- The restaurant industry lost an estimated $ 25 billion in sales and more than three million jobs in the first 22 days of March as the coronavirus outbreak swept across the United States.
- About 30,000 restaurants have already closed permanently across the country, and more than 110,000 are expected to close within the next month, according to estimates by the National Restaurant Association.
- “Any expert who thinks he’s going to use recent history – and by recent history, I mean the last 100 years, including the Depression – as a model for what’s going to happen here?” “said Roger Lipton, investor and advisor in the restaurant industry.
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The fate of the restaurant industry is uncertain as the coronavirus outbreak keeps customers at home and forces thousands of locations to close.
The impact has already been devastating across the industry.
11% of the more than 4,000 restaurant owners and operators surveyed by the National Restaurant Association (NRA) last week said they plan to shut down permanently within the next 30 days. 3% said they had already closed their doors permanently.
If those numbers are applied to the more than one million restaurants that the NRA estimates there are across America, that would mean 30,000 restaurants are already gone. About 110,000 more are expected to follow the same path during the month, based on those calculations.
In the first 22 days of March, the restaurant industry lost about $ 25 billion in sales and more than three million jobs, according to the same survey.
Roger Lipton, restaurant industry analyst, investor and advisor who recently wrote a blog post on the next “restaurant apocalypse,” told Business Insider US that the restaurant industry faces an unexpected and unprecedented challenge.
“Any expert who thinks he is going to use recent history – and by recent history I mean the past 100 years, including the
– as a model for what will happen here? They’re laughing at themselves, “Lipton told Business Insider on Monday.
Restaurants have faced massive upheaval, with new safety rules, forced closings and customers staying at home.
Total restaurant transactions were down 36% in the week ending March 22, compared to the same week last year, according to The NPD Group. At full-service restaurants – which are less equipped for drive-thru orders and deliveries – transactions fell 71%.
In a report released last week, Cowen analyst Andrew Charles predicted “a steady double-digit drop in same-store sales that began on March 16 and lasts through the end of July.”
Cowen cited a call with Jordan Thaeler, founder of pedestrian traffic tracking company WhatsBusy, who said sales of gourmet restaurants fell more than 90%. Casual dining is down 75%, quick causalities by 65%, and quick service or fast food by about 50%.
This extreme financial crisis alone would be enough to cause panic. Now, says Lipton, that financial stress is associated with photos of body bags outside of hospitals.
Restaurants are already laying off millions of workers
Layoffs and pay cuts have already started across the industry, especially in sit-down-centric restaurants and chains that are less willing to switch to take-out, delivery and drive-thru .
The Cheesecake Factory has put 41,000 hourly workers on leave. Ruth’s Chris has laid off the majority of its employees who worked in restaurants, including managers of the chain’s 23 locations where delivery and delivery was not viable. Chuy’s closed nine of its 101 locations, and put about 40% of its administrative and administrative staff on leave.
Punch Bowl Social has laid off more than 1,000 employees during the shutdown of sites in the United States, according to WARN notices from the States. A representative for the trendy arcade chain said the closures would be temporary.
Industry CEOs, including executives at Texas Roadhouse, parent company of Olive Garden, Darden Restaurants, and Yum Brands, which owns Taco Bell, KFC and Pizza Hut, have said they will not accept a salary at this time.
It’s hard to predict which restaurants will reopen and which will stay closed forever, as loans, rents and government responses remain in motion. Lipton predicts that many struggling restaurant chains will not consider filing for bankruptcy until the onset of winter, in part simply because their lawyers will have been overwhelmed and working from home in the preceding months.
In 2021, the restaurant industry will operate with a whole new set of rules, says Lipton. The $ 2 trillion coronavirus relief bill will provide a massive injection of money. Lipton predicts a period of accounts for large franchisors, many of whom are already heavily in debt and will face a sharp loss in royalties from struggling franchisees. Venture capitalists still have billions of dollars they could invest in struggling concepts.
At this point, it’s impossible to say which chains will survive the restaurant apocalypse. The period of disruption will likely last for months or years, instead of weeks.
“The good news is people have to eat,” Lipton said. “Some companies will figure it out. And others, for one reason or another, won’t.”