After surviving the harrowing mid-2021 local COVID-19 outbreak, the capital’s foreign restaurateurs are cautiously optimistic about the coming year.
Herban Kitchen was having a stellar 2021. With Taiwan a safe haven from pandemic-induced turmoil, the Taipei vegetarian restaurant hit a three-year sales high in early May. Not only were regulars packing the restaurant, but veggie-loving guests from elsewhere in Taiwan also began eating at Herban during their visits to the capital.
“We were on a roll,” says Marco Henry Lapka, Herban’s owner. “We could have had a record year if there hadn’t been a COVID outbreak.”
Level 3 restrictions imposed to contain the virulent pathogen when Taiwan’s vaccination rate was below 1% banned eat-in dining from mid-May until early August. The lack of on-site patrons clobbered restaurants like Herban, where guests enjoy the atmosphere as much as the food and drink. During the outbreak’s peak in the late spring, Herban’s business fell by 80%. To survive, Lapka had to cut all the restaurant’s part-time staff and two full-time staff.
Craft beer and pizza restaurant Craft House experienced similar woes. On the cusp of the outbreak, business was brisk. “Then things just fell off a cliff,” says Duncan Smith, Craft House’s co-owner. “We managed to pivot to takeout and pick-up, but it was about survival at that point, not turning a profit.”
Craft House’s sales fell 70-80% during the outbreak. Smith says that the drop in alcohol sales hit the restaurant especially hard. “Many people come to Craft House to enjoy craft beer, wine, or cocktails. They are willing to pay for that. If you take away the atmosphere and service, there is not a lot of value left for the customer in the drinks alone.”
While Craft House did experiment with alcoholic beverages to-go, sales were limited. “In Taiwan, you can easily get a similar product from a 24-hour convenience store,” Smith observes.
Like many sit-down restaurants, Craft House reluctantly turned to app-based delivery services to help it survive the sharp downturn in sales. Smith says that Craft House had tried out Uber Eats in 2020 but found that the fee was too high and that it was slowing down the restaurant’s dine-in business. Once that business vanished in mid-May, there was no alternative.
He acknowledges the convenience of app-based delivery services for customers. “From a customer point of view, it makes perfect sense. It’s easy; you can browse a wide variety of choices in the same platform on your phone and pay with your credit card.”
However, he says that many customers are unaware of the large cut the food delivery services take from each sale. For instance, the average fee a restaurant in Taiwan pays a delivery provider like foodpanda or Uber Eats is 30-40% of a sale.
Dominik Tyliszczak, owner of local chain Maryjane pizza and an investor in Herban Kitchen, notes that the cut taken by food delivery services rose from an initial 25% to 33%, and then to 40% during the outbreak.
He acknowledges that these services helped Maryjane when it could not offer patrons on-site dining but says that margins were too depressed for the business to be in the black. “A restaurant’s normal profit is 20% if things are going well. When all of your eat-in business is gone, where does the money come from?”
He weighed various options to boost margins, including setting up a ghost kitchen – a kitchen-only establishment – to reduce rent costs. However, he calculated that even with a lower rent burden, it would not be financially viable due to delivery costs.
Instead, Maryjane kept its four Taipei outlets, used delivery services as needed, and encouraged customers to pick up their food and drink in person whenever possible. To stimulate the pick-up business, Maryjane gave away draught beer and soft drinks, and offered pick-up only discounts.
As a pizza restaurant, Maryjane enjoys the advantage of having a core product that can be delivered relatively easily, even if best enjoyed in the restaurant, fresh out of the oven. Not all restaurants have that flexibility.
For Fumo, an upmarket Italian restaurant in Taipei’s Tianmu neighborhood that launched in April, the outbreak made it necessary to close down temporarily. “The atmosphere is very important to what we do. Takeout does not work well for us,” says co-owner and operations director Matteo Zennaro. After a strong start in April, Fumo closed from the end of May until mid-July. Fortunately, the restaurant was able to negotiate significant rent reductions in the summer: no rent in July, 50% of the normal cost in August, and 75% in September. In October, the monthly rent returned to normal.
The high-end American steakhouse Smith & Wollensky is one restaurant that has been resilient in the face of COVID-related challenges, especially the lack of foreign visitors to Taiwan. According to Cale Jackson, the restaurant’s culinary director, Smith and Wollensky has been able to transition to an all-local clientele – even though pre-pandemic it attracted a fair number of international guests, both business and leisure travelers.
As a premium steakhouse specializing in dry-aged beef, Smith & Wollensky has been able to attract strong demand from big local spenders who would ordinarily vacation overseas. The menu’s “classic dry-aged cuts” range in price from NT$3,280 to NT$4,280 (US$118 to US$154).
It is not just the price but the exclusivity and quality of the beef that attract high-end customers, Jackson says. “Smith and Wollensky has its own ranch in eastern Washington from which we source all of our beef. No other steakhouse has our beef.”
By the spring of 2021, Smith and Wollensky was on track for a record year. When the outbreak hit, the restaurant decided to shift gears and focus on takeout business, even though the management understood that it would not be profitable.
“We had to do what we could,” Jackson said. “We let the staff take their paid leave, and then their unpaid leave. We said to our customers, ‘You can have the Smith and Wollensky dining experience at your own dining table.’”
When Taipei City lifted restrictions on indoor dining in August, “business came back with a vengeance,” Jackson says. Such was the demand for a table at Smith and Wollensky that the restaurant’s online reservations system nearly crashed.
Heading into 2022, “we’re optimistic,” Jackson says. With January and February fully booked, “if you want a table during prime-time dining hours, you need to be looking at March.”
Other international restaurants have recovered significantly since the mid-year nadir, but say they would benefit from a restoration of international travel. Pre-pandemic, Herban Kitchen and Craft House were both destinations for international visitors to Taipei, their owners say. At Herban, international tourists used to account for 10-20% of business.
Before COVID-19 struck, “we had loads and loads of tourists, especially Japanese and Koreans,” says Craft House’s Smith. “We would welcome tourists again.”
For Fumo, Taiwan’s closed border presents a particular challenge. The Tianmu neighborhood is historically home to the most foreign families in Taipei. However, the pandemic has severely disrupted the normal rotational assignments in multinational companies that bring foreign business executives to Taiwan for several years at a time. Without this market to serve, Fumo faces more constraints on its business.
“The local market is very strong and our regular guests have been helping introduce new customers to us,” says Fumo’s Zennaro. Yet, it is not enough for the young business to thrive. “We are surviving, just breaking even.”
Elsewhere, business is good, but it is difficult to find staff. Both Herban and Craft House say they are understaffed. Herban’s Lapka reckons Taiwanese remain wary of COVID-19 and may be concerned that they are more likely to be infected working in a restaurant than elsewhere. He expects that if Taiwan keeps the virus corralled, eventually such concerns will ease, especially with the island’s vaccination rate at 65% and climbing steadily.
Containing the virus is paramount for customers to have the confidence to eat in. Otherwise, they will default to delivery and restaurant margins will continue suffering, Maryjane’s Tyliszczak says. “For us, the ideal ratio is 70% eat-in and 30% delivery, and right now we’re at 65% delivery.”
To generate more interest for eat-in dining, he has added cocktails to the menu at Maryjane Pizza Bar in Taipei’s Da’an District and introduced regular DJ nights. “It has to be an experience; it has to be an event,” he says.
Meanwhile, Craft House’s Smith urges Taiwan to ease restrictions on foreign arrivals after the Lunar New Year period, when the two-dose vaccination rate is projected to reach 80%.
“Opening up is what we need and what we planned on,” he says.