Josh Phillips

This interview was conducted with Josh Phillips, the first Master Mezcalier and GM at Espita Mezcaleria in Washington, D.C.

Espita Mezcaleria is located in the bustling 9th St corridor of Shaw, an area teeming with some of the District’s most notable restaurants and nightlife spots including The Dabney and Columbia Room. Espita channels the dining and drinking traditions of Oaxaca, Mexico in its food and beverage offerings. In addition to being one of the city’s best Mexican restaurants, Espita is often recognized as having one of the country’s best mezcal lists with a focus on sustainable and ethically-produced mezcals.

Josh Phillips and his wife Kelly Phillips opened the doors of their restaurant to fanfare and rave reviews in 2016. Times have changed for Josh, his staff, and his business since March of 2020 when the effects of COVID-19 began to take hold of the city.

This is a glimpse into his life before the pandemic hit, as well as his continued fight in keeping his business alive.

What is your name? What is the name of your business?

Josh Phillips, Espita on 9th Street. We make Oaxacan food, an upscale casual restaurant.

Describe what your business was like before Covid-19 hit. What did an average day look like for your business?

So, before we closed we had about 55 people on board. On the busiest days of the week, we probably have about 30 or so of them working. Restaurant has about 150 seats including the patio, and before COVID-19 we were averaging about $75,000 a week in sales.

Wages were great - our front of house staff, made about $18 an hour and for service or bartenders, more than $30 an hour. Average kitchen wage was probably $17-ish an hour. In addition to that staff, there were five managers including myself. It was fun, it was busy, and we were actually in the middle of having our best year to date.

When did you start to feel the impact of COVID-19, what happened?

We were lucky, we didn't slow down until the week before the shutdown. The week before, it actually had been one of our best weeks ever. And the week leading up to March 16th and the shutdown, sales dropped by about 55%.

Immediately after the shutdown, we pivoted to take-away orders. At first we were only doing around $9,000 a week. Right now, we’re up to about $17,000 a week. And we've just started a partnership with World Central Kitchen that's going to push us hopefully higher, which is nice. It was pretty dramatic and pretty fast.

I know a lot of restaurants were seeing a slowdown over a period of about three to four weeks, but for us, since we're at the Convention Center, we were actually very busy until the end.

What resources, if any, helped you through this time period? (From the federal government, state, family and friends.)

So beyond the World Central Kitchen partnership, we’ve taken out a PPP loan, which is the most confusing thing I've ever experienced in my entire life.

I don't know how they could actually distribute money without having firm guidance on forgiveness. Yeah, so that's something I talk with other restaurateurs about, like daily. Everybody has a plan as to how they think it's going to get forgiven, but everybody's afraid that they're going to spend the money, including myself, and then not have the loan be forgiven.

We got a fairly significant loan, but the idea of paying that chunk of cash back over two years is a pipe dream. Like, it's just not gonna happen. If we don't get the forgiveness, we’re not going to be able to pay the loan back. So we have 55 people on our staff and only about 22 of them are full time employees. Most of the servers and front of house people are making far more on unemployment. So they're all like, “Nope, not coming back.” And then you've got this giant pile of money that you've got to spend 75% of on, you know, a small number of people to hopefully get forgiveness. So we'll see if that happens.

We’ve taken out a PPP loan, which is the most confusing thing I've ever experienced in my entire life. The idea of paying that chunk of cash back over two years is a pipe dream.

I applied for one of the Economic Injury Disaster Loans for my parent company. We received that one and it is much more forgiving. That's a 30 year loan. So that was great. But the PPP one...it's pretty terrifying. It’s causing me more anxiety than if I hadn't done it.

We've had about 20 staff willing to come back, essentially all of the kitchen workers. Our strategy has been to give them all raises to kind of get through all the cash. So they're being paid fairly well right now, which makes me really happy and it's been really nice to see all their faces every morning. I don't know about most restaurants but we have incredibly loyal kitchen staff, everybody that we have currently working in the restaurant has been there for over three years now. This place is really a family, and it feels great to be able to give them a check as well as a reason to leave the house.

What resources are missing?

PPE

All of them, if I’m being honest. So we're operating on extremely small revenue numbers, and there's no agency in the government providing PPE for businesses that are open and running. With our lower revenues, our costs have gone up dramatically. Like providing masks for people. It's a $1 mask.

At first we couldn't even buy them, but now that we can buy them it's a $1 per disposable mask, and gloves aren’t cheap either. Back of house gloves were an existing expense, but front of house workers need them now too. You're supposed to be changing these things out constantly. If we could get free or subsidized PPE, that would be extremely helpful. Particularly in kitchens where we try and make sure everybody's at least six feet apart. We don't have any more than four people in our kitchen at any given point, but it's still impossible to avoid coming closer than six feet all the time. As much as we try and everybody's very conscious of it. It is impossible in the space we have.

In general, I think the guidance that people are putting forward for reopening is ridiculous. I think we need to understand what restaurants look like until there's a vaccine, not just until we reopen. Because in my view, there is no reopening until then.

We have no plan of reopening as a full service restaurant until there's a vaccine to be very blunt.

Rent

I think most people's rents in the city are outrageous in this current environment, even though I think our rent was totally fair. We had a fairly reasonable dollar per square foot cost before COVID hit, and it came to around 6% of our revenue which I think is fine. I'm not one of those people who are like, “My landlord is charging too much money!” Our rent was honestly fine.

That said, our rent is not fine now. We pay $18,461 a month, which is nowhere near affordable compared to our old revenue. We used to average well over $300,000 a month in revenue. So $18,000 a month in rent was not that big of a deal.

There needs to be some sort of acknowledgement from the government that if they're going to reopen us not at full capacity, then our fixed costs have got to change.

I don't understand how they expect us as a business to actually survive this. We're all kind of like playing nicely. I don't care how well anybody says they're doing in this environment. Nobody's actually succeeding.

Tax

So they deferred sales tax - which has been nice - but they only deferred it. When we reopen with no money, we still owe a giant chunk of cash. That's not realistic. Before COVID-19 on average we made north of $300,000 a month, that's $30,000 in sales tax that we deferred the first month the virus hit. The second month was a partial month. So let's call it another $15K. Assume the tax is now frozen and we don’t have to pay that amount - but do the math and that's $45,000.

And then when we reopen, our reopening costs are going to involve rebuilding inventory, which is going to take three days of labor plus the actual inventory costs. That's going to be another $22,000. We've got to assume that we're not going to get the full staff or even the same staff that we had before…so that means training  15-20 new people. The numbers just keep stacking, stacking, stacking, stacking, stacking...it's like opening a new restaurant. You know, you don't have any of the expenses of building out a restaurant, but we have all the soft costs of opening a restaurant.

What has been the most difficult thing you have dealt with so far?

Probably the mental health aspect of this. I mean the finances are just math, you figure that out. And we've done a pretty good job of minimizing our expenses and we're at a point where we're sustainable for a certain amount of time. I don't know how long that lasts, because we still have to negotiate some longer term things like rent.

I've talked to a lot of other operators that are either breaking down mentally, or you can just tell visually they are way more agitated than usual or more sad than usual.

Mental health is a big challenge for all of us to stay in production. And I think that's everybody, not just restaurant people. It's just how do you deal with being home all the time? Or how do you deal with the fact that your life has entirely changed?

Has anything positive happened for you personally or for the business as a result of COVID-19?

One thing that I think is pretty amazing is we put up a link on our ordering pages to donate to our team. Seeing the number of people who actually clicked that link every day still amazes me. I would have thought it would have tapered off but it’s still $1K every week.

It's always really nice because it's not enough money to give the whole team since if we divided it amongst everybody they’d be getting 30 bucks, which isn’t a ton of help, so every week we pick three people and just give a nice big check. That check does move the needle and at least gives them a little relief.

It's just nice to see these three staff and know that like for a week, at least one week, they’re doing okay.

And watching them come in to pick up the check, it's...just nice. I'm not gonna say gratitude, I certainly don't deserve gratitude, it’s our guests that deserve it since they give the money.

Have you been following the reopening process in other states, how does that make you feel?

Yes, it’s absolutely crazy. So the guidelines in every state are some version of the CDC guidelines, specifically the phase three opening, start with outdoor seating then go to six foot distance between tables. None of that makes sense. I'll explain why, and maybe I'm wrong or maybe I'm crazy, but in my head none of that makes sense.

So for proper social distancing, you need six feet between people wearing basic PPE. So if you're dining in a restaurant you can’t possibly be eating and drinking with a mask on - the mechanics just don’t work. The idea of somebody wearing gloves during dinner is also kind of silly because they should be changing those while they go through their meal according to the CDC. If they’re performing any kind of gesture towards their face, they should be changing those gloves.

So if tables are six feet apart, according to the guidelines your waiter is also supposed to be six feet away from your guests. If that waiter is six feet away from one table, then he’s standing on top of another table - you need to double up on distances between tables to 12 feet. Then you have food runners who need to drop off food at a table. So realistically, to keep the server safe you need like 12-13 feet between tables and to keep food runners safe, they would have to place food six feet away and have the guests collect it - which again, is insane.

If you do the math on our restaurant according to the CDC guidelines, by that I mean the distance rules, even if we maintain our same track record before the virus and had absolute 100% occupancy, which is not realistic in any way, shape, or form, our max out for revenue is $20,000 a week. That’s less than we do now, without anybody in our space.

It's absolutely crazy. Why would anybody open?

When I see these people reopening their restaurants and I get in my own head and think, “Have we done enough? Is there something I’m missing? Are you getting a subsidy that I don't know about? Who's making this possible for you?” No matter what you still have to pay rent, you still have to pay utilities, you still pay your business insurance, your sales taxes, all those things.

I’ve heard people compare reopening restaurants to grocery stores, but restaurants just aren’t the same. We all go into grocery stores and try and get in and out as soon as possible. We limit our contact with other shoppers and there are plastic barriers between cashiers and patrons. The same rationale is going to continue. People won’t all of a sudden be like, “You know what? I feel very okay being within a foot and a half of a food runner. I'm going to go eat out with my five friends for dinner that don't live with me.”

How has your business changed, or will change, for when you reopen?

We eventually plan on letting people sit on our patio and then eventually our dining room. We will not do that as a full service operation. You will still order at the counter and take your food away, just like it is now, but instead of going home you can sit down at one of our tables that are setup for social distance.

Hopefully, there's going to be a point where they have some sort of medicine to actually combat the virus itself as opposed to preventing the virus. That'll make me feel probably safe enough to open up inside to do the same thing, but definitely not for full service.

What does your partnership with World Central Kitchen look like?

We give them 250 meals a day and they pay $10 for each meal, it’s pretty great. You figure if you're donating to World Central Kitchen, you're actually helping two people. Every meal is not only feeding people, but also sustaining restaurants. So they're partnering with restaurants to keep us afloat, and in turn, giving the food to people who need to eat. It's a really powerful program. It's sustaining a lot of independent businesses.

Jose Andreas has been a better life line for restaurants than any government entity, federal or local.

Because of him we get to do 250 meals a day this week. We just started so we're getting $10,000 in revenue this week. That allows us to hire a few more people, to pay more bills, and helps me sleep at night.

When it comes to reopening, what are you most concerned about?

Safety. I think there's going to be a period where restaurants are going to make uncomfortable decisions when it comes to matching the number of staff to the demand of customers. And that's going to hurt two ways; it will hurt because there's going to be times where you overestimate the staff and you lose money. There's gonna be times where you underestimate the staff, and give bad service. I'm hoping during that transition period, guests are more forgiving than usual. Trying to make plans for meeting demand is extremely difficult without having relevant historical data.

Typically I know based on time of year, based on the day of the week, what volume of guests we’ll have within a fairly tight margin. We're going into uncharted territories - we're gonna end up buying too much food, we're gonna have too many staff, we're gonna throw away food, and we’ll end up paying a bunch of labor hours that we don't need

What have you learned from this experience?

This has made us better operators. We've always operated in a generous environment where there was plenty of money to cover margins. This pandemic has made us much tighter operators. It’s also taught us how to make the most impact with our products. How can we have even better food for less money?

There's much less waste at the restaurant than there ever was. Everyone is working for a reason and everyone's very productive right now. Everyone is also learning to do jobs that they have never done before. So I mean, that's probably the biggest takeaway - we have this kind of really thrifty attitude, are really interested in learning new aspects to the industry that are outside our traditional roles. We've definitely identified future leaders in our business, which to me, is very cool.

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