Retail Trend to Watch: Restaurants Struggle to Stay Afloat
Of all of the industries impacted by the COVID-19 pandemic the restaurant industry is one of the hardest hit. Nearly six million waiters, chefs, cashiers and other restaurant employees have lost their jobs in the United States since the pandemic began. While there has been widespread disruption, not all segments of the industry have been equally impacted.
Fast food restaurants have fared better during the pandemic. “Fast food restaurants were built for off-premise usage, with 70%+ of sales coming from drive-thrus,” says Stifel Analyst Chris O’Cul. “Fast food chains are also better positioned to promote value in the current environment where casual dining profits have been decimated,” he added.
By mid-April fast food restaurants was the only category seeing pre-COVID-19 sales levels with pizza restaurants seeing positive same store sales versus casual and fine dining restaurants which are struggling to stay afloat.
With razor thin margins restaurants depend on their premises being at capacity with a constant flow of traffic. But with social distancing requirements some restaurants have had to reduce capacity by more than 75%. "If you talk to restaurants across the globe, the language might change, but the math is the same," says Ryan Pernice, a restauranteur that owns Table & Main, Osteria Mattone and Coalition Food & Beverage in Georgia. "Restaurants and bars need volume and traffic to make them work." Another Georgian restaurateur, Blaiss Nowak, who owns a restaurant called Nowak’s, reflecting on the situation said "there will be no profits for us while we are social distancing." "There are a great amount of restaurants that I've heard will never open again." The capacity in Nowak’s restaurant has been reduced dramatically, from 200 people a night to 50 in line with social distancing requirements.
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Independent restaurants which were already struggling before the pandemic will be the first ones to go. An estimated 30% of independent restaurants in the United States will never open again. Bars are also in trouble since they also depend on packed venues to make their numbers work. They are also the ones that have been the cause of COVID-19 resurgences in several places around the world. In South Korea a bar hopper went to five clubs during one night, tested positive for COVID-19 and then was found to be responsible for infecting over 100 people. These super spreaders thrive in crowded environments. After the incident occurred bars and nightclubs were closed indefinitely in Seoul.
The pain is unlikely to go away anytime soon as 60% of consumers say they plan to eat more at home and less at restaurants after the pandemic is over. “There are three main variables that will influence continued restaurant recovery: reopening of on-premise dining and expanding allowed capacity; the willingness of consumers to dine out and feel safe and confident in doing so; and the economic well-being of the consumer,” said David Portalatin, NPD food industry advisor. When it is all said and done it is predicted that 20% of the over 650,000 restaurants in the United States that were in business in 2019 will not be open next year.