Many of us must have already heard Albert Einstein’s quote, “In the midst of every crisis lies great opportunities,” two and half years into the pandemic. In webinars I’ve attended these past months, many speakers have tackled this idea, and all of them are trying to reassure us that there is light at the end of the tunnel. They encourage people to look beyond the negative effects and point out the need to learn from the crisis so that we will not only survive but also thrive from it.
Since rejoining the company in 2003, I have had the privilege of seeing Shakey’s post 16 consecutive years of double-digit growth both in sales and profits. Even as late as mid-March of 2020, the business was doing extremely well and we were certain to extend the run to 17 consecutive years. Then on March 16, 2020, the government imposed one of the world’s strictest COVID-19 lockdowns, and all hell broke loose.
In my 37 years of working in the food service industry, I’ve witnessed numerous crises, all of them bringing serious negative effects. From my experience, the combined effect of all the previous crises that hit the industry would pale in comparison with the catastrophic effect of the COVID-19 health crisis. I consider this pandemic a bona fide “Black Swan” event — something rare, totally unexpected, and with far-reaching ramifications and consequences — for the food service industry.
With our strong position in the industry, Shakey’s had felt invincible before the pandemic, yet we were not spared the crippling effects of the crisis. Our chairman would eventually describe Shakey’s as “a hard-hit company in a hard-hit industry.” In the first few weeks of the pandemic, the whole team was lost and did not know what to do.
I’m the type who loves challenges and I get excited about solving problems. I soon realized this crisis was immensely different; no one knew what we were up against, and I didn’t have a playbook for this. Truth is, with all the fear, anxiety, and sense of hopelessness, I actually entertained the idea of just quitting and escaping. Good thing I didn’t.
We did what most could not — open more new stores than ever and boldly acquire additional brands to our portfolio during the crisis. The painful but necessary belt-tightening measures and the structural changes we adopted in the pandemic now help our group by cushioning the cost headwinds.
Like all other restaurant businesses, Shakey’s is basically a cash business. The ability to generate healthy cash flows is one of the key reasons many invest in this industry. However, the lengthy, strict, and widescale lockdowns imposed during the pandemic negated that ability. Like all major food chains, our company has huge fixed overhead costs to be able to operate effectively. When the revenues practically vanished, this huge overhead fixed cost became our worst nightmare. Not knowing how long the lockdowns would last and the huge drain on cash were what made many in the industry decide to close business.
Shakey’s employs several thousand employees, and we have suppliers and business partners depending on the company. It was our duty to find ways to ensure they were safe and help them go through the very difficult financial stage. At the same time, we had an obligation to make sure we served our guests in a safe, secure, and convenient way. Existing safety protocols weren’t enough and we had to find new solutions. All of these entailed additional costs and, with revenues reduced to a fraction of normal levels, we surrendered to the fact that we were in for a huge financial loss. There was no escape. We decided to just focus on how to survive the crisis, navigate it as best we could, and find a way to come out of it in a strong position to take advantage of opportunities that we knew awaited us afterward.
I believe that while it seems like the worst of this pandemic is behind us, the risk of new lockdowns continues to loom overhead. Couple this with the historic high inflationary environment, and we have a situation where we must be extra careful to avoid mistakes that could plunge us back into the abyss whence we came. But there is hope, and I do see that we are close to better days. And because we truly believe in the relevance, strength, and resilience of our brands and our people, we did something different. We did what most could not — open more new stores than ever and boldly acquire additional brands to our portfolio during the crisis. The painful but necessary belt-tightening measures and the structural changes we adopted in the pandemic now help our group by cushioning the cost headwinds. We expect them to also provide us with even healthier margins once revenues normalize and increase.
Now as I look back on the last two years, I believe our team has earned the right to say that we went through our darkest time and came out of it better, smarter and stronger.
Indeed, we are betting big on our recovery play, and we are strengthening our capability to bounce back better. It is not without risk, of course, but I am confident in our growth playbook. We have applied extreme diligence to our plans, we are very conservative in our estimates, and we always maintain a healthy and productive paranoia that new disruptions can re-occur anytime. I know our team is ready to quickly apply the many contingency plans that we have in place alongside our growth plans. The word “hubris” has always been deeply entrenched in our minds, and we will make sure we do not ever get caught in its trap.
As of writing, business results are indeed encouraging, and our numbers, barring any new lengthy lockdowns, all point to the strong possibility that our system-wide group sales will even surpass pre-COVID-19 levels. I believe 2022 will be a much better year than the last and that our team is off to a new double-digit run. With the high dedication and passion of our employees and their strong desire to wow, it is almost certain that our brands will strongly recover this year.
Now as I look back on the last two years, I believe our team has earned the right to say that we went through our darkest time and came out of it better, smarter and stronger. That we learned a lot from the COVID-19 crisis — by taking advantage of the opportunities that lay hidden.
NO, we did not waste this once-in-a-lifetime global pandemic. I pray it is the same for others.