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Crown Shy’s Jeff Katz On Rebuilding New York’s Restaurants Via Representation

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Jeff Katz is partner and general manager at New York’s Crown Shy as well as a managing director/general manager at Del Posto. Both restaurants are shut down due to the pandemic. See previous interview.

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As everything started leading up toward the civil authority closures, my partner James Kent and I had started to discuss whether or not we should close the restaurant, because it was becoming evident that restaurants were a part of the spreading problem.

As other restaurants started to close, we had a unique scenario in that we remained busy, or as busy as the city allowed us to be, up until the day we closed. We didn’t have the same sort of financial pressure from “is it worth even being open right now?”

But we said, “Listen, we should take care of our community.” And in our case, our community was our 140 employees. We knew we were going to be heading into a long, cold winter, and we don’t know how long it would be before we could employ everybody again.

Two days before the civil authority mandate came out, James and I finally said, “It’s time. It’s very clear that restaurants need to close. So many of our peers have closed, and we need to become part of the solution.” We were actually prepared to close the day before the civil authority mandate came out on March 16. And we shut the doors.

Our partners owned the building, and therefore we were able to put together a pretty substantial severance package for our team—definitely more than a lot of my peers were able to. We said, “Here’s what we need to do the right thing by our team,” and our partners said, “Here. Do it.” That was a really amazing thing that they did, and it was an amazing feeling to be able to go back to our team and say, “Guys, this is going to suck. We don’t know when we’re coming back, but here’s what we can do for you.”

The building that we’re in has about 1,500 tenants, give or take. It’s a residential building above us from the 9th to the 60th floor. There’s also a hotel from the second to the eighth floor. We were able to leave a team in the restaurant who were staying in the hotel—six or seven guys who quarantined themselves there—and we started cooking exclusively for the residents. It was a way for us to say thank you to them, because they welcomed us with open arms. Our one-year anniversary was the day of the shutdown, so we actually haven’t made a full year. It’s been a crazy, crazy road, and the only comforting feeling is that we’re not the only ones on it. We have a lot of company.

We’ve tried to keep in mind that we know we’re going to reopen. We’re not a question mark, barring this going crazy for way longer than anyone thinks right now. We also knew that reopening was going to be predicated on the success of how well we treated our team. We’ve tried hard to make sure our team knows how important they are.

There are things those of us at Crown Shy and restaurants like us are going to have to consider that we would never have considered before. We have never considered doing delivery. We’ve never even done to-go. We don’t even do it for the building. It’s just not the kind of restaurant we wanted to be. We put a ton of focus on the food, and it’s hard to make a lot of our things travel well in a little black box. The reality is that we know now that we’re going to have to consider that stuff in a way that, three months ago, we would’ve said, “Shut up. I don’t want to do that.”

Then there are the realities of trying to make our guests feel comfortable when they come into the restaurant. We would usually set a table before you get there. But is my team seating you, the host team—are they going to walk you to the table and wipe the table down, disinfect the table in your presence so that you’re comfortable sitting there? These are the kinds of things we have to think about. We would not normally wrap our silverware. We’re not a hospital. But are we going to wrap our silverware so you feel better about using it? We know the virus lives on surfaces. Are we going to be wearing masks? Are we going to be wearing gloves? Are you going to pick up your own food at the pass, instead of having someone bring it to you, to minimize contact? There’s a lot of crazy stuff that I would now have to consider a possibility.

We would be in the middle of opening another restaurant right now if this hadn’t all gone down. But that restaurant is a very fancy, very fine-dining kind of restaurant. Even in that case, do we need to start considering crazy stuff like, if you buy a tasting menu to-go, do you need to give me a $500 deposit so that I can send you all of the beautiful china that you would have had in the restaurant?

These are the in-house operational changes we might have to deal with. Some ideas are more far-fetched than others. Some are realistic. I think you’ll see a lot of hand sanitizer in restaurants.You’ll see tables being set with guests present as opposed to beforehand—all kinds of little things like that.

In the larger industry sense, this shakeup is going to be a complete bloodbath for a lot of restaurants. If you read the surveys that have come out from the Beard Foundation, four out of five restaurants may not reopen. If those numbers are real—and I have no reason to think they’re not—then things are going to feel very different when we all get back to work.

Cities like New York are built on restaurants. New York City is Broadway, fashion, and restaurants. If you take restaurants out of that equation, we’re not the city that we once were. We could all make the argument that New York City had a stronger, more well-positioned restaurant community a decade ago than it does today. It’s because the rents are high. The margins have gotten super, super slim. There’s a ton of rules and restrictions. Our tip-credit wages are higher. That has forced really great chefs, really great restaurateurs and talent, into other markets. It pushed them into Brooklyn. Now Brooklyn is expensive, just like Manhattan, and it’s pushed people outside of the state.

And New York is a beautiful state. We have some of the best farming in the country. We have all the best importing of international fine-good products. The international wine road comes through New York City. We are the center of a huge economic ecosystem. We should be the best. We should be the most respected. I think over the last decade or so, that’s changed a little bit. And it’s not bad that there are other cities around the country that have vibrant restaurant scenes. But you’ve got to ask yourself, What happened? Why did we lose everybody?

In the meantime, I teamed up with John Houghtaling, an attorney out of Louisiana who is a really bad-ass insurance litigator and whose firm did big tobacco lawsuits and defended Louisiana after Hurricane Katrina. We brought on a bunch of great chefs—Thomas Keller, Wolfgang Puck, Dominique Crenn—to be the face of the Business Interruption Group. Our insurers are denying claims that we feel should be getting paid. And moreover, they’ve actually started disinformation campaigns to try to take us off the scent. I remember prior to meeting Houghtaling, I was kind of like, “This virus thing is going to come. We’re going to close for a little bit. We’ll reopen. We’ve all got insurance coverage. It won’t be that big of a deal.” People started telling me that that’s not going to work, it doesn’t apply.

To trigger business interruption coverage, generally speaking, you’re looking for physical property damage, which is easy when you’re talking about hurricanes and earthquakes and things like that. In this case, it’s not as clear. Moreover, a lot of people have policies that specifically exclude virus and pandemic-related incidents. In fact, in New York state, it’s a very common problem to have with your policy. The New York State Insurance Commission, after SARS, allowed insurers to not include coverage for these kinds of viruses and pandemics because they made the claim that they don’t know what it could cost, and therefore they can’t establish a premium

The truth is that the virus itself causes physical property damage and presents a threat to the public, and civil authorities around the country have all adopted language that says that’s the reason they’re shutting down restaurants. “The virus has a propensity to live on surfaces. That is why we’re closing down your establishment.” Therefore we think that the insurers should be paying.

We’re working to introduce a bill asking the federal government to create an opt-in program for insurers who want to pay out coverage for business interruption. If you opt in, the government will backstop your loss. Otherwise, if the insurers pay out these claims, there’s a really good chance that they’re all going to go insolvent. So without the government stepping in to say, “Pay the claims. We’ll save you from dying,” they won’t do that. They won’t be able to, and they won’t step up.

If there’s one positive that I hope comes out of this whole thing, it’s that the independent restaurant community bands together and finds a way to get themselves represented. We’re a pretty regulated industry with very little representation. There’s a lot of really good organizations spearheaded by really smart people. I’ve tried to get involved with them and support them as much as I can without getting in the way.

But I do think that the industry needs a shake-up. This is not the way I wish the shakeup happened. But like Andrew Cuomo’s been saying, we have to find a way to emerge from this in a better place. Independent restaurants with 11 or 12 million employees have to find a way to band together, get some representation, and get laws passed.