Is The Pandemic The Ultimate Death Sentence For Independent Restaurants?

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It is quite evident by now that hospitality is one among the worst-hit sectors globally due to the coronavirus pandemic. Especially restaurants, both big and small, are suffering a lot during this time as it is the nature of these businesses to be heavily reliant mostly on footfalls.

Now, in a recent discovery, it has been found out that the situation stands to become even grimmer, especially in the US – the worst-hit country from Covid-19 by the number of total cases. A whopping 85% of all independent restaurants run the risk of being forced out of businesses in the United States by the end of 2020. This particular discovery comes from a study was commissioned by the Independent Restaurant Coalition and was conducted by Compass Lexecon which is a consulting company.

The aftermath of the rapid spread of the COVID-19 throughout the US led to the entire restaurant industry incurring major losses and laying off staff members in massive numbers. The suffering was particularly more intense in the case of independent restaurants like mom-and-pop diners, neighbourhood local cuisine joints, fine dining staples and so on, as opposed to that of big chain restaurants or fast food joints such McDonald’s and Starbucks.

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In the United States, independent restaurants comprise 70% of the total number of restaurants and they all heavily rely on dine-in revenue. Now, most of them are looking forward to an uncertain future because they were in no way prepared to deal with such a pandemic on such a global scale. Also, it should be noted that they don’t possess a financial runway big enough to sustain this disaster as well.

Many of the restaurant owners who have been interviewed have revealed that they are at least two months behind when it comes to paying rent and other utility bills because they haven’t been making any money whatsoever for the entire first quarter of 2020. Also, while agreeing that the Paycheck Protection Program loans have been able to provide them with some amount of relief, owners of independent restaurants are simply considering it a band-aid-like temporary solution.

COVID-19: The Death Sentence

Independent restaurants in the U.S, much like in all other parts of the world, operate on very thin margins. Now, in the case of sit-down restaurants, those margins have shrunk even more due to the capacity limits that have come into play to maintain safe and social distancing until a vaccine is found for the virus.

While many restaurants have chosen to pivot to making themselves available on food delivery apps and allowing takeout, it won’t still help sustain them in the long-run. In the US, food delivery platforms charge a hefty 15% platform fee which for many independent restaurants isn’t profitable at all.

Another survey report which recently was made available by Eater survey of San Francisco restaurant owners came to the conclusion that nearly 87% independent restaurants have claimed they will not be able to survive on just delivery and takeout. Also, close to 60% of restaurant owners have reported to constantly losing money by staying open in the current situation.

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The Ray Of Hope

By now, the circumstances have made it quite clear that restaurants wouldn’t possibly be able to return to the kind of business it was doing in the pre-pandemic time. Thus the trajectory of recovery trajectory is going to be extremely slow for them. As of right now, they have little to no choice but to persist through the coming months by continuing to operate at a loss. However, all hope is not yet lost.

The IRC aka Independent Restaurant Coalition is currently pushing very aggressively for funding which is restaurant-specific in addition to the PPP in the Congress. They are doing this with Oregon Representative Earl Blumenauer spearheading a new bill. He has proposed $120 billion grant in support of these suffering independent restaurants all across the US. Now, it remains to be seen what the future hold for them. We will keep you posted on all future developments. Until then, stay tuned.

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