How did your peers survive the economic carnage of lockdown? And how will they come out the other side? We talk to Craig Squire, whose restaurant Ochre, in Cairns was heavily reliant on the international tourist market in a town that was similarly exposed.
Even though the lockdown due to the pandemic started at the end of March, you’d been feeling the impact since January, hadn’t you?
As soon as the news got out about the shutdown in Wuhan, China banned all outbound travel. That was the end of January, which affected business to Cairns straightaway. And not only did it affect restaurant trade, but I have a catering company called Tropic Spirit Catering that specialises in the Reef Fleet, the large day-tour vessels going out to the Great Barrier Reef. So that side of the business was extremely affected because a lot of those big reef trips have been heavily focused, in the last 10 years, on the Chinese market. So we were copping it from all sides.
Did you start formulating a plan in those first three months of the year to try and work out how you would manage that?
It was pretty much ‘learn as you go’. Like it has been for everyone, from the prime minister down in this whole situation. There was really no point in those early days in changing your business focus or your marketing, but what we did do pretty quickly was to pivot the catering company to focus on locals as well as tourism. And we started doing a home delivery meals service, because people were getting a bit more hesitant about going out because of the health scare. We started doing that pretty early, before the March 23rd restaurant shutdown.
Did you find that there was a good uptake in the local community, given that a lot of people’s jobs and sources of income elsewhere in the community are also from tourism?
The locals have been very supportive. Obviously, there are still people with income, but as time goes on, people’s discretionary spending will be reduced as more businesses fold. In today’s paper in Cairns, they’re reporting that we’re looking at 18 per cent unemployment. I would estimate there’s probably about 25 to 30 per cent on JobKeeper. That’s massive. Those numbers are just way higher than anywhere else in the country.
The thing with tourism is, you don’t just turn on a tap and it all starts again like it was. The projection for this region is based on the GFC model, which, of course, didn’t have such a devastating low point, but the graph basically demonstrates a five-year timeline until we’re back to where we were.
How has it impacted your menu and your supply chains? Ochre has built a reputation over the years for a focus on native ingredients as well as fresh local produce. But I would imagine the large spike in demand from the major supermarket chains would have a flow-on effect?
A lot of those producers and growers are still obviously doing their thing and we’re buying as much as we can locally. Ironically, we have a fantastic local milk and dairy producer up here, but they just can’t keep up with their commitments to Coles and Woolworths and can’t supply what we need, in terms of milk, cream, and cheese. The main problem I found in the first few weeks of the shutdown was the quality of fruit and veg was extremely questionable because the wholesalers got caught with so much stuff that they then tried to pass off, so there was a lot of returns going on. We were having to stand our ground with a couple of suppliers. There’s a couple of things that are out of stock, but we’ve got plenty of options and plenty of menu items and fresh produce, so that’s been okay actually.
And with the native ingredients?
The local market is less interested in native approaches than the tourism market. So when we were only doing home delivery, we stopped getting the fresh natives that are quite expensive straightaway. There just wasn’t the demand. I put my first native food order in a week ago and I picked it up from the airport today, so we’ve restocked with what we need there. Now that we’ve reopened the restaurant on Thursday and the menu’s a slightly different positioning for the local-only market we’ve got, but the pricing’s the same.
How did you manage the situation with staff?
I think the shutdown was on the 23rd of March and then JobKeeper was announced on the 30th, so we stood down all our front-of-house staff and we moved our home delivery to our catering facility to share overhead costs. And then when JobKeeper was announced, we brought back our five full-time front-of-house staff, and I’ve had 14 staff, which includes myself, on JobKeeper ever since. The most tricky thing with the JobKeeper is the internal politics of managing your staff hours so that they’re all doing similar hours—because they’re all getting paid the same money. I’ve had a bit of attitude about the apprentice or the waiters earning the same money as more qualified staff. So we just have to explain that it’s best to just cop it on the chin and let’s all be happy we’ve still got jobs and that the business has got the cash reserves to get through this.
How have you kept staff busy and kept things ticking over?
The catering company, Tropic Spirit Catering, has definitely been the more severely impacted with business loss because it was essentially a wholesale caterer primarily servicing tourism, and we’ve basically had to start that business from scratch with the home delivery meals. We also started up straight away a grocery home delivery service, which was quite popular, but has dropped off a bit now that the big players are back heavily marketing their home delivery.
We also started with picnic platters and hampers, and trying to think of new ways of developing business relationships. We just put out an individual lunchbox product. We can provide lunches for very low numbers for small tour operations that might otherwise not have a lunch option. And Ochre itself has been doing home delivery all throughout and using our front-of-house staff as the delivery drivers, and then washing the dishes and keeping them busy.
Do you think this current, limited set-up is sustainable?
My prediction is I won’t be making a profit until well past this point next year, at best, as my best case scenario. And that’s on the back of the fact that Ochre is quite a large player in the event space as well and we’ve got a big conference dinner that’s been rolled over to the 1st of May next year. So that’s my focal point at the moment. That’s 12 months time, or it’s bit less now, and as far as running the restaurant profitably between now and then, I don’t think that’ll happen at all.
During April, I lost $6000 a week, and that’s factoring JobKeeper back in. That was offering home delivery only. But now I’ve reopened the restaurant, the turnover is only 30 per cent more than when we were doing home delivery. We’re operating the restaurant Thursday to Sunday lunch and dinner and plus home delivery on Tuesday and Wednesday night only, and the reason that I’ve struck that formula is to still stay with neutralised wages. So, sure, I could open the restaurant for more nights, but I’ve only got the Cairns local market, which is oversupplied and currently I can only do 10 people at any one time. So that’s the holding pattern until the 13th of June.
Until we see domestic tourism happen in Queensland—which the premier is not been very forthcoming on—I’ll still be losing the same sort of money, and that’s with the JobKeeper factored in. If we have to wait until September before they open the borders, it will just be a complete disaster for tourism in Queensland, or particularly North Queensland.
What new initiatives or new ways of doing things that have been forced upon you by the situation will you hang on to when all this has passed?
We’re going to go with the home delivery model from the restaurant for some time until the demand drops away. It’s a very similar menu, so it’s not like it’s any extra difficulty. We can utilise our wait staff. I mean, when we go to bigger numbers in June, we’re going to have to look at a bit of a different delivery platform and we’ll be using a small, local community-based organisation, which is a flat fee, rather than a commission, and we’ll factor that in to our charging. And we’ll use them as our overload for delivery, so if we’re not able to do it ourselves, we can call on them.
We’re happy with the way our home delivery’s been working. We’ve been really engaging with our customers, and there’s a lot of repeat business and some new business as well. The advantage of doing it yourself is that level of engagement with the people. We’re even happy with people ringing their order through because it’s a more personal engagement and you get all the facts straight from the start.
If we get busier and we need those waiters to be actually servicing the guests in the restaurant, we’ll go to an overflow delivery option with a local group and just pass on their charges. The whole thing about running this business at the moment is about keeping the brand alive, about keeping the staff engaged and the public relations. It’s certainly not about normal business profit and loss.
What have you done in terms of marketing during this period? It’s a cost, obviously, at a time when you want to keep all costs to a minimum. But it’s also important to keep your brand front-of-mind for when custom can pick up again.
Social media has made our home delivery quite successful by being present when a lot of restaurants just shut, so their brands disappeared. We’re pretty good on social media. You can always be better, but our social media presence is pretty strong for any restaurant. And that’s one of the reasons why we’re full for all our sitting periods over the weekend, after only opening on Thursday, which was a week behind all the other restaurants in town. And today, I’ve written down 14 phone calls that I’ve got no availability for.
Hopefully the interest will continue when we can open a bit more, but we have to be careful as well that we don’t run the staff hours up and start having to pay more than JobKeeper for all the staff.
I understand you’ve introduced a pre-authorisation charge on bookings as a way of managing the impact of no-shows, which were always a problem, but are a greater threat now you’re limited in your seating capacity due to social distancing rules. Will you keep doing that post-lockdown?
Yes. We’ve only just started it as we reopened last week. It’s not an earner, it’s just an incentive. But we only had a couple of issues. Look, it’s a problem in the industry as a whole. Obviously it’s more of an issue when it could be 40 or 60 per cent of your actual potential diners, so for the next three weeks that’d be the major issue. We’ve had problems in the past. We find international conferences are one of the worst.
I’m going to stick to that. It’s going to be locked in from now on, and I’ll probably increase it, actually. Of course, you don’t want to cause the locals any more financial pain than they have already incurred. Most people are very honest and do the right thing, but as we see, tourism and conferencing in particular coming back to Cairns, I’ll be looking at probably increasing that pre-authorisation amount to probably $20.
What do you think the next 12 months holds for Ochre?
Well, we’ve been smashed around the park in every sense. Everything’s been cancelled this year. We’ve worked really hard in this restaurant to build really good relationships with tour operators, including direct marketing overseas, travelling to Japan and Hong Kong and China.
Our Japanese business was extremely good and I was very happy with that business. And all of that’s going to have to be re-established. Those relationships take years to build. Some of those operators will come straight back to us, but others may not survive or they may get a better offer elsewhere. This year was looking really good. So it’s going to be a long road back. My prediction of losing money for 12 months, I think that’s about as positive as I can be. I hope that the events industry will come back next year and the wedding market should be good.
I guess there’ll be less competition.
People say that to me—”If you stick it out, there’ll be less competition”. But we all know this game. Everyone thinks they can make a go at it, so a couple of years will go by and then people will start opening up and probably undervalue their product to get their market share going, then realise after 12 months they’ve lost money as well. It’s just pretty typical of the industry no matter whether there’s a pandemic around or not. Yes, I imagine there’ll be a little less competition around, but I don’t really want to feel like that’s a good thing because that’s terrible for those people. I guess that’s a small positive, but I’d prefer them to all survive and us to get our tourism back. That’d be the better option.