Restaurants 2.0: What kind of dining experience can we expect a year from now?

Josh Niland surrounded by takeaway packaging at Saint Peter restaurant in Sydney.
Josh Niland surrounded by takeaway packaging at Saint Peter restaurant in Sydney. Photo: Rob Palmer

Josh Niland opened Saint Peter on the site of an old sushi joint in Sydney four years ago. A co-production with Niland's wife, Julie, the seafood shrine has impacted the way chefs think about fish cookery like few modern restaurants before it.

Now the chef is ripping his 35-seat restaurant to bits and starting again. 

Luke Mangan: 'The days may be gone where you can charge $70 for a steak.'
Luke Mangan: 'The days may be gone where you can charge $70 for a steak.' Photo: Dominic Lorrimer

"With social distancing restrictions, we can only have 17 people in the room including staff, so that has prompted a lot of conversations about what we do next," says Niland. "We've decided to demolish the restaurant and deliver a whole different offering."

The chef says Saint Peter will remain at its current Paddington site, but with one long bar running through the middle where no more than 20 people will sit once social distancing rules have been lifted. 

"We're not turning the place into a wine bar, though," he says. "If anything the restaurant will be more focused and detail-oriented than ever before."

Restaurateur Chris Lucas.
Restaurateur Chris Lucas. Photo: Simon Schluter

The Saint Peter owner is one of the country's 22,000 restaurant operators rethinking their business model as Australia begins to emerge from the coronavirus crisis. COVID-19 has ravaged a restaurant industry already under immense pressure before venues were required to pause in-venue dining in March. 

Increasing labour, rent and food costs, restaurant oversupply, skilled staff undersupply and delivery platform-led disruption were some of the factors contributing to a restaurant model the majority of operators acknowledged was broken. 

In order to stave off mass restaurant closures, industry leaders are now asking the government for an extension of JobKeeper for the hospitality sector, especially if social distancing is still restricting trade at the point of the payment scheme's cut-off date in September. 

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Meanwhile, restaurateurs such as Luke Mangan and Merivale's Justin Hemmes are calling for the fringe benefits tax on dining to be scrapped. "If that tax can be abolished, the corporate business lunch customers will come back to restaurants rather than sitting in a boardroom," says Mangan. "It would be a great way to help kickstart the industry again. Changes to payroll tax would also help our bottom line."

However, industry insiders believe it will take much more than stimulus packages and tax reform to create a robust hospitality sector in Australia. 

"Everything is broken into pieces at the moment, which means it's a good time to analyse what we're putting back together," says Christian McCabe, co-owner of hatted Melbourne wine bars Embla and Lesa. 

"It will be a wasted opportunity to put things back the way they were, especially when the 'way they were' was not really making much money for anybody." 

What pieces of the model need discarding or nurturing, then? And what kind of experience can customers expect from an Australian restaurant in 12 months time?

Fire and regrowth

Market analysts IBISWorld predicts revenue for the restaurant industry (excluding cafes and fast-food outlets) will fall by 25.1 per cent in the current financial year to $15 billion. 

Data also forecasts restaurant numbers to fall by 9.6 per cent in the current financial year, however Mangan believes that number will massively increase over the next six months.

"Unfortunately, when JobKeeper finishes, I think we will lose a good 30 to 40 per cent of our cafes and restaurants because the current business model just isn't great," he says. 

Kisume and Chin Chin owner Chris Lucas says that while the pandemic has been terrible for the industry he loves, the devastation also presents an opportunity for vibrant regrowth. 

"Before the pandemic, the industry was a bit like an overgrown forest," says the Melbourne-based restaurateur. "It had been allowed to let itself go in all sorts of directions. I wouldn't say it had lost its way, but in some ways it had become very self-absorbed and very insular."

Lucas views the virus like a bushfire burning everything that stands in its way. "But just like after a bushfire, the forest will regenerate. I think it's going to be very exciting for the consumer. The diner is going to experience a rush of creative spirit they haven't seen before – a new wave of thought about what restaurants are."

McCabe believes more restaurants will focus on being centres for culture and their community. "The good thing is, a lot of great people already know how to provide that sort of hospitality," he says. 

Christian McCabe, owner of the Embla. Restaurateurs react to the premiers continued shutdown of restaurants. 11 May 2020. The Age News. Photo: Eddie Jim.

Christian McCabe of Melbourne's Embla and Lesa says it's time to analyse. Photo: Eddie Jim

Value matters 

"The days may be gone where you can charge $70 for a steak," says Mangan. "At the very least, it's going to be a harder sell."

Lucas agrees. "Many people have been impacted greatly by this virus, and they're not going to want to visit a restaurant for an ego trip or martini that costs $55 for god knows what reason."

The restaurateur says Lucas Group is reworking all its restaurant menus, wine lists and cocktails to "reflect warmth". 

"I think over the next 12 to 24 months, that's going to be the driver – making the customer number one and being sensitive to their needs. People will want something real. The aim will also be to recalibrate people's perception of what value is."

Niland also hopes to change people's value perception, but won't be dropping his prices when Saint Peter reopens in late July. Rather, he will likely increase the cost of his tasting menu to reflect the level of skill and quality of produce required for each dish.

"I've started talking to a lot of people [in the supply business] I've never spoken to before because I feared their price tags," he says. "But I feel that if we're gearing ourselves towards a business model that's going to be raising the price of food, then people's expectations rise just as quickly and you have to deliver."

Saint Peter's new bar-style seating is designed to bring greater visibility to chefs and front-of-house staff. 

"Even with an open kitchen, I think the intimacy of a chef's work gets lost," says Niland. "It's cool to sit at a bar, sure, but it's also important to see the level of attention provided to these premium ingredients to justify the renewed price tag."

John Susman is the managing director of seafood marketing, sales and consultancy company Fishtales. He says a strong value proposition will be vital for restaurants moving forward. Customers will still pay $70 for a rib-eye or premium fish, but it has to be deadset delicious to warrant repeat business – there's no room for "just OK" in an economy with reduced tourism numbers and weak consumer sentiment.

"I'd like to see a re-emergence of the perception of value over price," he says. "Price at both ends of the spectrum doesn't necessarily dictate quality."

General manager of Fink hospitality group, Jeremy Courmadias, concurs. "Value isn't necessarily about spending the least amount possible and getting the most you can, it's the proposition of quality."

Fink owns Sydney fine diners including Otto, Quay and Bennelong, and Courmadias says the group is "doubling down" on that quality proposition coming out of the crisis.

"What I've found in my experience off the back of other financial crises, is that the restaurants which have been ever reliable day in, day out - year in, year out - are the ones that get busier during the tough times. People will spend a little bit more on a better experience if they know it's going to be as good as it was the last time." 

Money up front, no food for free

Diners skipping a restaurant booking and not informing the restaurant is disrespectful at the best of times, but potentially restaurant-closing when venues are experiencing reduced revenue. 

"The no-show rate in our restaurants is unacceptable," says Justine Baker (pictured), chief executive of Solotel hospitality group which counts Matt Moran's Aria and Chiswick restaurants in its portfolio. 

"A no-show can take you from a profit point to barely breaking even or worse. As a result, I think the requirement to prepay for your restaurant experience at the time of booking is going to become quite common, especially in the premium dining space."

Niland says prepaid bookings are becoming necessary to guarantee income, too, and the customer can also benefit from paying in advance.

"There has to be conversation around ticketed dinners. It's a tricky one to dive into head first, because there's a lot of things to consider, but I like to think of it like a theatre production. By booking your ticket to a show a month before it opens, the theatre company is able to organise the best cast and props it can.

"In our case, the cast is our staff and the props are the food and wine and all the other details that make up a restaurant experience." 

Susman isn't against the idea of prepaid bookings diners, but says restaurant operators should consider paying their food suppliers on time, too. 

"I look at my debtors ledger every night and cry. It's not about the account that hasn't been paid since March, it's the account that hasn't been paid since December. Every distributor I'm talking to is now saying that outside of the corporate companies, they will no longer be extending credit to food service operators.

"They're happy to take an American Express or Mastercard, however. Restaurants using corporate finance rather than distributor finance is going to be the new world order."

James Marinopoulos is the sales manager at Melbourne's Red Coral seafood supply company and supports Susman's call. 

"I'm deeply concerned that a lot of suppliers won't come out of this pandemic in a good state, and the fishers, farmers and producers upstream won't be paid either," he says. 

"At Red Coral, we've survived the past two months because five years ago we said 'enough is enough' and started putting everyone on a tight leash. If operators don't pay their bills, we cut them off – simple as that. This approach has helped us weed out the bad operators and today everyone we have on our books is a great person."

Susman is also hopeful for a return to "old-fashioned relationships". 

"I would like to see more supplier-chef relationships that are symbiotic in the true sense of word - commercially, culturally and respectfully. A return to working closely with someone rather than calling three guys to ask for the best price on tuna, or flicking one supplier for putting pressure on the restaurant because you're 60 days in debt."

Small Town by Tim Deutscher  Jo Thomas and Alex Delly and their family.Supplied for Good Food 

Small Town's Jo Thomas and Alex Delly with their children. Photo: Tim Deutscher

The shrinking restaurant

Over the next 12 months, there is a very good chance more Australians will eat at smaller restaurants with tighter menus and fewer chefs in the kitchen. 

"It's very true for restaurants that the bigger they are, the harder they fall." says Alex Delly, who opened the 20-seater Small Town in Milton on the NSW south coast last year. 

"When my wife Jo [Thomas] and I closed our larger restaurant St Isidore in 2019, we built Small Town based on what we thought the future would be. A business designed to run on the smell of an oily rag. A lot of other restaurant operators have also been considering shifting to a smaller venue, and this pandemic is definitely going to escalate that." 

Like many restaurants reopening after the virus, Small Town is offering a condensed set menu with a minimum spend to maximise turnover during social distancing.

"It's when you start making the changes for this new world, that you realise that you have perhaps been underselling your product and experience all along," says Thomas.  

"Suddenly we're telling people that they must fork out $75 for a fixed priced menu, and they can only stay 90 minutes so we can get the next lot in to try and turn a profit. It feels weird, but our accountant is happy. I feel like perceptions are changing - maybe people will realise this industry has been on a thread for such a long time, and we all have a role to play if we want it to survive."

McCabe says coronavirus restrictions will certainly shape what Australian food looks like for some time.

"If we're trying to squeeze more people through in shorter periods because we have a restricted number of seats, then you have to come up with menus that are faster to serve. And if you want to save on labour costs, you can't have food with too many components or work required." 

Delly says he has already been trying to "knock out all the kitchen nonsense" involving tweezers and edible flowers at Small Town. "I think we'll see a lot more examples of chefs simply serving a delicious piece of fish or meat with great sauce and letting the produce speak for itself."

An industry united

"One of the big positives to come out of this pandemic is that we're more united as an industry than we have ever been in the past," says Baker. "The way everybody has banded together has been fabulous – a lot of information has been shared between competitors that normally wouldn't be."

Baker believes this new collaboration also paves the way for the industry to approach Canberra with a united story on issues such as tax reform and changes to the restaurant award legislation, which many operators say is overly complex and out of touch.

"I don't want to drop anyone's wage, I want to improve it," says Lucas. "But to do that, you need productivity and flexibility. Overtime has effectively been banned, for instance, because no one can afford it. If a kid wants to work more than 38 hours a week to save for a mortgage, they usually end up taking a job at another restaurant under a different tax rate. The whole thing's ridiculous." 

Lucas says the time is right for reform, but it will take maturity and cooperation from both sides of politics and the labour movement to recognise the system needs to be fixed.

"Everyone will need to drop their politics and ideologies and come together," he says. "Just like they've done in the past nine weeks to save the country." 

Niland says the industry must also focus on how it can engage with the next group of staff coming through, "provided they haven't lost all faith and hope in restaurants". 

"There's a lot of conversation around what the dining scene will look like coming out of the pandemic, but how damaged are the chefs going to be too? Will some chefs just give up and decide to become a plumber? It will be wasting their talents and capacity for teaching if so."

For Mangan, engagement with the next generation of Australian chefs, front-of-house staff, sommeliers and managers is paramount to creating a sustainable restaurant industry. The chef and restaurateur is currently in talks with state governments to visit highschools and promote the benefits of a career in hospitality through question-and-answer sessions with industry leaders.  

"We're bringing in people such as Peter Gilmore and Guy Grossi to talk with kids about how good the restaurant business can be and what it can do for their future," he says. "If this all clears up, we'll be holding those sessions in August and September around the country."

Change for good

Consumer sentiment is the great unknown coming out of COVID-19. How many Australians will be able to afford that $70 steak? How many households will be in a financial position to eat at restaurants at all? And even if a person has the bankroll for silver service seven nights a week, there is a fair chance they may enjoy the comfort of home cooking a little while longer.

One thing is certain, though: restaurants will never be the same. Honesty, generosity and fairness will most likely be the values successful business models are built on. Restaurants fostering positive social change will thrive.

Operators who give a damn about their staff, suppliers and customers are poised to come out of the crisis with renewed strength. Swindlers focused on a quick and easy buck will swiftly discover that buck isn't quick and is far from easy. Restaurants face a hard road ahead, but the future is bright.