More Than 500,000 Restaurants are in Freefall

Mish

Restaurants are struggling and the latest lockdowns add to the misery.

Economic Freefall 

The National Restaurant Association reports 110,000 Restaurants Have Closed Permanently during the COVID-19 pandemic.

Since the COVID-19 pandemic began in March, 17% of restaurants (or about 110,000 establishments) have closed either permanently or long-term, and 10,000 restaurants have closed over the last three months alone, according to the National Restaurant Association’s December data released on Monday. 

Letter to Congress

The National Restaurant Association sent a Letter to Congress, including House Speaker Leaders Nancy Pelosi, Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, and House Minority Leader Kevin McCarthy.

Letter Details 

  • 87% of full service restaurants (independent, chain, and franchise) report an average 36% drop in sales revenue. For an industry with an average profit margin of 5%-6%, this is simply unsustainable.
  • 59% of operators say their total labor costs (as a percentage of sales) are higher than they were pre-pandemic.
  • We predict that as of today, 17% of restaurants—more than 110,000 establishments—are completely closed.  
  • The vast majority of permanently closed restaurants were well-established businesses, and fixtures in their communities. On average these restaurants had been in business for 16 years, and 16% had been open for at least 30 years.
  • Only 48% of these former restaurant owners say it is likely they will remain in the industry in any form in the months or years ahead.
  • What these findings make clear is that more than 500,000 restaurants of every business type— franchise, chain, and independent—are in an unprecedented economic decline. 

Congressional Bickering Since September

The letter includes a wish list of priorities for the next pandemic package.

This plea was sent to Congress at the same time that restaurants are speaking out in various areas around the country where restrictions on restaurants have gotten more stringent as cases continue to rise, including in California, where Gov. Gavin Newsom passed a three-week stay-at-home order (including shutting down outdoor dining) for parts of the state.

On October 2, the House Passed a $2.2 Trillion Heroes Act that included $120 billion in relief for independent restaurants.

In September, the Democrats demanded over $3 trillion. 

The bickering goes on an on. 

Latest Package Details

Politico reports Bipartisan Coalition Releases Details of $908B Coronavirus Package.

  1. Unemployment: Expand federal unemployment benefits to $300 a week for 16 weeks.
  2. Paycheck Protection: $300 billion to the Small Business Administration to fund the Paycheck Protection Program
  3. Rental Assistance: $25 billion in rental assistance to states and local governments and extend an eviction moratorium until the end of January 2021.
  4. Child Care: $10 billion to support child care providers
  5. Education: $82 billion for education providers
  6. Vaccines: More money for testing and vaccines.  

Missing in Action

  • Relief for restaurant and other business owners whose businesses were closed by state orders. 
  • The plan does not include direct stimulus checks to Americans, which Sens. Josh Hawley (R-Mo.) and Bernie Sanders (I-Vt.) are both endorsing and has the backing of President Donald Trump. 

What About Restaurants, Hotels, Salons?

None of the above details nor Trump's proposed $600 checks will do anything for the restaurant industry nor any other business harmed by forced closures.

Is this a responsibility of states since they forced the shutdowns? 

If so, the same can be said for the entire bailout package. 

Mish

Comments (55)
No. 1-17
PecuniaNonOlet
PecuniaNonOlet

Doesnt sound very MAGA does it?

cudmeister
cudmeister

Why should we be so worried about restaurants? Do they contribute to the balance of world trade somehow? Restaurants used to be where we spent our disposable income.

Mish
Mish

Editor

The concern is not over restaurants. The concern is actions that forced then to close.

That's the discussion.

Eddie_T
Eddie_T

How many were forced to close....and how many just went broke due to lost business due to fear of dining out? Do we have any idea?

There were forced closings here, but only for a couple of months.....and some were able to shift to a take-out service to keep some income coming in.

But all restaurants had to deal with social distancing.....hard to make a living when you can only seat half your capacity or less.

The well capitalized old established places mostly weathered the storm. Recent start-ups and places with super high rent folded up pretty fast. The restaurant biz is brutal anyway....tastes change...a place is popular for a while ....and then it isn’t.

This has also been our problem in dentistry.......we just can’t get back to full production. Our plight is not as dire as the restaurants, so far...but it looks to be a long tie before we can get back to our old normal....if ever.

Bars are really screwed......they’ve been locked down here for months, and no end in sight. College town...there were lots of very successful people in the bar business here. Family dynasties.....

Casual_Observer
Casual_Observer

The Republicants keep trying to use the pandemic to force states into reorganization and bankruptcy but why don't they do the same when it comes to the federal budget and pork barrel federal spending to specific states ?

Zardoz
Zardoz

I guess the real metric we need to figure out here is how many deaths per restaurant saved is acceptable.

On the flip side, once this is over there is going to be a LOT of opportunity in the restaurant business.

Casual_Observer
Casual_Observer

I always thought the restaurant business was going to decline at some point. Most illnesses even before Covid could be traced to poorly prepared restaurant food. It isn't surprising that Covid continues to thrive every time restaurants open. Eating out cratered after the great recession. It simply isn't necessary in the middle of a pandemic. My ancestors actually thought eating outside the home was not hygienic.

goldguy
goldguy

The shutting down of the global economy will/has caused many more deaths than by the virus alone. They should be looking into why ALL our leaders have committed these atrocities... most of the virus deaths were nosocomial, mostly the elderly. What they have done to the economies will be with us years to come.

Sechel
Sechel

If we really expect restaurants or bars to stay closed for an extended period of time the government is going to have to subsidize them. This is the approach other countries or municipalities take. When the bars and restaurants had to close in Girona funds were made available. That's really the fair choice. If the restaurants pose a health risk and need to shut compensation is in order.

Rbm
Rbm

Well whats the answer. Leave every thing open. What is the cost to the economy has anyone looked into that. Would you go out to eat when you know the hospitals are full. Or when people you know start dying humm how bout the cost of social unrest. Its an ugly situation all around. If you can separate all the agendas/ politics and money out of the equation. It boils down to people trying to do what they think is best i an ugly situation. Even if you dont agree with them.
Ps i caught it at work this summer. Mild case and i am a relatively healthy and active person. Two weeks later on my first day back to work i about dropped over. Im no long hauler but i still have issues. My recommendation is to try to avoid it as long as you can.

humna909
humna909

Closing of an otherwise profitable business due to short term long tail events like a pandemic is clearly an economic loss. Keeping all business afloat is not a good outcome, but nor is letting plenty of good businesses fail.

There is no easy solution. Many countries have found half-good solutions. The US doesn't seem to have any solution to the sufferings of these businesses.

Rippletum
Rippletum

The Republican in me says I shouldn't have to pay (more) taxes

Jackula
Jackula

Its not fair or equitable to force businesses to close without providing financial relief. However, even if the resturaunts were kept open very few people would be patronizing them over the next few months. Smarter folks know that's playing Covid roulette.

Sechel
Sechel

Adjusting for population the U.S. has had four times the number of Covid deaths of Germany. That's simply failed leadership

Mastergator
Mastergator

Here is the solution: www.flccc.net Check out Dr. Pierre Korey's emotional testimony about Ivermectin before a Senate committee on December 8, 2020.

Bam_Man
Bam_Man

Massively over-building restaurants and retail was pure mal-investment, enabled by decades of Central Bank policy error.

The wipe-out was inevitable.

RonJ
RonJ

Melinda Gates: “What did surprise us is we hadn’t really thought through the economic impacts.”


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