Ed Rudisell On The Restaurant Industry’s Bleak Outlook

The facts on the ground are unambiguous—some restaurants have already closed. More will almost certainly follow. Ed Rudisell, an owner or partner in Black Market, Rook, Siam Square, and The Inferno Room, has been characteristically blunt on social media lately, forecasting what’s in store for a restaurant industry without massive government intervention. We spoke to him about how he’s managing day-to-day operations, what restaurants really need to survive, and why he thinks it’s important for colleagues and customers to trade platitudes for hard truths.

How are you doing?
Every day is something new, and we just have to guess about what it’s going to look like. What can we do? What should we do? We don’t have real leadership helping us make sure we’re doing everything correctly not only for our personal health, but also to keep our businesses rolling. That’s where my ranting comes from on social media. Everybody seems to be really reluctant to talk about how rough of a situation we’re all in. There’s a lot of pride in the restaurant business, and you have to put your best foot forward and your best public persona. But it’s pretty devastating.

Did you apply for the Payroll Protection Program?
We did, but the PPP requires that 75 percent of the loan be used for payroll expenses in just eight weeks in order for it to be forgivable. The problem is that our biggest costs aren’t payroll. In restaurants, labor usually runs about 23 to 25 percent of expenses. I talked to my best friend who runs a landscaping company, and PPP is great for him because 85 percent of his costs are in labor. But our expenses are mostly in food inventory, liquor inventory, insurance, and liquor liability. That’s thousands of dollars every month. The PPP only allows you to use 25 percent of the money on those overhead expenses. So the program takes care of one problem but creates a lot more. If you don’t meet the requirements on using 75 percent of the money for payroll, you can still get the loan, but you have to pay it back in two years. That’s insane. You’re talking about a $100,000 loan paid back in two years. I don’t know of any independent restaurant that could do that.

How do you stay on top of information about assistance programs available to small businesses?
I’m working at Siam Square every day from open to close since we’re on a skeleton crew doing curbside pickup. So it makes it very tough to be able to do the webinars or other seminars to help determine which information is legitimate and which is a scam. I don’t have time to do three hours of research every day on loans. The first few weeks were a deluge of information. I was lucky that my business partner at The Inferno Room, Chris Coy, was able to sort through tons of information to help me out. If it weren’t for his help, nothing would have been filed on time. And even with all that, we still have no money. We’ve gotten two notifications that we have been approved, but nothing has been dispersed. We don’t know if help is coming.

You have four restaurants, but you’ve only done carryout at Siam Square so far. Why didn’t you do it at Black Market, Rook, or The Inferno Room?
We’ve always done a lot of carryout at Siam, so we already had the infrastructure in place to do curbside. We didn’t do a lot of carryout at those other places, so we weren’t in the public consciousness as a takeout option for customers. At the time, we were looking at a five- to six-week closure. It’s really difficult to pivot your business that quickly. Black Market is 9 years old now. Rook is 7 years old. Siam Square is 12. Introducing a whole new system and way of doing things that fast is very difficult. We were afraid we would have ended up screwing our employees over by making them ineligible for unemployment. It wasn’t worth the risk to ask all of them to forego that possibility just so they could work three hours a week and we could make a couple hundred extra dollars during that time. That wouldn’t even pay the bills, and we would have been in a much worse situation. But now that it looks like the shutdown could last a lot longer, I’ve been talking with the chefs at Rook and Black Market about menus and logistics planning for carryout-friendly dishes.

What about your rent? Are your landlords working with you?
I own the Siam Square building, so I’m lucky there. And I have great landlords at Rook and The Inferno Room. I have an amazing landlord at Black Market because it’s Ed Battista (co-owner of Bluebeard). Having a restaurateur as a landlord has been incredibly helpful. He’s a good guy, and he understands.

The kitchen of Black Market

Have you started thinking about what reopening might look like?
We’re paying attention to restrictions being implemented in other states because we suspect that’s probably what will happen here as far as limiting the occupancy. The things that we don’t know are how comfortable people are going to be sitting in a small dining room, even at 50-percent capacity. Rook has a much larger footprint, so I think we’ll be in better shape there. Black Market’s patio certainly will help us through the summer months. But of course we all fear what could potentially happen in the fall because a second round—another quarantine—will effectively shut down the whole business.

I think, regardless, half the restaurants in the city will be gone in a year. I’m not trying to be pessimistic, but the help has been very, very difficult to get. We’ve been in business a long time and it’s hard, even for us. If a restaurant is brand new, or just opened in the last two or three years, I don’t know how they’re going to do it.

Do you think customers really understand how hard this has hit the industry?
People pull up to Siam Square to pick up their food and see four or five DoorDash or other delivery cars out there, but they don’t realize those companies take 25 to 30 percent off the top, which leaves us with pretty much pennies on the order. We’re doing 15 percent of our normal business. We’ve laid off the entire staff just to be able to keep our bills paid. It’s definitely hurtful when you hear people say, “Looks like you’re doing great.”

Why do you think it’s so hard for some people to understand what restaurants are going through?
Because so many of them are working from home and still getting a paycheck. I’m here at Siam Square every day, and I look out the window in Fountain Square and you’d think there’s no quarantine. Groups are riding their bikes, having fun. Everybody’s on vacation. They’re on Facebook saying they’re bored watching everything on Netflix. For us, our days are spent in deep depression and anxiety, Googling how to get funding and how we can keep our heads above water? There’s a real disconnect between what’s going on in the hospitality industry and what’s going on if you work for Lilly or Salesforce or Anthem.

I think, regardless, half the restaurants in the city will be gone in a year.

Is that why you’ve been so vocal on social media?
Believe it or not, I don’t like to go online and bitch and complain all the time. I know it can scare people. I was talking privately about it with a restaurateur in New York City and he said, “We need to come together on this.” Unfortunately, it’s very hard to get restaurateurs to be honest with each other because everybody wants to say, “Yeah, it’s rough right now, but we’ll be fine.” The reality is, we’re not all going to be fine. Everything may reopen at first, and then you’re going to start to see mass closures.

What kind of help right now would make a real impact on saving the industry?
Freeing up the restrictions on what we can spend the PPP money on would be a giant help. Loan forgiveness is important. I worked my ass off for over a decade to pay off my loans for Black Market and Siam Square. The last thing I want to do after all that work is to take on debt I had to take because I was told to close down by the government. I was happy to close down for public health, but then to be told, “Hey, we’ll help you reopen. You can borrow money from us. Just pay it back.” I think it’s an affront to small businesses, low interest or not. It’s money we didn’t owe in the first place.

Is there anything else the government could do to help?
Forgiveness of sales taxes and food and beverage taxes in February and March would be big. It wouldn’t be the savior, but at least it would give us a little bit of a bridge to reopen and not have to worry about all this debt sinking us the moment we unlock the doors.

Upstairs interior of The Inferno Room tiki lounge
The Inferno Room

Is there anything customers can do to help?
I think we’re past that. And I don’t mean that customers can’t be helpful. We’ve had an amazing outpouring of support across the board. It’s like post-9/11 levels of empathy. But we’re talking about numbers now that are too big. I’m sitting on $14,000 of back sales taxes, just at one of my restaurants; that doesn’t even include the others. So 200 extra dollars from one of my customers is fantastic, but it doesn’t even put a chip in that tax bill.

What fault lines has this crisis exposed in the hospitality industry?
I recently posted a Medium article called “Why Restaurants Are So Fucked.” The writer [Joelle Parenteau] said, “Did you know that most restaurants don’t even have two months of rent in their bank account?” And I was like, of course they don’t. Do most businesses? And then she showed the profit margins in the health industry and banking industry, and my jaw dropped. I’ve lived in this bubble for so much of my life that our slim margins seemed normal.

How do you fix that?
It’s unfixable.

In March, Patachou, Inc. founder Martha Hoover told the Take Away Only podcast that restaurateurs have to start talking openly and publicly about the broken business model, especially with menu prices. She said they are universally too low, and the public needs to know that if they want restaurants to be able to take care of their staffs on a daily basis—not just in times of crisis—they have to charge more for food.
I’m not sure it’s possible. There are very few restaurants that are charging you the value of what the food actually is. At Siam Square, we’re selling food for $12 a meal, and that’s a fresh, home-cooked meal with everything made to order in house. That’s damn near what you pay at McDonalds. And Americans in particular have been very spoiled in thinking that everything should be cheap all the time. It would take a very big shake-up in the world for people to realize how much food should cost.

Do you see any upside right now? Is there any part of you that thinks you might be able to look back someday and think, well, at least X, Y, or Z resulted from all of this pain?
I think in the long term we are all going to be much more cognizant of the way that we interact with one another. At Siam Square, we have spicy food, and one of the things that always bothers me is people will get a runny nose and blow their nose on a napkin that they leave for us to pick up with our hands. I hope people are a little more cognizant of that now. Restaurant and hospitality workers are held to very high standards by the health department, and we have a deeper level of training about sanitation. I don’t wash my hands more than I did before, because I was already obsessing about it. So when there’s a run on sanitizer at the grocery I’m like, “Wow, were you not sanitizing anything before? Were you not washing your hands already?”