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Covid-19: A look at the Restaurant Industry & its Needs

Saving our remaining restaurants and opening new ones

As America tries to go forward after the Covid-19 disaster, special attention must be paid to the restaurant industry. It, among all industries, has been probably the hardest hit of all.

Yelp, besides being an “online customer review site” for restaurants, offers a reservation system for many of the restaurants in its system. It has the needed ability to track restaurants it services to  determine their status during the Covid crisis.

Yelp reported  in mid July that of all the restaurants in their system, 60% would never reopen after the temporary. Of the ones that did reopen, over 50% of them expected to fail. And that is before the second  shutdown forced upon them by Covid surges.

The restaurants that are covered by Yelp are your typical local “mom & pop” restaurants. They are Sandwich shops, Mexican, Chinese, Asian, Japanese and other ethnic restaurants and of course, the typical Western eateries featuring all types of American regional style foods.

These restaurants are gone, gone for good. Never to reopen.

Restaurants have an incredibly tough business model to follow and succeed with even in the best of times. 50% of all restaurants that open fail within the first two years. Even those that operate for decades remain at risk of failure every year.

Unlike many other businesses, a restaurant that does not open loses all income generated for that day. It is lost forever and cannot be “made up.” So each day not opening is another nail in the coffin of the restaurant.

Restaurants rely upon a number of factors to profit and remain open. They are:

  1. To provide quality meals in a market that their customers desire.
  2. To provide a reason for people to select their restaurant over others.
  3. Use premium ingredients for meals at the least cost.
  4. Provide excellent and memorable service at the least possible labor costs.
  5. Make the most of each square foot of restaurant floor space and pack in the diners.
  6. Ensure that tables are constantly filled with eaters.
  7. “Turn over tables” more than twice per night.
  8. Provide quality bar service as meets the demand of customers.
  9. Most important of all, location, location, location.

Following these rules with a dose of good luck should allow most restaurants to remain open for many years.

Covid-19 and the response to the virus through shutdowns have inflicted the maximum damage any restaurant could ever sustain. The shutdowns not only cost restaurants the business and cash coming in to keep operating, but the fixed costs of rent, equipment leasing and utilities continued to be incurred virtually guaranteeing that many restaurants would never reopen.

Provided that restaurants could reopen, the rules established for reopening were negative to them. Many did not have the “curb side” pickup needed to reopen. And if they did, there was the need to order fresh food to open with, but no money to purchase the needed supplies.

Then, restaurants needed to comply with not just the regular health and safety regulations, but also the new Covid mandated requirements. For most, reopening could never occur.

More than 16.5 million people were legally employed by restaurants across America prior to Covid. Another 3.5 million or more were also illegals employed. This does not include all of the food service employees, equipment servicing employees, and health/safety employees. Most are no longer working.

For America to get back to work, the restaurant industry must recover and put people back to work. Otherwise there will be no recovery.

The best way to bring the restaurant industry back will be targeted programs aimed at the mom and pop restaurants. The programs would provide assistance in new restaurants opening in place of the failed restaurants. Restaurants that failed or those who opened under the restricted guidelines should be allowed to take advantage of the targeted programs as well.

Small business loans with delayed payment structures or loan forgiveness would be a good start in assistance. Payroll assistance would also be a requirement. Add tax relief and America could see restaurants reopening and hiring again.

Additional programs should be established for the ancillary companies affected by restaurant closings. They should be similar to those programs designed for the restaurants.

Returning the restaurant industry to viability will not be easy or quick. It will be a long term effort taking many years before we see the industry rebuilt. Even then, much of it will be different than before Covid. Let us hope that those in Washington see the light and put together programs to revive the restaurant industry.

As always, my thanks go out to Mark and the other Moderators for allowing me to write and post for SpartaReport. It is a great honor to be a participant here.

In closing, I ask that you remember…

LIFE IS GOOD! (No matter if you must cook at home instead of going out to eat.)

 
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Written by PatrickPu

Former Loan Officer and currently a Case Consultant and Expert Witness in Foreclosure and Lending Litigation cases. Avid follower of NCAA Football and Top 25 teams.

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