By Fritz Nelson, editor-in-chief
Among the businesses grasping for customer support, government assistance, rent forgiveness and fresh ideas, small dine-in restaurants seem to be the neediest. These boutique and family-owned businesses typically operate on profit margins whose edges would raise the eyebrows of a chef's bladesmith. Their rents, especially in cities like New York, San Francisco and Los Angeles, are an albatross. Their inventory is often particular and always perishable. Competition for customers is fierce. Falter in any of those categories, and they won’t make it. And when the government shuts their dine-in business down, everything goes wrong.
Karim Megji operates two restaurants in the suburbs of Los Angeles. Wood and Water is in Sherman Oaks, and The Gallery is in Westlake. Both serve what he calls “new American cuisine,” which is to say just about anything he’d like it to be. Perusing Wood and Water’s menu, the rack of lamb or the wild boar ragu catch my eye, though I’m a sucker for something like the roasted corn with herbed goat cheese butter — nothing like high-end comfort food.
Like many other small-business owners we talk with, Megji had to quickly set in motion a series of changes when his restaurant shut down — an event presaged by a gradual slowdown in customers. And this came at a time when takeout was only 1% of the company’s sales. Megji has seen a downturn overall of about 90%. Like others, he thinks about keeping his business alive, making payroll, giving his family of employees some hours, lifting spirits.
Megji has adjusted his menu, serving fare that will hold its quality for those ordering in. He has created family meals, and he’s struck a few hits, like a burger-fries-wine package that his customers seem to feel gives them the experience of the restaurant in their homes.
Remarkably, like so many others who are struggling, he has also found a way to make time and space to serve others. A GoFundMe campaign Megji initiated exceeded his expectations, allowing him and his employees to deliver 400 meals to hospitals around Los Angeles.
Oh sure, he’s talking with his landlord about getting some leeway on his rent. He’s working on securing small-business loans and various restaurant grants that spring up. But he’s also inspired to bring meals to an older generation that can’t get outside.
It’s funny how when you’re grasping, you find something inspirational within reach.
Watch our conversation with Megji in the video above.
Here’s the full transcript of our conversation:
Fritz Nelson: We're joined today by Karim Megji, he is the owner of several Los Angeles-based restaurants, including Wood and Water there in Sherman Oaks and The Gallery in Westlake Village. Karim, where are you right now?
Karim Megji: Right now, I'm in Sherman Oaks in our little storage closet because I know we needed a quiet space. So in Sherman Oaks getting ready to open up for takeout orders in the next few minutes. And so the phone might actually ring a few times, but I can probably silence the one in the office.
Fritz Nelson: Alright, well it's just part of the biz. Can you tell us a bit about your restaurants?
Karim Megji: Yeah. So both of them ... one's in Westlake Village, which is more of an older bedroom community and one's in Sherman Oaks, which kind of runs the gamut between young and old. We just try and aim to do new American cuisine, which pretty much means we can do whatever we want. So having Indian heritage, but being born here, it's kind of like a blending of the two cultures in the food. As well as my family having some roots in East Africa. So really giving people a take on familiar foods that they've had before.
Fritz Nelson: Why the suburbs of Los Angeles?
Karim Megji: I grew up in Calabasas in Westlake, so an opportunity arose out there for The Gallery and that was the first restaurant. That was about five and a half years ago. And as that continued, we look to go out more towards the city and stumbled upon this location in Sherman Oaks that really seemed like it could use our style of food and restaurant and just kind of ambience. I don't know how familiar you are with the area, but it definitely needed a little bit of change and update in the food scene. A lot of bars and burgers, but just needed a little revamping.
Fritz Nelson: And how are the two restaurants different in terms of the cuisine?
Karim Megji: They're pretty similar. If you walk into one versus the other, the style is a little bit different. Westlake is a little more, I'd say, steakhouse-y. We do jazz on Fridays and Saturdays—or used to do jazz on Fridays and Saturdays. And Sherman Oaks has a little younger and livelier, a little louder. But a lot of our regular customers from Westlake have come into Wood and Water not knowing it's us and then kind of being shocked. So even though a lot of the food is similar, the vibe of the two are different. So it kind of gives people two different experiences.
Fritz Nelson: What's your favorite food in both of them?
Karim Megji: Oh, I mean honestly, whatever they're making in the back of the house that day. So they make some great burritos and tacos. But if I'm ordering from the menu, the rack a lamb was great.
Wood and Water is offering many of its popular dishes, like rack of lamb, for takeout.
Fritz Nelson: Alright. Alright. When I get back up there, going to try it out. We want to talk a little bit about the current state of the world and the impact it's having on businesses like yours, the restaurant business.
So, when it first became clear that restaurants were going to have to shut down as places to dine in, what were some of the first thoughts that went through your mind?
Karim Megji: Well, even before that Sunday where Garcetti kind of mandated that we close for dine-in service, we started feeling the effects the Thursday before. That day when the stock market took a big dip and everything seemed to kind of be put in perspective and be real. That's when that night it kind of just like—We did 40% of what a normal Thursday is, where the following two days prior were actually pretty busy. I don't know if people had the feeling of like, alright, last meal out, last time getting drinks, well let's go out before S hits the fan. But just throughout that weekend, up until that Sunday, it was just kind of putting everything in perspective of wow, this is real. This is a health concern and survival of the business is obviously important, but survival of the people we love is important as well. I mean that's the main thing here.
So when that mandate happened, we really had no idea what to do. We are in uncharted waters. Basically resorting to take out, which is 1% of our sales, if that. So completely switching our business model to see what we can do to survive, basically.
Fritz Nelson: And so it went from 1% to—I mean it's all of it now, but in terms of comparing sales then to now, is it…
Karim Megji: So, we're at probably a 90% reduction in sales given the two weeks that we've operated under these new circumstances, which is a struggle. I mean it's a big struggle to cover the payroll, keep everyone employed, keep spirits up. It's hard but it's one of those situations that it's not just us. Everyone's kind of in this together. So the neighboring restaurants, us, our buddies down the street, we're all kind of talking and what everyone's doing and see what we can do to basically make it through.
Fritz Nelson: So walk me through some of the steps, what were some of the steps you and some of the others took in terms of how do we batten down the hatches and stay with it through this time? What were the business decisions you may made?
Karim Megji: So we've, I mean, obviously done some promotions. Like we started a family meal for four people because we know it's just easier on a family to come in, pick up all the food and have a ready to go meal with a salad and entree and everything, things for the kids.
We started a GoFundMe page to deliver meals directly to hospital workers. So we're doing our first drop tomorrow at Los Robles Hospital in Thousand Oaks. And that kind of had a lot more support than I expected. So right now our page is at like $11,000 funded, where we estimated that a meal would cost $25. So in the next two, three weeks scheduled out, we're basically dropping off 400 meals to different hospitals around LA. So that's kind of been something that's been a little outside the box.
The restaurant crowdfunded an effort to deliver its meals to hospital workers.
But in terms of what we're doing in-house, it's coming up with different packages to make it convenient, sort of give the experience that we normally give when you dine in but at your house. So last week we did a burger, fries and a bottle of wine to go for 25 bucks and that had a lot of success. So right now we're working on our special for the weekend to do like a three-course with a cocktail or bottle of wine so that people can have the experience of good food at home and still having us kind of be a part of their lives.
Fritz Nelson: I imagine that the relaxation of rules around takeout alcohol has helped out a bit in that regard.
Karim Megji: It's definitely helped with our clientele, and it seemed to go a little bit more for the wine versus the cocktails. I think because we're in a local neighborhood, people are making cocktails at home. We definitely have done some of them and we're still tinkering with making some ones that are great for travel. So for instance, giving a bottle of ginger beer on the side instead of mixing it and things like that. But before, we had a pretty competitive wine list where I had some bottles of wine that were more expensive than grocery stores if they had them, and now we're doing half off bottles of wine to go. So it's almost like it's a steal. We had someone come in and buy eight bottles of wine last week with an order of French fries. So every little thing helps, but it's tough to look at big picture right now.
At Wood and Water, some to-go bottles of wine currently come at a lower price than grocery stores.
Fritz Nelson: What are some of the steps that you took—obviously you don't the revenue coming in—what are some of the cost-cutting steps that you took?
Karim Megji: Dumbing down the menu a little bit, which is tough for us because a lot of the thing that makes us attractive is getting food here that you can't get elsewhere of different flavor combinations, things like that. But a fried squash, stuff with cheese is not going to travel that well once you pick it up and take it home.
So certain things like that that were just kind of taken off the table. Some of the sashimis, oysters definitely, we can't do those to go. So that Sunday when the announcement was made, I mean, we had 400 oysters basically down the trash, so that's been tough. But ordering foods that travel better has helped us keep our inventory down.
Fritz Nelson: Got it. And what about on the payroll side? I mean, you talked about the people that we love, and I think you were talking about our families and things like that, but I would imagine your workforce is partly family as well.
Karim Megji: Yeah. I mean, we're a small operation and we have people that have worked for us for a very long time. So I do consider those people family as well. It has been tough. All of the servers, luckily, could apply for unemployment while still having a shift or two here. But that's been tough. We're doing to-go food, and I have one guy running it right now with a quarter of what the kitchen staff normally is. So that's been a challenge for them as well.
They want to help. I want to give them something to do, but it's still...It can be volunteer-based as you know, a lot of them have volunteered, but we still have to pay them. So we had to unfortunately lay off our first, one of our main kitchen guys the other day and hopefully he can come back in the next few weeks depending on what the SBA loans situation is or what the funding sources can be from the federal government. But right now, everything's kind of up in the air.
Fritz Nelson: Yeah. I want to talk about that. But one last question in this regard. I mean obviously a big cost for restaurants is the space and the leases that they have. Have you had some success in terms of negotiating the flexibility there?
Karim Megji: Right now, we have good relationships with our landlords. The landlord at Wood and Water actually owns the space, operated the space as a restaurant for 40 years before he owned the property. So he understands that this is a different situation that anyone's ever gone through. We're communicating back and forth, but nothing's really been on paper of what we're going to do. I imagine rent has to be deferred, not forgiven, which will make it tough after all this, too. Rents in LA are already very expensive and we work on razor thin margins. So to take on another expense to pay back rent is going to be difficult, but we're going to have to try and figure that out.
Fritz Nelson: Sure. So let's talk about some of the relief efforts and there are several, either in the works or that already exist. James Beard Foundation has a relief fund. They're a restaurant/
Karim Megji: Yeah, which is now closed, but ...
Fritz Nelson: Oh, really? Okay.
Karim Megji: Yeah, it's funny, I applied for—because there's two different restaurants under two corporations—I applied for one. It seemed to go through, and then when I was applying for the second, it was a, “Due to overwhelming applications, we've closed it for now,” which, of course, there's thousands and thousands of restaurants applying for these grants. So that'll be interesting to see how many actually go out.
But yeah, all those grants and programs like that have been great. People want to help restaurants, they understand the ripple effect that it has in the economy.
Fritz Nelson: So, you're applying for some of these?
Karim Megji: Yeah, I mean right now, every day something new kind of comes across my email box and applications for grants. I think it would be stupid not to apply for them. But yeah, the amount of grants that are kind of out there seems to be tremendous. But it's all so new right now. We haven't seen anything go through.
Fritz Nelson: Have you seen some other ideas out there? You talked about the, the meals for the people at hospitals and that's phenomenal. Are you seeing other ideas out there like that? And do you have others that you're thinking about for yourself?
Karim Megji: Right now I haven't seen too much else out there besides what everyone's putting on Instagram with the cocktails to go and the cocktail kits. What we're kind of tinkering with right now is through our own personal network. We have a lot of friends and family that have older parents and grandparents and getting meals to them under a similar platform might be something that we experiment with and that would just be something where I am physically driving from place a place dropping off food for grandma and grandpa, you know?
The eatery is selling to-go cocktails, a popular move among restaurants.
Fritz Nelson: Yeah, for sure. How does all this make you—you said restaurants operate on very thin margins and we've heard that from several different people. When we come out of this, you start to think about building some resilience into your business. Do you still feel optimistic about the restaurant business and this is just a blip or how are you looking at it?
Karim Megji: I mean, yes and no. I think for us through this process we've seen that the goodwill that we've built up with our customer base. So that's helpful. On the business side, to incur a lot of debt before reopening just seems a little difficult to build into the business model. As is, minimum wage goes up, we have to increase prices and you look at a menu in L.A., say, "Okay, why am I paying $9 for French fries when a potato costs 30 cents?" So I don't know if statewide everyone's going to have to increase their menu prices by 10, 15%. But I don't know, we're kind of taking everything day by day.
Fritz Nelson: Sure.
Karim Megji: Now that seems very far in the future of being done with this.
Fritz Nelson: No doubt. But $9 French fries, when I can get eight bottles of wine with it, that's not a bad deal.
Karim Megji: Yeah.
Fritz Nelson: Well, I know it's tough. I admire what you're doing and wish you the best of luck and keep doing it.
Karim Megji: Well, thank you. I mean, any support helps, and we know a lot of people are stuck in their house and they're still thinking of us. So the emails, everything, the outreach has all made the staff and us feel great.
Fritz Nelson: Fabulous. Well, we'll all keep it going. Thank you for joining us today.
Karim Megji: Yeah, thank you.