We’re (Not) Open

Features - Cover Story

The restaurant industry is facing a crisis like none before. That’s a challenge for pest control companies. Here’s how your peers are changing the way they service these customers.

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November 5, 2020

No industry was harder hit by COVID-19 than restaurants.

An estimated 100,000 restaurants — 1 in 6 — closed either permanently or long-term during the first six months of the pandemic, according to a recent survey from the National Restaurant Association (NRA). In addition, 40 percent of restaurant operators did not expect to remain in business by April 2021 without further financial assistance from the federal government.

The Independent Restaurant Coalition had a more dire prediction: The U.S. could permanently lose 85 percent of independent restaurants by year end without additional support.

A SIGNIFICANT HIT. This is not good news for pest control companies that provide service to restaurants. So far, the industry has potentially lost about $137 million in annual service revenue in the U.S.

Rich Kalik, a partner at Specialty Consultants, which analyzes the pest management industry, determined this figure by multiplying the industry’s average monthly commercial service charge of $113.85 by 12 months and then by the NRA’s estimated 100,000 restaurant closures.

Gil Bloom, president of Standard Pest Management, felt the pain firsthand. “We have at least eight restaurants that have closed down and will not be opening up, along with two catering halls,” he said. About 15 percent of the company’s revenue comes from servicing restaurants in New York City.

Abell Pest Control had about 17 percent of its more than 7,000 restaurant clients in Canada and four U.S. states cancel service since March 16. Most cancellations were due to permanent business closures.

“We’re seeing this trend continue with the second wave of COVID-19 upon us,” said Mike Heimbach, Abell’s director of business development and marketing.

Other pest control companies were less affected, said Dan Gordon, managing partner of PCO Bookkeepers. Commercial work performed by his clients typically accounts for 25 percent of revenue, with restaurants making up a very small portion of that.

“Most pest control companies don’t want to service restaurants. They’ll service the big chains that have sanitation standards in place but the local pizzeria and Chinese restaurant; that’s not a good market for pest control guys” because such small businesses often have limited staff and can’t maintain good sanitation practices. “If you talk to most PMPs, they’re really not interested in the restaurant market,” said Gordon.

CLIENTS SCRAMBLE TO SURVIVE. Restaurants struggled to adapt in the pandemic. They faced mandated closures; then limited dining capacities. Some shifted to outdoor dining or take-out to stay alive.

“Those that had good carry-out business before are doing OK,” said Jeff King, president of Abe’s Pest Control in Florence, Ky. Still many restaurants in his area were “barely making it,” even with apps to make online ordering and payment easier. King said two of his 20 restaurant clients permanently closed and three are on the ropes.

Restaurants with drive-through windows and established delivery services fared better. But while a few restaurants like Domino’s Pizza thrived — its revenue increased more than $108 million in the second quarter compared to 2Q 2019 — many eateries in urban centers won’t see sales improve until office workers, business travelers and tourists return. Protests and rioting in some cities added to reopening uncertainties.

Not all restaurants had money to invest in plexiglass barriers and semi-permanent outdoor dining spaces, which will be a hard sell in colder climates this winter.

“I don’t know any restaurants right now doing really well. It’s been really, really tough for these folks to make it,” said Tim Best, staff entomologist for Assured Environments in New York City. Small restaurants account for about 20 percent of service work at the company, which is owned by Terminix.

COVID-19 forced PMPs to change how they served restaurant clients. “It has significantly had an impact on how we do business, for sure,” said Best.

GAINING ACCESS. Scheduling restaurant work was always a challenge given the small window during which service could be performed. Pandemic-forced closures and reduced hours of operation made it even more difficult to gain access.

Bloom had one employee spend 20 hours a week calling clients to confirm appointments and verify how technicians would get in. “It was a task we never had before,” he said.

Eventually, some clients gave PMPs keys and access codes so service could be performed without a restaurant employee having to open up the store.

“Even people who were hesitant at the beginning to give us keys changed their tune during this process. A lot of people looked differently at the scenario and said, ‘You’re right. I don’t need to be there for you to do your service,’” said Ross Treleven, president at Sprague Pest Solutions, which does “a significant amount” of restaurant work in six Western states.

Companies like McCloud Services, which serves restaurants in five Midwest states plus Kentucky and Tennessee, would like to see this trend continue post-pandemic, as it allows for greater scheduling flexibility and the opportunity to perform more intense treatments when restaurant employees are absent.

“With today’s surveillance technology, everything we do is under watch anyway,” said Ben Channon, a district manager for the company. Restaurants account for more than 20 percent of McCloud’s customer base.

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The Independent Restaurant Coalition said the United States could permanently lose 85 percent of independent restaurants by year end without additional support.

GETTING PAID. To help long-term restaurant clients get through the pandemic, pest management professionals expanded payment terms and waived administrative fees.

“I have customers who I’m not charging anything to right now because I know they’re in a bad situation,” said Marty Overline, owner of Aardvark Pest Management in Philadelphia.

Abell Pest Control extended credit. “We’re committed to our customers and our focus is to stay connected and do what we can to help. Hopefully they’ll remember that down the road,” said Heimbach.

Bloom put pre-pandemic money owed by some restaurants on “goodwill hold.” He picked up a few new clients “because other people cut them off” but has put them on strict payment terms, requiring a credit card on file or C.O.D.

PMPs kept a close eye on account receivables given the grim outlook for restaurants. The NRA expected the foodservice industry to lose $240 billion this year. And in August, 87 percent of New York City restaurants, bars and nightlife venues — nearly 9 in 10 — could not pay their full rent, according to a survey by the non-profit NYC Hospitality Alliance.

Still, suspending pest control service for non-payment wasn’t the solution for long-term clients, said PMPs.

“A crisis is a time to show your values and our values are to take care of our customers,” said Sprague’s Ross Treleven.

Even so, it was an opportunity to jettison problem clients that never paid on time, never did their part to clean up or fix problems, who constantly pushed for less service frequency and still expected PMPs to magically fix their pest issues. “There’s a couple; if they don’t call me back, I don’t really care,” said Overline.

ADJUSTING SERVICE FREQUENCY. “We recognize that these are some really tough times, so we’ve been working with our customers to reduce frequency, just so we don’t lose them as a customer,” said Chad Gore, market technical director at Rentokil, which serves independent eateries and national restaurant chains.

It was essential that restaurants have some kind of coverage from pests, however. “If something does pop up, you need to be able to respond to it without that problem getting out of hand,” Gore explained.

But fewer service visits were harder on technicians. “They’re having to do more while they’re on site because they know that is probably the only opportunity that they’re going to be able to get in there that month,” explained Best.

Assured Environments had a slight increase in no-charge services due to “technicians being stressed; pressed for time; not being able to do as much as they were previously,” said Best. “It’s still manageable at this point but I don’t know for how much longer,” he added.

TAKING ADVANTAGE. Some of Overline’s restaurant clients “were opportunistic and took that time to actually go in and clean their restaurants and fix the things they’ve been needing to fix for years.” This included water leaks, doing exclusion work and deep cleaning.

With customers not present, Overline performed more clean outs and set more traps, including in dining rooms and common areas that were normally off limits. “We were able to add to our trap placements almost 10-fold and we were able to clean up a lot of populations of various pests by doing it,” he said.

McCloud Services also had clients use the shutdown to squash ongoing pest issues. “We definitely have taken advantage of doing more intensive services when able,” said Channon.

Clients saw the effectiveness of proactive service and giving technicians full access to the facility during non-operational hours; Channon hoped they see the value post-pandemic, as well. “Clearly, it works,” he said.

This was the time to fix long-standing pest issues, agreed Gore. “We should all in the industry be making the best of a bad situation and taking that opportunity to really dig in deep into our customers’ pest problems and get those things resolved,” he said.

CHANGING PESTS. Pest issues depended a lot on how restaurants were left at the time of shutdown. Some were properly closed; others were left for months with grease in fryers, soda in soda guns and food in the fridge.

In New York City, it took restaurants a good month to get employees back to see what was happening inside, said Bloom. That’s when he started getting calls for small flies and mice.

“The rodent population that was happy to dine outside was now looking for new food sources, so if they weren’t rodent proofed and adhering to previous recommendations, they ended up having rodent problems inside,” he recalled.

Sprague Pest Solutions, which uses electronic sensing devices in restaurants, saw rodent behavior change almost immediately.

“Within two days they completely changed their behavior,” said AJ Treleven, director of operations at the company. Movement shifted from nocturnal to daytime because humans weren’t present and normal food and water sources no longer existed. As such, rodents were traveling further and “pushing inward, looking into buildings, trying to find those food sources,” he said.

Abatement efforts by Assured Environments were more successful since bait- and trap-shy rodents had fewer resources. “We’re actually getting increased consumption in our rodenticide baiting efforts and capture counts are going up,” said Best.

The shift to outdoor dining caused challenges. Doors were constantly open, allowing flies and mice inside. Seating in city streets reduced parking for service vehicles. And diners had more up-close encounters with pests.

“You may have more visibility of rodents by diners” in cities like Chicago that have cases of rat activity, said Pat Hottel, technical director, McCloud Services.

More problems occurred if neighboring properties cancelled service. Closed businesses provided harborage for pests like German cockroaches to develop; the critters then moved next door to forage. “You can see that in places like strip malls where there’s a connection between the different businesses,” said Hottel.

And dried-out drain traps gave American cockroaches, drain flies and rats easier access to buildings, said Overline, Aardvark Pest Management. He now opens faucets to flush out pipes while performing service at restaurants.

Still, restaurants had fewer new introductions of pests given fewer customers, employees and deliveries of goods, said Gore of Rentokil. “We’re not seeing the bed bug activity in restaurants like we might see in the past,” he said.

FORGING AHEAD. In the near term, PMPs expected more restaurants to shutter and cancel service.

Sprague Pest Solutions saw an uptick in cancellations in September. AJ Trevelen said some businesses tried to stick it out but with the weather changing and patio seating no longer viable “they’re just kind of giving up the ghost.”

Abell Pest Control, which earns 9 percent of its revenue from restaurant work, expected business in this category to decline.

“We maintain a real nice mix of residential and commercial clients in a lot of different industries to insulate ourselves from this type of shock,” said Heimbach.

“For those (pest control) companies that were very restaurant heavy, they’re having a rough time of it,” added Bloom, Standard Pest Management.

Companies were tracking COVID-19 infection rates and health department directives in their markets to help predict the impact on clients and their own operations, with the goal of staying nimble.

Seeing restaurant clients in distress has been particularly difficult, especially since many restaurants — like pest management companies — are family-owned and took generations to build.

“It’s very emotional when you see these family businesses that have had to struggle so much just to keep their heads above water,” said Alfie Treleven, CEO of Sprague Pest Solutions.

As such, Sprague has trained frontline employees on “what it means to have empathy for what everybody is going through and how fortunate we are to be able to support them to the best of our ability,” he said.

The author is a frequent contributor to PCT.