Colorado restaurants reopen after millions in losses as coronavirus cases fall across the state

Key Points
  • As all 50 states begin to partially reopen after a two-month shutdown, restaurants and retailers are preparing to operate their businesses beyond pick-up and delivery services.
  • Colorado Gov. Jared Polis allowed residents to start eating out at restaurants under social distancing rules as of May 27. 
  • Chef Troy Guard, owner of TAG Restaurant Group in Denver, has reopened six of his 12 restaurants. 
Colorado residents are dining out in the patio area at Los Chingones restaurant in Denver
Source: TAG Restaurant Group

Chef Troy Guard is hoping to bring back all of the 623 employees he had to furlough across his restaurant chain when Colorado Gov. Jared Polis ordered all bars, restaurants, theaters, gymnasiums and casinos to close on March 17.

Colorado restaurants began reopening their doors two weeks ago under stringent new public health guidelines that limit the number of diners and require employees to wear protective gear to try to limit the spread of the coronavirus. The city of Denver is also working to help its local restaurants by temporarily allowing them to extend their outdoor spaces onto adjacent parking lots, streets and sidewalks.

That doesn't make it easy to rehire employees for restaurateurs like Guard, who has reopened six of his restaurants. His company, the Denver-based TAG Restaurant Group, lost $7.5 million in revenue over the 10-week shutdown. TAG's 12 locations were making about $3 million in revenue a month before the pandemic.   

"We're excited to reopen but we're also very scared, cautious and nervous because things are just different. There is no new normal yet. There is no normal right now. It's an adjustment and it's going to take time to really see how everything shakes out," Guard said in an interview.

As restaurants reopen and people spend less time at home, "we have a very important month ahead. We have to make sure that we don't overshoot," said  Dr. Jonathan Samet, dean and professor of epidemiology at the Colorado School of Public Health.  

There is roughly a 13-day lag from the point of infection with Covid-19 to being hospitalized, which is the main indicator that the state health officials are tracking, he said. 

"If restaurants open tomorrow, we will be not seeing what's happened for about two weeks," Samet said. "If we overshoot, then we have to restore some measures and it's going to take again awhile for those measures to have their impact." 

Denver restaurant group owner: We're still unsure of what "reopening" looks like in this new reality
Denver restaurant group owner: We're still unsure of what "reopening" looks like in this new reality

Restaurant owners like Guard are equally concerned. 

"The biggest thing is that we want to make sure that when we reopen, we don't have to close again because if we close again, it's kind of a death sentence," he said.

Two weeks after letting everyone go, Guard brought back two employees on a part-time basis, his controller and human resources manager. The company has now rehired about 80 people to staff four locations open for takeout and two that just reopened for dine-in service.

"We'd like to rehire all of our employees if given the capacity," he said. "But given the 50% capacity mandate, we are not able to bring everyone back until we are allowed to operate at 100% capacity again."

Phased reopening

As all 50 states begin to partially reopen after a two-month shutdown, restaurants and retailers are preparing to operate their businesses beyond pick-up and delivery services under stringent new guidelines designed to limit the spread of Covid-19. Those restrictions will also severely hamper how much money they can make and whether they can ultimately stay in business.

Restaurants in Colorado can now serve customers indoors at 50% capacity of the posted occupancy code limit or at a maximum of 50 people, whichever is less, under the new guidelines. Party sizes are limited to a maximum of eight people and tables must be spaced at least six feet apart. They are encouraged to provide as much outdoor space as possible to ensure maximum ventilation and minimize air conditioning. Customers and employees are both required to wear face coverings inside the restaurant to meet new guidelines from the Colorado Department of Public Health and Environment.  

At Guard's restaurants, he's additionally requiring all staff to take their temperature and assess symptoms every day. There will also be one or two designated employees to regularly clean restrooms and sanitize kitchen surfaces. He's also expanding the patio space at two of his locations to accommodate more customers while adhering to social distancing rules.

Financial Repercussions

Many restaurateurs across the state have struggled to stay afloat while awaiting the new guidance. Although most businesses were allowed to stay open for takeout and delivery, many had to permanently close their doors.

TAG Restaurant Group was no different. It owns seven culinary brands in 12 different locations, one in Houston and 11 in Denver, but it likely won't be able to keep all of them open for business.  

"We closed one already permanently and we're looking to possibly close a few more permanently and not reopen just because we think that this pandemic is going to last longer than we want it to," Guard said. "Doing takeout is not really our business model. Our business model is people come in and enjoy themselves and dine in."

Guard said he's reopening his most profitable restaurants first, but even that is being measured differently these days, he said. 

Guard and Grace in Denver, a high-end steakhouse with the highest average check per person, used to be the company's most profitable restaurant. However, it wasn't among the first to reopen because of its location in downtown.

"We started carry-out and dine-in at our restaurants that are heavily patronized by the neighborhoods, because people aren't returning to their downtown offices quite yet," Guard said.

Location has been an essential factor when deciding which restaurants to reopen for takeout and delivery services. Los Chingones, a casual Mexican restaurant with an open patio, reopened two of its locations and they've been doing well in attracting customers, Guard said. The Los Chingones located by Denver Tech Center is the company's first to operate limited dine-in service. 

It also reopened FNG and TAG Buger Bar, which are neighborhood restaurants that serve comfort food and craft beer. 

"It's important that we are following the demand and the patterns of our guests, so that has been a key factor in what we chose to open," Guard said.

Store closures and furloughs

Since March 17, which is when Polis ordered all businesses to shut down, most of Guard's restaurants have stayed closed. He recently reopened one store in Houston for dine-in service and four in Denver two weeks ago for takeout and delivery.

Even though offering pickup service has attracted customers, Guard said it has been a challenge to adjust. 

ChoLon Restaurant Concepts, another restaurant group in Denver, said it lost $1.2 to $1.5 million in revenue since mid-March. On a regular basis, it made $600,000 in revenue per month across four locations, according to Christopher Davis-Massey, the group's co-founder and chief operating officer. 

Like TAG, ChoLon furloughed approximately 170 employees and 20 to 25 store managers. It closed all 4 locations on March 17 and reopened two of its restaurants for takeout service early this month.

Small restaurant owners are experiencing even worse losses. According to a recent survey from the Colorado Restaurant Association, more than 250 restaurant operators saw an average sales decline of 76% year-over-year during the lockdown.

"Some are down upwards of 90% and they were the ones that stayed open for the first part of April," said Sonia Riggs, CEO of Colorado Restaurant Association. 

"There's only so long until you're going to see more and more restaurants closing permanently and going out of business," she said in an interview.

Decline in weekly rate of cases

As Colorado surpasses its one-month mark since the start of the safer at home order, both essential and non-essential businesses are operating with restrictions, and the weekly growth in cases has been slowing. Coronavirus cases jumped 25% from April 26 to May 2 when the state started easing restrictions, according to a CNBC analysis of data compiled by Johns Hopkins University. Coronavirus cases rose by 19% over the next seven days, then 12% over the next week and 11% for the week ended May 23, according to the data. 

From May 24 to May 30, the state saw a 9% increase in the number of infections. The growth in cases dropped to 7% from May 31 to June 6, the lowest percentage increase since the state reported its first Covid-19 infection on March 6. 

As businesses begin to reopen and the weekly rate of new Covid-19 cases falls, more Colorado residents are leaving their homes and heading outdoors.

However, restaurant owners remain concerned that they won't see a rush of customers coming through their doors anytime soon. 

"From the time that things start to reopen, I think it will take two full weeks to see what the repercussions of that is. I think we're going to see people wait and see what's going to happen and if we're going to get a resurgence," ChoLon's co-founder and executive chef, Lon Symensma said. 

Building consumer confidence

Even though the state has allowed restaurants to serve people under tight restrictions, not all employees and customers are convinced that it's safe to do so. 

Guard said he's had several conversations with some staff members who are hesitant to return. "But overall, we are proud of the professionalism and enthusiasm our staff has shown around returning to work," he said.

There's a need for businesses to send a consistent, clear message to help build consumer confidence, according to Dirk Draper, CEO of the Colorado Springs Chamber & EDC. "We know that consumer confidence is an essential piece of businesses being able to reopen soon," he said.

Along with TAG restaurant group, ChoLon is also looking to implement additional health guidelines to its restaurants to ensure the utmost safety of its patrons and staff workers.

Co-founders, Symensma and Davis-Massey, said they're in the process of figuring out how to minimize the amount of physical contact between guests and servers. 

"Normally at our restaurants, your plate would be cleared frequently. We would make sure that we refill your water constantly and we clear empty glasses right away," Davis-Massey said. Wait staff will now bring all the drinks out at once. They'll also set the tray down and allow guests to grab their own drinks "so the server's not leaning over and breathing on the table."

Colorado residents are dining out in the patio area at Los Chingones restaurant in Denver
Source: TAG Restaurant Group

'Important month ahead'

While recent data from the Colorado Department of Public Health and Environment and Johns Hopkins have both shown a decrease in the rate of new Covid-19 cases, there are few caveats. 

The weekly case count relies heavily on the state's testing capabilities. If a state is unable to provide sufficient tests, the reported number of coronavirus patients could be artificially low. Health officials have also said there is generally a lag in the reporting of new cases, which makes it harder to paint an accurate picture of the spread of the disease. 

Samet, the dean of the Colorado School of Public Health, said the state's Covid-19 indicators, including the number of confirmed cases and hospitalizations, "are looking good" across the state.

"Hospitalizations have been falling progressively," he said, adding that the infection rate is also "where we want it to be." 

"For now, Colorado is at a good place to begin doing some measured relaxation of social distancing," he said.

That doesn't mean people should become complacent, he said. He warned that people should still remain cautious and maintain social distancing practices to "avoid having an epidemic spike that could overwhelm the healthcare system."