The American Restaurant Industry in the Wake of COVID-19

December 13, 2020
Antonio Flores

Over the past eight months, COVID-19 lockdowns have closed down establishments across America. From restaurants to gyms to offices, commercial properties are no longer able to use their space as expected, and because of this, their businesses are frequently losing money or going out of business. Some businesses have managed to adapt; others have not, to the point that one in five restaurants could close due to this stress. Small businesses in particular have been very hard-hit, as they lack the deep pockets of larger conglomerations to make up for the shorter-term economic hits of the crash from the lockdowns. In particular, in this article we will focus upon the restaurant industry and how the lockdowns have affected restaurants’ ability to stay open. This is an extremely important development in the commercial mortgage sector.

First of all, sales volume at restaurants has been devastated, with a 27% decrease in sales projection from the National Restaurant Association. Restaurants are competing for far less business, as local jurisdictions often forbid them from in-house or even in-person service. In addition, restaurants are forced to take extra precautions to deal with customers that come inside, whether that be requiring face masks, closing off tables to comply with social distancing, or sanitizing surfaces.

Another major factor is the rise of delivery apps such as Grubhub, UberEats, and Postmates. These services use contracted drivers to pick up meals from the restaurant which are then delivered to customers’ homes. The problem for the restaurant is that these apps demand a large share of the sale price, often as much as 30% or more! This is not a profitable strategy for many restaurants, forcing them to raise their prices, especially with the extra expenses due to COVID protocols, or else go out of business. Delivery apps present another method of serving food for restaurants, but their rates are so high that they do not present a suitable alternative to in-person service for many restaurants.

To conclude, restaurants face a very difficult environment in the post-coronavirus world. Many of them will close, and the rest will tend to make less money. Large corporations will do better on the whole than the smaller businesses, but even medium and larger chains are hit by the pandemic’s impact. It remains to be seen how further waves of the pandemic will affect the economy and the restaurant industry. However, hopefully the economy continues to recover so that restaurants can recover their profits and come back.

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