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How a Mid-Sized Restaurant Group is Weathering COVID-19

Atlas Restaurant Group is one of the largest restaurant groups in Baltimore. Since opening its first restaurant in 2012, the company has grown to include a dozen throughout the city, ranging from properties in the Four Seasons to neighborhood pizzerias, and it employs more than 1,000 people in Baltimore, Texas, and Florida. Atlas is prolific, and it’s also high grossing. The group was on pace to earn as much as $85 million in revenue in 2020 and projected surpassing $100 million in 2021. All of that changed with the coronavirus crisis.

In mid-March, Atlas closed all but one of its restaurants as governors in Maryland, Texas, and Florida ordered nonessential businesses to shut down. Only Harbor East Delicatessen & Pizzeria in Baltimore remains open for delivery and takeout. “We went from 15 restaurants down to one restaurant pretty much overnight, just like everybody else,” says Atlas founder and CEO Alex Smith. “It’s very sad and very scary.”

Atlas’s projected 2020 earnings are unlikely, if not impossible, for an independent restaurant to achieve, and yet they’re by no means on par with those of a chain restaurant corporation that employs tens of thousands. Atlas is one of a number of mid-sized restaurant groups across the country that occupy this in-between space, and it represents a segment of the hospitality landscape that was left out of an early draft of the stimulus bill completely, although the final plan does take businesses of this size into consideration. Smith spoke to Eater about envisioning a new future for restaurants and the lifelines his business depends on now. — Monica Burton

We were doing about $6 million to $7 million a month in revenue. We were going to be a fairly large restaurant group this year, with probably $75 million to $85 million in revenue, and we basically went from that to zero overnight. We employed just over 1,000 people year-round, and seasonally we would have gotten up to 1,200. Of the 1,000 employees we had, we furloughed over 900. We still have about 50 working on a reduced salary as well as seven corporate officers to help get us up and running again. The challenging part is that we need to keep a certain number of people to be able to restart the engine. Our goal is: As soon as these governors say go, that we can take our leadership team that’s still with us and get these furloughed employees back to work so we can take care of them.

I think our size makes us more vulnerable in some ways and it helps us in other ways. It makes us more vulnerable because we have a lot more payroll to carry. The insurance companies have completely abandoned the restaurant industry. I actually have in my insurance policy a viral outbreak clause and they’re fighting with me saying that it doesn’t include pandemics and only includes a viral outbreak, like salmonella. It doesn’t say anything about precluding pandemics. But the insurance company has basically said, “Go ahead and sue us. We’re not going to pay out anything.”

There are a few subsidies we can get in different states that are basically grants, but essentially we’re down to two options. Option one is the Paycheck Protection Program (PPP), which is a really good option. If the government did not set up PPP, we would be in a very, very difficult position to be able to reopen these properties, but it’s a challenging process. We’ve gotten all our paperwork in and we still haven’t gotten answers on timing or anything. The other option is the SBA Express (Small Business Administration loans). We’ve applied for some SBA Express loans because it takes money to reopen these properties. You have spoilage, you have some training you need to redo just in case your furloughed staff don’t come back.

‘How do you start back up the engine?’ is the question.

If PPP comes through, it’s incredible for us, because it allows us to pay our rent and it allows us to pay all the current employees. If we get that money it’s incredible for us, and not only that, it turns into a grant as long as it’s used for payroll and rent. For eight weeks we’re covered, and that is really our lifeline. If it wasn’t for that, we would be in a really, really difficult position financially. I can only imagine the position that a lot of our furloughed employees are in. But if that comes through, we’ll be able to backdate and get those people paid, get them money in their hands as soon as possible.

I think the one advantage that a mom-and-pop shop has is that if you’re running a small restaurant and you’re running it with your business partner or your family members, you are the labor — and you don’t have necessarily the GM, executive chef, sous chef infrastructure where you have these people on salary in many different properties. If you’re fortunate enough to own your own building, that’s probably the best scenario because you don’t have to rent. There are restaurant owners in Baltimore who run the place themselves, they own their own building, and I think they’re going to come out of this the best, just because they don’t have the carrying costs that a lot of us do.

“How do you start back up the engine?” is the question. How do you get organized when you have that many employees and that many properties to get going again? It’s very difficult. We have 45 managers — around three per property — that have all agreed to take a reduction in salary. They’re still being paid by us right now. We’re in constant contact with them. And we have our seven core leaders of Atlas in our corporate structure along with me and my brother. The goal is to be in constant contact with our hourlies. We’re providing groceries once a week for all of our employees. We’re providing resources for them to file for unemployment. We’re providing resources for where they can find things like health insurance and other grants that the state and the city are handing out.

We need to get our employees and our Atlas family back to work. But you’re not really only taking care of 900 employees; it trickles down. You have your vendors. There’s local farmers that now can’t sell their goods. The trickle-down effect of this is absolutely devastating. The best thing we can do is respect social distancing, backdate pay and take care of our people through PPP, and do our best to get people moving around again.

The dynamic of restaurants is going to change. We may have servers wearing masks. We may have to space all our tables six feet apart. We may have to get rid of barstools. Maybe they’ll start with just outdoor seating. But if you’re going to eat a meal, you’re no safer in a grocery store than you are eating in a well-run dining establishment, from a food safety standpoint. I’ve always felt that way, but the narrative of what’s going on is changing and we’re going to have to adapt. If that means a 50 percent reduction in business, we’ll need to adapt to that to make sure we can survive.

https://www.eater.com/2020/4/16/21222597/restaurant-group-owner-coronavirus-covid-19-impact-atlas

As told to Monica Burton | Eater