US economy

Covid-19 means crunch time for the sad desk salad

A few short months ago, the lunch rush at Just Salad in Manhattan’s Hudson Square neighbourhood was a mob scene. On any given weekday around noon, throngs of office workers would peel themselves away from their spreadsheets, grab their brightly coloured reusable plastic bowls and trudge over to the restaurant to join a queue that snaked around the concrete floor and spilled out on to the street.

Last Friday, however, it was completely devoid of customers.

The scene is familiar across New York, especially in areas like Hudson Square and Midtown where offices far outnumber residences. Months after the government began easing the coronavirus lockdown, scores of “fast casual” eateries remain shuttered. The “sad desk lunch” that had become its own shorthand for the corporate drone’s existence is now a distant memory, as company work-from-home policies keep most people from returning to the office.

Sweetgreen, a salad chain valued at $1.6bn last year, saw its revenue drop by nearly 70 per cent at the height of the pandemic, according to chief executive Jonathan Neman. “When the world went on shutdown, our sales took a massive nosedive right away,” he said.

That kind of loss has been common. While US restaurants as a whole saw their sales fall off by just around 24 per cent in April, May and June, soup and salad specialists were down by 69 per cent, said David Portalatin, analyst at NPD.

“Traditional lunch traffic was already under a little bit of pressure. And then along comes Covid and, of course, it mostly evaporates,” said Mr Portalatin. “If you’re a business that is heavily reliant on that, you’re really struggling right now.”

Mr Neman is downbeat about the future for restaurants, especially independent operators, and expects to see some high profile bankruptcies in the coming months. Yet, at the same time, he sees cause for hope at his own company.

Sales at Sweetgreen have picked up in recent weeks, he said. The company has reopened all of its 33 New York City locations and brought back nearly all of the 2000 employees it furloughed across all markets.

A big reason for this is Sweetgreen’s investment in mobile-ordering technology, which allows customers to pick their salads up or have them delivered without standing in a socially-undistanced line. “I think this is going to usher in a new breed of digitally native restaurants built for delivery,” said Mr Neman.

Rivals Nick Kenner, chief executive of Just Salad, and Nick Marsh, chief executive of Chopt, share his optimism.

As luck would have it, they were already adjusting their businesses in ways that seem to suit the new environment and expanding into more residential locations that have not been as hard hit by the lockdown.

According to Mr Kenner, 90 per cent of Just Salad’s orders today are digital, and most of them come through the company’s own app or website, allowing it to avoid hefty fees charged by third party platforms like Grubhub or Uber Eats.

Sweetgreen’s revenue dropped by nearly 70 per cent at the height of the pandemic

Chopt has seen similar success with its newly launched takeaway and delivery-only locations, where there are no cashiers and in-store customers must either order ahead online or use their phone to scan a QR code to order digitally at the restaurant.

Investors are even starting to look back into the sector, said Mr Kenner. Earlier this year he had been in talks with private equity about tapping into more capital to expand Just Salad. That all went on pause when the pandemic struck, but those conversations have now resumed.

The urban salad chains are anxiously watching whether or not people start coming back to work after the Labor Day holiday in early September.

“It feels pretty critical, with the change of seasons,” said Mr Marsh from Chopt. If children are able to go back to school safely, he hopes that will mean their parents will be able to go back to the office.

Right now, he estimates that big offices in New York are operating with about 10 to 15 per cent of their usual workforce on site. “I’m hearing from the big landlords in New York City that we’re going to move [closer to] 25 to 30 per cent occupancy. And that’ll be a huge, huge bump for us.”

Even if things don’t improve dramatically, all three chief executives are confident they will be able to weather the storm. Chopt, Sweetgreen and Just Salad all received loans as part of the US government’s Covid-relief package, although Sweetgreen returned what it received. Some of their landlords have been willing to cut them a break on rent.

“We are certainly in a good place right now,” said Mr Kenner from Just Salad. “Part of that is [because] our landlords have really worked with us. And that has certainly helped us to be in a stronger position.”

For Mr Marsh crisis is nothing new. He opened the first Chopt just before 9/11 and steered the company through the recession caused by the financial crisis. “Like everybody else in New York it is in our DNA to persevere through difficult times,” he said.

At the Just Salad in Hudson Square, the recovery still appears to be a long way off. “We still get some people in the store around lunch, but it’s nothing like it used to be,” said Julissa, one of the two employees on duty, as she prepared a takeaway order. “It’s been real calm.”


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