Even As Cities Reopen, Restaurants Are Being Hammered By The Coronavirus

Over the weekend in New York’s Koreatown, near the Empire State Building in Midtown, throngs of diners packed the area, where some streets were closed to accommodate outdoor seating. Just a short block away from the revelry, however, the silence was palpable as restaurants, large and small, sat darkened. The same eerie contrast can be seen across the city. 

New York isn’t alone, either. In the Commerce Department’s latest report on Wednesday on how American consumers are spending, August sales at food service and drinking places, while improving by 4.7% from July, slumped 15% from a year earlier. In comparison, total retail sales rose 2.6% from a year earlier, led by demand online and for home-improvement supplies, grocery and sporting goods gear.

For the first eight months of this year, restaurant sales fell 21%, with the decline outpaced only by a 35% slide from clothing and accessories retailers, a segment that was struggling even before the coronavirus pandemic upended how and where people shop. 

Nearly one in six restaurants, representing about 100,000 restaurants, has been closed either permanently or for the long term, six months after the first government-mandated restaurant shutdowns in the U.S. during the pandemic, according to a survey released Monday by trade group National Restaurant Association. Most restaurants were seeing higher operating costs while their average sales had declined by a third, the group reported, adding that most businesses “are still struggling to survive” without expecting their situation to improve over the next six months.

The trade group expects the industry is on track to lose $240 billion in sales by the end of this year. 

“Our lease expired on August 31st and we were not able to come to an agreement with the landlord on how to move forward both during and after the pandemic,” The Mermaid Inn wrote in an open letter announcing its decision to close its popular East Village location in New York after 17 and a half years. “What began as a little 29 seat restaurant on a sleepy stretch of Second Ave grew into a place that had welcomed hundreds of thousands of guests and employed thousands of people over the years.”

U.S. employment in food services and drinking places is down by 2.5 million since February despite job gains in recent months, according to the latest Bureau of Labor Statistics data. The restaurant industry has suffered far more job losses than any other sector, according to the National Restaurant Association. 

Restaurants in cities like New York that have lost travelers and commuting office workers have been among the hardest hit. About 56% of U.S. adults said they are aware of a restaurant in their community that has permanently closed during the pandemic, with that percentage rising to about two-thirds for urban residents, a separate consumer survey by the restaurant trade group showed.

“The past few months along with the unexpected pandemic was especially hard for us and now we have lost our lease,” said a sign on the door of what was formerly Terri, a small counter-service vegan sandwich place nearby New York’s Flatiron Building that had been in business for over ten years. 

Although many cities and states have allowed local restaurants to reopen for outdoor dining—instead of limiting them to takeout or delivery orders—indoor dining is still not allowed in places like New York. (New York will finally allow indoor dining at 25% capacity on September 30.) Meanwhile, many restaurants are in locations that aren’t conducive to outdoor dining, and takeout or delivery orders haven’t been enough to make up the operating costs. 

“Delivery, while keeping a few people employed, does not provide any profit for the restaurant,” read the Mermaid Inn’s East Village “farewell letter.” “Many of our restaurants have storefronts that are too narrow for it to make any sense to put tables outside. … Other restaurants are in front of a no standing zone, a bus stop or a turning lane. … And re-opening at 50% for many restaurants is a nonstarter. How can a 75 seat restaurant that only makes money in the best of times given the cost of doing business in NYC, reopen with 40 seats and no bar?” 

That’s not to mention outdoor dining is subject to the whims of the weather.

The Mermaid Inn letter also blamed the city and the state for a lack of clear guidance that led to “maddening” uncertainty for a sector where small “restaurants operate owing vendors 30-40 days’ worth of bills.” 

Different lawsuits have reportedly been filed, including a class-action lawsuit representing 300 restaurant owners against New York State for the city’s ban on indoor dining even as eateries in nearby Nassau County on Long Island have been allowed to open at a 50% capacity. 

What’s going on in New York is just one example of the tale of two cities that’s repeatedly being told across the country.

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