating at all. I know some of the Besh Restaurant Group restaurants have reopened, but they’ve closed some of their other restaurants after reopening them. The challenge with the Paycheck Protection Program dollars is when they were first allocated, they were used to pay staff and get the maximum forgiveness and have the least impact on their workforce. That money was going to run out before the demand of the guests would pick back up to prior levels. And of course we’re not anywhere close to where the prior demand was. When you look at hotels in the French Quarter and CBD running in the teens during the week and maybe 20% to 30% on the weekends, then that is devastating. That’s where those restaurants are picking up 30% to 40% of their business. We know from data points that about 70% of our Open Table reservations were made by out-of-town people before COVID-19. That’s a pretty big hole to fill.

How do you think some of the smaller and independent restaurants will fare?

Access to capital and liquidity are very important. It’s easy to look at the Payroll Protection Program and say, “Wow, what a nice gift this was.” But if you already borrowed and leveraged yourself up, and even if it’s low-cost money, it’s still money you have to pay back. It doesn’t say that this is a gift from the citizens of the United States or the U.S. Treasury. What it says is that “I promise to pay.” Yes, there’s no collateral and limited recourse on it, but most people are going to try and do the right thing and pay it back on time as agreed because their credit is important to them. If you’re a franchisee of a national brand, you’ve got a different support network than a restaurant that has one location. You have a marketing co-op, you may have a purchasing co-op, your own distribution co-op. You have a lot of tools and resources where if you’re the operator of a small neighborhood place that seats 80 to 90 people, then that’s your whole life. You may not own the building and have all your net worth tied up in lease holds from a building you don’t own. In essence, it’s your livelihood. Maybe you got it from your parents or you did it or now your kids are in the business. It’s a hell of a lot of risk.

Some in the industry have speculated that at least 25% of New Orleans-area restaurants may shut down permanently. What have you heard?

I think we’ve already lost 8% to 10% of them that are just not going to reopen. We’ve projected as much as 30% to 40% of (New Orleans-area) restaurants would be lost. That’s not an unreasonable projection in this area because we had 19.5 million tourists come through last year. Our cruise line business is shut down, our trade association and corporate meeting business is shut down. Those are big drivers of volume for restaurants and opportunities. I think that’s a realistic approach to it. We have some legislation that is going to be considered by the Senate, hopefully before they go back on recess in August, called the Restaurants Act introduced by Senators Roger Wicker (R-Miss.) and Kyrsten Sinema (D-Ariz.) that will provide some stabilization for the industry so that it can sustain itself through the rest of this crisis. It’s about $120 billion of support for the industry. It’s really focused on independent restaurants and small chains. Whether it’s that or a second round of PPP that might come through, it’s clear that a lot of the restaurants have run through their original PPP money by trying to do the right thing. They’re used it to pay people, to pay their rent or mortgage and operating expenses.

Would you say there was an oversaturation of restaurants in the New Orleans market?

If you look at the way the market is made up in the city of New Orleans or the metro area, let’s say it’s around 1 million people. How many restaurants does a city of that size need? A lot of it is in Orleans Parish, especially in the CBD and the Warehouse District and the French Quarter. Those areas have a large density of restaurants. You still had restaurants that have closed over time that hadn’t reopened yet. When you look at that, is it an overcapacity? It probably wasn’t when we had 19 million visitors. But if we go through a year where we have 5 million or 10 million, it’s going to be a very different look for the restaurant industry because we won’t have those corporate meetings, trade shows and conventions that bring in a lot of discretionary dollars. At the same time, another thing that hurts us is events — whether it’s football or basketball games, the Final Four or any of the fairs and festivals that are draws to bring people to New Orleans. It’s the cuisine, the culture, the people and activities. When we don’t have all those things going on, it’s hard for one leg of that table to stand on its own.

What has the LRA done in terms of guidance, support and advice?

Probably the two biggest things we were able to get done for our industry were to mobilize our members to impress on Congress to pass the Families First Coronavirus Act, the CARES Act and the PPP Flexibility Act. Those things getting passed were huge opportunity values for our members. At the same time, we worked with the state legislature to create some liability protections for businesses that served the public. We had one bill pass this session, Senate Bill 508, that is specifically for restaurants that operated during the COVID-19 emergency crisis. There’s a broader liability bill, House Bill 826, that was signed into law by the governor and provides broader COVID-19 liability protection for other businesses. Restaurants and hotels were put back into enterprise zones. They created the possibility for restaurants, hotels and some retail businesses to be back in the Quality Jobs Program. Another thing we’ve advocated for was for (Mayor LaToya Cantrell) and her team, which by the way have given us amazing access. We have nothing but thanks to give them for making themselves available during very busy times. Early on in this, we had a call with the mayor every day. It was obviously important, and she knew the number of people the industry employed. Over 97,000 people were employed in the leisure and hospitality industry as of December. This has all been about outreach, making information available and moving legislation. The mayor has suspended different fees and permits and extended renewal periods because they’re not operating at full capacity in their facility and some of their offices. The governor and his staff have made themselves available to us because they have dire concerns about our industry and the number of people it employs. We’re all working together to make a more resilient Louisiana.

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