How Much COVID-19 Pivots Cost One Detroit Food Hall

Annoyingly techie but excruciatingly precise, “pivoting” is now a loaded term in the restaurant world. The pandemic has demanded adaptation; since March 2020, restaurants and bars across the country have navigated through the COVID-19 pandemic by transforming into online groceries, outdoor dining destinations, meal-kit providers, and more. These pivots require time, resources, creativity, innovation, and, of course, money — and their success can mean a restaurant’s survival. In this series, Eater asks operators to open their books and explain how pivoting has (and hasn’t) worked, by the numbers. First up: Detroit Shipping Company.


March is usually a whirlwind time for Detroit restaurants. Diners come out of the hibernation that Midwest winters demand and revel in a slew of holidays and sporting events, including St. Patrick’s Day, Detroit Tigers Opening Day, March Madness, and the Marche du Nain Rouge, an annual parade and celebration held in Cass Corridor. For Detroit Shipping Company, a two-and-a-half-year-old food hall near the Marche du Nain Rouge parade route, March 2020 was shaping up to be a great month. “We placed a huge order getting ready for St. Patrick’s Day and Nain Rouge, and we had mountains and mountains of Jameson and Irish whiskey,” general manager Matthew Zacklan recalls. But by the time the booze was delivered, the state confirmed its first two COVID-19 cases. Within six days, the state’s food industry was at a nearly complete standstill.

Trying to ensure the safety of customers and staff and the viability of the restaurant stalls that operate inside Detroit Shipping Company’s walls has been, to put it mildly, challenging. In a regular year, the food hall would be thriving off a steady number of customers coming in for entertainment, drinks, art displays, and international food from six independently owned restaurants. At full volume, it might hold 600 people.

“We are considered a food gathering spot and community space where people come together, order, and then sit with some people that may or may not be in their own party — they basically sit with random strangers,” says Zacklan. All that, however, has been put on hold because of COVID-19, throwing its model into question. In 2019, Detroit Shipping Company served 88,210 customers. In 2020, it served less than a quarter of that volume. It closed its doors on March 16, 2020 with the expectation of reopening sometime in early April; on its last day of service, the food hall made a grand total of $734. Since then, the food hall has undergone several iterations, reopening for curbside carryout on May 20, and for dine-in service at half capacity on June 12. With the exception of a brief closure in July to reevaluate its reopening plans, Detroit Shipping Company has kept the doors open in some form ever since.


Sales changes

Detroit Shipping Company, by design, is a destination for private parties and a gathering place for large groups. The 12,000-square-foot food hall is within walking distance of some of the city’s biggest concert venues and arenas. The variety of food and the space, complete with stages for musicians, makes it a good, people-pleasing spot for hosting casual events. But with the pandemic, large gatherings were one of the first things to cease in Michigan. Weddings, bachelorette parties, and baby showers were canceled at a moment’s notice and counties began issuing new capacity limits. Detroit Shipping Company tells Eater that it canceled roughly 145 private events, including one wedding, as well as six public events and countless regular calendar events like open mic nights and comedy shows.

A visual illustration the event cancellations explained in the story.

Staffing

Between 25 and 30 employees were laid off in March, including most of Detroit Shipping’s events staff. Detroit Shipping Company, like many establishments, organized a staff fundraiser, but received only $1,915 toward its $50,000 goal, while some individual restaurants within the food hall, like Bangkok 96 Street Food, received nearly $2,000 in donations to benefit workers.

In order to comply with new rules that came down in the summer limiting the movement of customers as well as mandating masks and social-distancing requirements, the food hall restructured front-of-house operations. Instead of customers walking up to order at individual stalls, Detroit Shipping Company had to offer table service, with a host at the door who enforced masks and seated guests and food runners delivering customer orders to tables. Detroit Shipping incurred additional labor costs to hire those workers, as well as from hiring staff to help keep up with rigorous sanitation protocols. “It definitely added up,” Zacklan says.

Relief

In the spring, the team applied for the Paycheck Protection Program through the CARES Act, securing $100,700 — all of which management ended up using to pay staff and modify service — and an additional $149,900 Economic Injury Disaster Loan. “That helped us tremendously,” Zacklan says. The food hall also secured grants through a local company, Midtown Detroit Inc., to help with things like rent relief for tenants, totaling $26,016 — enough to forgive two months of rent for each business within Detroit Shipping Company. The food hall also participated in a state spirits “buyback” program that offered money in exchange for liquor purchased prior to the March 16 shutdown. This allowed Detroit Shipping Company, which operates all the bars within the food hall, to offload the booze it had purchased for events like St. Patrick’s Day that never happened.

A visual explaining the loans described in the story.

A visual showing the money received from the state buyback program explained in the story.

New costs

While many restaurants were bringing in little to no revenue at the beginning of the pandemic, some were still compelled to make costly purchases to improve their online presence and takeout services. The restaurants within Detroit Shipping Company transitioned from independent point-of-sale systems (the programs and equipment through which businesses take orders and payments) to a single online ordering system, costing Detroit Shipping Company well over $10,000. (The unified point-of-sale system, notably, didn’t last. Shipping Company partner Jonathan Hartzell says that they’ve returned to individual systems due to the complicated nature of splitting up sales for each business.) The company incurred new costs from cleaning supplies and PPE, included as part of its management responsibilities.

COVID-19 pivot-related construction projects were another cost to contend with. During the spring, management spent an initial $35,000 constructing a patio in the property’s surrounding parking lot to supplement seats in the building’s central courtyard. They added wood fencing to insulate the space, as well as a volleyball court to make the outside of the building feel more fun and inviting. They erected tents and designed new wood booths to improve the feel of the outdoor area. For Hartzell and his business partner, James Therkalsen, creating the outdoor space was actually a positive outcome in a very challenging situation. “It’s been our dream and plan that the area around us builds up, and to eliminate the parking lot in the back and make that into the backyard,” he says, referring to the vacant space surrounding Detroit Shipping Company’s two-story building.

Hartzell says that from the outside, it looked as if Detroit Shipping Company was doing well during the summer. “During the height of the late summer, when people felt comfortable being out, we would have an hour wait, and it looked like we were jamming,” he says. “But you’ll see year on year, we were still at 40 percent of what we were doing [during the same period in 2019].” The smaller capacity limited the food hall’s ability to serve as many people per day, and the groups coming in were smaller, too, in accordance with safety recommendations. Changes to state laws allowing for to-go cocktails did little to help.

And winterizing was a huge, largely unrecognized cost incurred by restaurants in cold climates this fall. Detroit Shipping Company’s management estimates they spent $30,000 on top of the $35,000 to build the original outdoor seating area. Less than a week after the new tents were built, Michigan closed down indoor dining areas and placed some unanticipated restrictions on outdoor seating. Among the rules: Outdoor structures were required to have no more than one wall if they seated multiple groups, meaning tents like those at Detroit Shipping couldn’t be enclosed or insulated with any sort of wall. They also had to be a certain distance from standing walls, meaning that Detroit Shipping Company had to move one of its tents from inside the building’s courtyard seating area further away from its building to comply, at a cost of $3,800. “That’s one misstep on our part that we couldn’t foresee,” says Hartzell.

A visual explaining the costs of building, maintaining, and weatherizing outdoor dining setups as described in article.

A visual explaining the costs of a new point-of-sale system as described in the article.

A visual that explains the costs of personal protective equipment and cleaning supplies as described in the article.

Looking forward

Right now, Michigan restaurants are gazing into an extremely difficult winter. Indoor dining is currently closed through Sunday, January 31, with the possibility that the state may allow some forms of indoor service to resume on Monday, February 1, if hospital capacity, overall case rates, and the percent positivity rate continue to improve. Businesses like Detroit Shipping Company, which has received numerous grants and loans throughout this process, may be able to make it through. But others may not.

Even with that relief, however, winter has its own set of challenges, and the promise of March — its events, its improved weather, its potential for progress on vaccinations — is still a ways away. “Unfortunately, we had to lay some people off and make some changes internally to operate for the winter. We’re pretty much doing everything we can to make it this winter,” Zacklan says. “Hopefully in spring, we’ll see some will be in better days.”

Infographics by Brittany Holloway-Brown, icons by Made by Made.

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