These 2 Restaurants Joined Forces to Fight the Pandemic

For the past seven years, New Yorkers with a yen for So-Cal taqueria fare have flocked to Otto’s Tacos, whose first location in the East Village turned heads with its coarse-ground tortillas, masa fries and spicy fillings. When the food blog Eater reviewed the place in 2013, it applauded the fare, but noted ominously: “The rent is undoubtedly stratospheric, and here’s hoping the new place … can make a go of it.” As things turned out, Otto’s did make a go of it, opening three more doors around town and doing a brisk lunch trade. Then Covid-19 knocked. Shortly after Mayor Bill de Blasio urged the city’s white-collar multitudes to work from home in early March, Otto’s founder Otto Cedeno knew his burgeoning restaurant empire was in trouble. “Our catering vertical represented a large amount of our revenue,” Cedeno told Adweek. “Once New York City was canceling events and advising companies to work from home, that revenue stream practically disappeared. We knew that even with an uptick of delivery and takeout, there was no way to make up for that lost revenue.” Otto's had grown to four units before it was forced to close. A heartbroken Cedeno had no choice but to shutter his restaurants, and he was hardly alone. Six months into the pandemic, the loss of dine-in and catering revenues had forced one in six restaurants across the country to close, according to data from the National Restaurant Association. The U.S. trade group predicts restaurants are expected to lose a collective $240 billion in 2020. Fortunately for Cedeno, he's found a second chance from an unlikely source—a competing restaurant. Micha Magid was also a New York City restaurateur who started in the East Village. His brand, a barbecue place called Mighty Quinn’s, had opened its flagship location within a few blocks and a few months of Otto’s. “As new, young restaurateurs, we’ve known each other for a while,” Magid said. And as the pandemic took ever bigger bites out of their revenue, Cedeno and Magid found themselves not just talking, but strategizing. Eventually, the brainstorming led to an unusual solution. Magid rejiggered his online ordering system to accept Otto’s takeout orders, then trained his cooks to prepare the taqueria's menu items in Mighty Quinn’s kitchens. The adjustment allowed Otto’s—while devoid of its physical restaurants—to survive as a delivery business and, of course, as a brand. Magid’s arrangement was a humanitarian one, but it benefited his concept, too. With diminished capacity of his own to contend with, a new stream of orders would furnish Mighty Quinn’s with a much-needed incremental revenue stream. “We wanted to figure out a way to both utilize the kitchen capacity that we had within our own restaurants and also bring back these amazing street tacos that Otto brought to the city,” Magid said. “Both of these missions clicked into the idea of doing digital only.” Rather than splitting the meal tickets with his partner, Magid worked out a licensing agreement with Cedeno. Mighty Quinn's runs the operation and takes the payments, while Otto's gets a fee for the use of its name and menu. Since Otto's tacos were easy to assemble, Mighty Quinn's kitchen staff (shown here in pre-pandemic times) easily learned to make the items. “What they’re doing is very smart,” observed Gary Stibel, founder and CEO of the New England Consulting Group. “As restaurateurs find that they have more production capacity than they have orders and guests, there is an opportunity for them to combine and share resources. It’s entrepreneurial, it’s creative—and it’s happening on a much larger scale.” Stibel is referring to the growing number of restaurants walking away from in-house dining completely in order to run their eateries on a takeout-only basis as “virtual restaurants” or “ghost kitchens,” as they’re known. In October, for example, a virtual restaurant called HotBox by Wiz (named after rapper Wiz Khalifa) opened its doors in Los Angeles, Houston, Denver and other cities. The following month, the first Chipotle Digital Kitchen debuted just outside the gates of the United States Military Academy (also known as West Point) in Highland Falls, N.Y. Big-tech money has also gotten into the act. Former Uber CEO Travis Kalanick’s Cloud Kitchens and the Virtual Kitchen Co., into which Peter Thiel’s Founders Fund dumped $20 million in 2020, have opened kitchen facilities from which restaurateurs can operate their digital-only concepts. Some industry observers have warned that, should Americans hold onto their takeout-only dining habits after the pandemic ends, digital kitchen startups may have the inadvertent effect of hastening the demise of the very same independent restaurants they purport to save. But for Otto’s and Mighty Quinn’s, the arrangement has nothing to do with big-corporate strategy or Silicon Valley equity and everything to do with surviving the toughest downturn restaurants have seen in generations. Figures from TOP Data and Zenreach indicate that spending in New York restaurants has dropped by 18% since January 2020. Even restaurants with a healthy takeout business and a solid web-ordering infrastructure are struggling. To that end, restaurant-industry veterans such as John A. Gordon, principal of Pacific Management Consulting Group, applaud the solution that Magid and Cedeno have cooked up. “You have to go out and think about how to partner with others so that you can stay alive until things get better,” he said. “Your competitor is not your enemy!” Gordon believes that kitchen-sharing arrangements like this are viable across the country, provided that the market has a sufficiently high population, income level and dining-out scene to support it. And while the win for Otto’s is only a partial one, the outcome is a lot better than bankruptcy. “There’s no such thing as a wrong answer right now,” Cedeno said. "Try anything to keep the business going.”

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Struck by the Pandemic, These 2 Restaurant Brands Joined Forces to Fight Back

Desperate times call for creative thinking

Robert Klara

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Robert Klara