The Coronavirus pandemic has been wreaking havoc on the hospitality industry worldwide. However, some unexpected casualties are on their way for the US as a surprisingly large percentage of its restaurants decline and are forced to shutter their doors permanently.
Due to a mix of lockdowns and social distancing restrictions, many restaurants have frantically tried to adapt their business model to the “new normal.” Since eateries could only send out their orders through takeout, online ordering, delivery etc. and many were forced to decrease their dine-in occupancy count, the sharp decline had to happen. In fact, experts suggest that the above factors are enough to lead many restaurants to shut their operations.
An Overview of the Current Condition of the US Restaurants
According to celebrity chef Wolfgang Puck, around 25 percent of small US restaurants will never see the light of dawn. He said, “They’re going to stay closed because they ran out of money and the landlords are evicting them. So it’s a really tough time.”
Running a restaurant is a challenge in a healthy economy, let alone managing a tattered one. For a restaurantowner to generate and maximize profits, he/she needs to fill at least 80 to 85 percent of the seats. Only then they can achieve break-even.
Now, with a pandemic-stricken economy, the costs and risks have greatly increased. The food delivery services, such as Uber Eats, keep 15 to 20 percent of the overall restaurant payment bill. Other than this, hosting customers means added costs to ensure that SOPs are followed, and safety measures like hand sanitizers, masks, and shields are available in quantities. However, not every restaurant can survive with these restrictions.
“The reality is not all of these restaurants are going to come back,” says Christopher Gaulke, a lecturer in the food and beverage area at Cornell University’s School of Hotel Administration. “Expectations are that as many as 30 to 40% may not come back, of the independent restaurants, your mom-and-pop-style sit-down [restaurants].”
On the other hand, restaurants like Domino’s and Chipotle, who solely thrived on takeout and delivery, are coping well.
The Takeout Restaurants Are Doing Fine
“Anyone that was in the takeout and delivery game before this has just done incredibly well,” Gaulke points out. “If you look at Domino’s, Chipotle, these chains that had invested so heavily in the technology for enabling third-party delivery or online ordering, etc., they’re all doing well.” Since their dine-in facility was only more or less an extra source of revenue, they don’t feel threatened and aren’t expected to lose everything to the pandemic.
The only way US restaurants can survive the COVID-19 crises is through innovation and working on their ability to adapt. They need to go beyond standard menus and design meal kits to cater to the masses. As Gaulke puts, “We have a company here in town that has started selling meal kits and groceries, as well as pre-made foods.”
It is never too late! Restaurants heavily dependent on in-house dining will continue to suffer compared to the delivery and takeout spots. Hence, it is advisable to invest time, energy, and money to redesign the restaurant business models and prioritize delivery, meal or grocery kits, and takeout if restaurants want to remain in the business through the COVID-19 pandemic.