The COVID-19 pandemic has hit some sectors of the economy like a 7.5 earthquake and other sectors like a gentle rumble.
Restaurants, as you’d expect, have been socked the hardest by stay-at-home, business closure and social distancing orders. Many restaurant owners won’t be able to save their businesses. And the ones that do survive are staring down a potentially arduous recovery.
Desi Saran, the founder and CEO of healthy fast-food restaurant operator Sweetberry, is doing his best to keep his acai-based franchises afloat during these uncertain times.
We recommended investing in Sweetberry late last year. In just the past year and a half, it had opened 20 locations across New Jersey, Florida, Illinois, South Carolina, North Carolina and Virginia.
Then the COVID-19 pandemic reached our shores and began spreading. And Desi put Sweetberry’s expansion on hold. Instead, he focused on figuring out a strategy that would allow the franchise to just hold on… at least until the worst of the pandemic is over.
I called Desi recently to see how he was doing. Below is our conversation, lightly edited for brevity and clarity.
Andy: What a crazy turn of events. How are you dealing with all the COVID-19 related changes?
Desi: We have temporarily closed 14 out of 20 of our restaurants. Restaurants are one of those industries getting hit the hardest. In areas where the government banned dine-in, our sales had dropped 50-80% in a matter of days. In order to preserve cash, we decided to temporarily close those locations. We may shut down more in the coming weeks.
Andy: Is there anything else you are doing apart from shutting down some of your restaurants?
Desi: Brick and mortar businesses are being forced to play defense. But there are only so many things we can do besides shutting down operations. We’re focused on cutting overhead and all unnecessary expenses. We’ve also applied to the SBA for disaster assistance. Still waiting to hear.
Andy: How do you picture Sweetberry a year from now?
Desi: Oh man, I have no idea. I do not know how long this [pandemic] will last. I hope that by June we will be in the clear to fully open up. But we could be heading into a recession. It’s just one more thing that will impact consumer spending and the restaurant business. I’ll need to understand (the new environment) as fully as possible (to better understand) how that impact will play out for us.
Two things in this conversation really stood out…
First, CEOs like to talk about cutting away the fat. But to survive, brick-and-mortar companies will be cutting back to the bone and then some. It’s going to involve a great deal of pain. And getting back to “normal” will mean getting back to a much diminished normal.
Second, the devastating one-two punch of a pandemic followed by recession will ravage consumer-facing companies. Many companies will fall by the wayside. It’s going to get real ugly.
And a pandemic followed by a recession isn’t even the worst thing (economically speaking) that could happen. We could see a pandemic, a recession and then a COVID-19 resurgence in the fall.
To Desi’s credit, he doesn’t sugarcoat any of this. Happy talk doesn’t make things better. Desi is fighting for his company’s life. The best thing he can do right now is play defense.
I wish him luck.