United States Restaurant Industry Hard Hit With Closures, According To Industry Research

As Hong Kong gets ready to completely shutter all restaurants within city limits this week due to a resurgence of COVID-19 cases, and the pandemic continues to sweep across the United States (21 states are in the red zone of more than 100 new infections per 100.000 people according to a federal report obtained by The New York Times), it’s clear that the pandemic will continue to affect lives around the world. Even in regions that have regained some semblance of control over new cases, such as Canada and New Zealand due to strict and immediate lockdown measures, the long-term effects of the pandemic will continue to shadow areas of the economic landscape.

The restaurant industry has been particularly hard hit. The National Restaurant Association’s chief economist Bruce Grindy estimates a decline in revenue across the board for American restaurants during the pandemic. “In total between March and June, eating and drinking place sales levels were down more than $116 billion from expected levels, based on the unadjusted data,” writes Grindy in a release. “Add in the sharp reduction in spending at non-restaurant foodservice operations in the lodging, arts/entertainment/recreation, education, healthcare and retail sectors, and the total shortfall in restaurant and foodservice sales likely surpassed $145 billion during the last four months.”

Although some restaurants attempted to pivot to takeout, delivery or curbside operations, some of these eateries will be shuttered permanently. According to The Q2 2020 Yelp Economic Average Report, which tracks US businesses reported as closed by owners, there were 26,160 total restaurant closures as of July 10, 60 percent (15,770) of which were permanent. Almost 3,000 of those permanent closures (2,956, to be exact, or 23 per cent) occurred since June 15.

The Facebook/OECD/World Bank (2020) Future of Business Survey notes a similar decline worldwide. “Consumer-focused sectors, such as hotels, cafes, and restaurants, have been particularly affected, and in many cases, they have been brought to a virtual standstill,” according to the data in the report. “In all sectors, more than 50% of businesses reported a decline in sales across the aggregate sample, with hotels, cafes, and restaurants (76%) and transportation and logistics (69%) most likely to have reported a reduction in sales.”

Even as some states start to reopen (although some are reimposing lockdown or stringent social distancing measures as cases continue to spread), recovery is slow. “I believe there is still a lot of upside recovery for restaurants, but for now we’re stuck in neutral until we can get the industry operating at full capacity,” writes NPD food industry advisor David Portalatin in a release, citing a decline between 12 and 14 per cent in major restaurant chains in mid July. “The ‘recovery’ phase will then tell us whether the industry can recapture enough customer traffic to get back to the pre-COVID baseline, or whether the new normal will reflect a re-set where consumers prepare more meals in their home kitchens for a longer term.” These numbers include a majority of restaurants (78 per cent of the 75 major chains polled) in regions permitting on-premise dining at the time of survey.

As the necessary measures to counter the pandemic shift due to circumstance on a near daily basis, it is difficult to predict what the ultimate long-term changes to an industry — already subject to razor thin margins and the whims of consumer taste — may be in the future. It’s clear, however, that these effects will continue to affect one of the world’s major sources of employment…and that many of the restaurants that you may have once enjoyed will not remain unscathed.

For more articles about the effect of COVID-19 on the restaurant industry, read What Covid-19 Social Distancing Measures Will Mean For Restaurant Dining Room Design, Fear Of Eating Out: Anxiety In Restaurant Dining During Covid-19 or A Restaurant For One, And How Personal Space May Change Post Pandemic.