Restaurants Innovate in the Face of COVID-19

J.K. Scheeres | May 19, 2021

The foodservice industry will be forever changed

When the first wave of COVID-19 restaurant closures hit last March, Famous Dave’s — an old-fashioned BBQ joint with 120 locations across the country — lost 80 percent of its revenue overnight. At the company’s sleek headquarters in Minnetonka, Minnesota, company leadership convened emergency meetings to discuss a rash of new local and state safety regulations designed to quash the spread of the coronavirus. Their overall focus was protecting the health of employees and guests, but the question in the background was this: How soon would things return to normal? At the time, no one dreamed the crisis would drag on beyond the end of the year.

“My initial reaction was one of fear and uneasiness,” Weston Pearson, VP of Supply Chain for Famous Dave’s, told Inside Magazine. “There was so much uncertainty and I felt empathy for the lives that were being impacted directly and indirectly. We had many difficult decisions to make, determining how we would service our guests, how we’d stay open, how many employees we would need to furlough, and many more difficult decisions to make — oftentimes without all the answers and with many unknowns.”

From the first day, we got with the team and told them to stay engaged with customers. Not to try to sell them anything — but to just reach out and see how they were doing.
Mark Ourada, Group VP of Foodservice at Hormel Foods

Following the emergency meetings, Famous Dave’s closed down all its dining rooms — even before it was mandatory in some locations — and furloughed 1,700 restaurant employees. Many of its franchisees followed suit. The company was far from alone in this unhappy obligation: in terms of impact on the restaurant industry, all previous crises pale in comparison to the pandemic. In the weeks following the September 11 attacks, restaurants in tourist zones took a temporary hit as fearful diners avoided crowded spaces; the 2008–2009 recession shuttered four thousand restaurants. But neither of those downturns even came close to the COVID-19 emergency, which has caused the closure of more than a hundred thousand American restaurants.

Closures and declining sales at restaurants have had a major ripple effect at Hormel Foods, says Mark Ourada, group vice president of the company’s Foodservice Division. A third of Hormel Foods clients are in the foodservice segment, which includes hotels, universities and restaurants like Famous Dave’s. Foodservice orders fell 70 percent in June as officials mandated shutdowns across the country. Marriott Hotels, one of Hormel Foodservice’s biggest customers, closed its kitchens and furloughed thousands of employees; Old Chicago, another major client, “mothballed” a hundred of its pizza parlors and taprooms.

As in-person dining shut down across the country, restaurants were forced to find ways to stay afloat: offering curbside pickup, creating DIY meal kits, converting their parking areas to makeshift drive-thru lanes and outdoor seating. Some, forced to lay off front-of-house staff such as servers and cashiers, shared “ghost kitchens,” ad hoc production facilities where two or more restaurants lease space to prepare food solely for delivery.

Hormel Foods instituted several measures to support clients during the shutdowns, including extending lines of credit to ninety days, offering rebates on cases of meat, and adding extensive COVID-related resources to its website. But one aspect of the Hormel Foods corporate culture in particular has helped customers persevere: its commitment to long-term, mutually beneficial personal relationships. The Hormel Foods fleet of 175 dedicated sales reps, who pay regular in-person calls on clients (or, in Ourada’s Minnesotan lingo, visit with them), has allowed the company to stay nimble during the COVID crisis.

With restaurants running on skeletal crews and trying not to overload their refrigerators with perishable raw meat, Hormel Foods saw an uptick in its fully cooked products, including its flame-seared and smoked meats, Ourada says. Without the possibility of in-person visits or product taste-testing, the sales team sent one-minute, Food Network–worthy videos to clients to offer ideas on how to incorporate Hormel Foodservice’s readymade fare into their menus.

“From the first day, we got with the team and told them to stay engaged with customers,” Ourada says. “Not to try to sell them anything — but to just reach out and see how they were doing. Having that bond, customers acted positively. We partnered with them to find answers to their challenges, which many of our competitors weren’t in a position to do.”

And so Famous Dave’s started its post-closure recovery by leaning into its twenty-five-year relationship with Hormel Foods. The BBQ chain buys eight million pounds of pork from Hormel Foods each year — 70 percent of its ribs and 100 percent of its rib tips and pork butt. “They’ve been a partner that we’ve worked with throughout our history when we’re trying to innovate,” says Pearson. “When the pandemic hit, we were certainly glad to have them to turn to.” Because 50 percent of Famous Dave’s revenue already came from takeout, delivery, and catering orders, the brand was in a better position than many restaurants to cope with COVID changes. But with BBQ season (Memorial Day to Labor Day) looming on the horizon, the brand wanted to offer something unique to quarantined backyard grillers. So it collaborated with Hormel Foods on a “heat and grill” promotion that repositioned Famous Dave’s legendary St. Louis Slab spareribs as to-go items. The ribs were smoked over hickory logs in the restaurant kitchens, but sold uncooked and unsauced, allowing home chefs to slap the ribs onto their own grills and prepare them to taste.

In the end, the restaurant industry will remember 2020 as a period of immense pain, but also one of remarkable innovation.

Hormel Foods underwrote a large-scale social media advertising campaign for the promotion, which Pearson says sold roughly 80,000 racks of ribs. The two brands worked on a second campaign for Veteran’s Day, giving away 32,000 free chopped pork sandwiches to former and active members of the military. These strategies eventually helped Famous Dave’s rehire all of the 1,700 employees it had furloughed at the beginning of the pandemic.

Pearson is in weekly contact with the Hormel Foodservice sales team to manage inventory and shipments. But he’s also visited the Hormel Foods production line multiple times to witness a live hog “broken down,” the better to understand how different cuts of meat are made and processed. “One of the things I like about Hormel is that they’re very personable,” he says. “They come to us with opportunities to be more cost-effective and evolve our business. The products they provide us are proprietary to us, which allows us to differentiate as a brand.”

Studies suggest that COVID-19 will have a long-term effect on Americans’ relationship to restaurants. With Fear of Missing Out (FOMO) turning into Fear of Going Out (FOGO), in-person dining won’t recover immediately; it may never return to pre-COVID levels, according to the National Restaurant Association. Even when a vaccine is widely available, the research firm Savanta found, only 19 percent of consumers are optimistic about returning to dining out. This is especially bad news for restaurants whose primary draw is a specific type of indoor ambience, such as Chuck E. Cheese and Rainforest Café. But chains, which are now busy slashing the footprints of future restaurants and creating separate lanes for drive-thru customers and delivery or online orders, should fare better.

In the end, the restaurant industry will remember 2020 as a period of immense pain, but also one of remarkable innovation. It’s been a year where both chains and standalone businesses have made the leap to digital-only communication, self-ordering kiosks, proprietary apps, outdoor dining, ghost kitchens, meal kits and even robotic chefs. Other innovations are sure to come. Famous Dave’s and Hormel Foods are already collaborating on a new sparerib recipe. Pearson is keeping the details close to his chest, but says the project involves a new, delectable way to prepare ribs that will help push Famous Dave’s further into the realm of fast casual.

“I can’t say any more,” he says. “But I’m really excited about it.”

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