'Shifting to home delivery and home shipping, its really kept us alive': Pat LaFrieda on COVID-19 impact on business

Pat LaFrieda, Pat LaFrieda Meat Purveyors CEO, joined The Final Round to discuss how COVID-19 has changed the restaurant industry and how his company has had to adjust operations and business strategy in order to stay afloat.

Video Transcript

- Welcome back to The Final Round. Well, the restaurant industry is struggling to survive the pandemic. The National Restaurant Association this week saying that around 100,000 restaurants have either closed permanently or for the long term. And the sector is on track to lose just around $240 billion in sales this year. Here to talk a little bit more about this, we have Pat LaFrieda. He's the CEO of Pat LaFrieda Meat Purveyors. And pat, it's great to have you on the show.

Your customer base includes a lot of these restaurants, a lot of these hotels that have been under a tremendous amount of stress over the last several months. I know you also sell directly to the consumer. But on the restaurant and the hotel side of things, what kind of impact has the pandemic had on that part of your business?

PAT LAFRIEDA: Well, most-- about 95% of our business was selling those high-end restaurants. So on March 16th, when those closed, I mean, that truly was a pandemic for us fiscally, especially with our accounts receivable as high as they were. So basically, most of the meat that was sold in January, February and half of March has not been paid for.

We've encouraged those restaurants to stay open and to do take out, curbside pickup, and to alter their business in the way in which they could stay open so that, when normalcy would come back-- if you remember, the reopen date was March 1st. And then we just had to make it to March 1st.

And then that date never came. But what did come is this void in leadership. And really, until last week, we didn't know when restaurants in New York City would be able to open. So I never really thought that the one thing that the restaurant industry needs most-- it's not a bailout, it's not a stimulus, it's freedom. We need the freedom to use the data and act accordingly.

If you'll remember, we were told that we were not going to be political about this. We were strictly going to use the data. And according to the data, we should have been open a while ago.

- Well, Pat, going off of that, what we have had happen over the last couple of weeks, the last couple of months, and looking ahead, we mentioned all this uncertainty. Have you shifted your business at all as a result? Or do you plan to make the direct-to-consumer part of your business at least a little bit more of a focus here, at least in the short term?

PAT LAFRIEDA: Absolutely. So we had already branched out and diversified into retail, so supply and retail. Even Amazon was one of the biggest users of our products during this pandemic. So between retail markets like Shoprite, Amazon, Fresh Direct, and our own home delivery-- so not only do we have our own home delivery, we fulfill kits, like Shake Shack's kit. You could actually buy a Shake Shack kit and cook burgers from it-- all fulfilled from our facility.

Because of our employees, I did not want to let anyone go. So I was able to retain all of my staff for this reopening date to come. And we've been successful in doing that. We went as far as allowing our stay staff to bring their children in for those whose schools did not open, which seemed to be a little bit more than than we expected. But, yeah, shifting to home delivery, which, I think we're going to see home delivery continue like this for quite some time.

I mean, I think that no matter what, people are uncomfortable in the supermarket. There's really little social distancing as a whole. If you really look at it, there's not six feet in between each person there. So the fact that you can get groceries delivered to your front door, and now, with other vehicles like InstaCart, you know, within a few hours, it's pretty remarkable. So shifting to home delivery and home shipping, it's really kept us alive. And I think it's going to be that way for quite a while.

- Pat, Ines here. And depending on the areas when restaurants start doing in dining with limited capacity, is that really enough, though, for restaurants, if there's limited capacity, especially as the weather starts to get colder, and people may not want to be sitting outside? Because restaurants operate under such tight margins.

PAT LAFRIEDA: Well, in New York City, there's no choice. So at the end of October, outside eating gets taken away. So if 25%-- so restaurants could barely make it. And they usually work paycheck to paycheck with 100% capacity. So now, at 25%-- which, I think we'll be a little bit more than that-- as long as the numbers stay low, I think, if we can ramp up that 25 to 50, and then, I don't know if there's a 75, then 100, or it just jumps. I don't think any of us know yet. The faster we can get to that 100, it's going to give that many more-- that much more percentage of restaurants will be able to stay open. So earlier, as we're speaking about the small caps relying on the large caps to survive-- and, you know, it was the other way around at one point in our economy. And now, the small caps have to rely on the large-- these are individual business owners that cannot stay open with a little bit of outside dining at 25% capacity. They need to reopen.

It's odd that, right outside the Five Boroughs, they do have indoor dining already. They're already at 50%. When you step one foot onto that Five Burrows, you know, anywhere in that boundary, and-- you know, it's not until the end of this month, can there be any indoor dining. So it's going to be a struggle. There's not a doubt about it.

And many are going to reach out and cry for help for the restaurant industry. We can help restaurants by participating in visiting those restaurants. But what have we seen in New York City? As a result of restaurants being closed, it's one main reason, you have an exodus. We have to get people back into New York City. And it's going to be quite a while before Broadway opens again. And I understand that. The seats are very close together.

But you really need all of that attraction to get restaurants full, for restaurants to be profitable. So at 25%, the profitability, they will continue to lose money for quite a while until they're able to fill to capacity.

- Hey, Pat, we only have about a minute left here. But you have such an inside look at this. And I'm curious, what percentage of your clients are at risk of going bankrupt or have already been forced to close because of the pandemic?

PAT LAFRIEDA: I have a stack of chapter 11s on my desk. I would say that 50% of all restaurants that did not open at all during this, that stay closed, they're already closed up. They're done. They're never reopening. Some are calling me to say hello from other countries, from the suburbs, from-- you know, they're just now coming back to New York. So at least 50%. And we have about 1,600 restaurants that we service in New York City.

So if, of the 1,600, if maybe 500 or 600 of those didn't-- they didn't open in any capacity, that's 250 to 300 restaurants just closed, right? You know, these are very frequently used restaurants. You know, they're our favorite places. And for them to not be able to open, fiscally, it's impossible.

- Yeah, it is. And we know that they're so important, not only from a job standpoint. Obviously, they employ so many local workers. But also just from a culture standpoint, from cities and everything. So if we see mass closing, that's obviously very, very worrisome for the economy going forward. Well, Pat LaFrieda, great to have you. Thank you so much for taking the time to join us. CEO of Pat LaFrieda Meat Purveyors. We'll talk to you soon.

PAT LAFRIEDA: Thank you for having me.

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