How Restaurants Are Reacting & Adapting to the COVID-19 Crisis

The closures that have followed in the wake of the novel coronavirus (COVID-19)’s arrival in the US have had a devastating effect on restaurants nationwide — particularly independent operators lacking the capital of well-funded restaurant groups. Associate Professor Brian Warrener, CHE, who teaches hospitality management at JWU’s College of Hospitality Management, examines the difficult and precarious position that chef-owners and restaurateurs are in:

The impact of the coronavirus as well as official reactions to those impacts seems to get more extreme on a daily basis. As of this writing [March 19], nearly 40 states have closed restaurants and bars, with most if not all expected to do so in some form or another.

What many had considered to be a two week or two month impact now seems more like 90 days minimum. This is certainly problematic for restaurateurs, a great majority of whom report that they are only able to remain closed and viable for between 2 weeks and two months.

Some restaurants have remained open providing pickup and delivery. This can be a viable alternative to keep things going for some operators but not for others. Especially for high-end operators with more expensive operating costs associated with food, staff, rent, debt service, etc., the low gross dollar and short margins can make these alternatives untenable. Operators with lower costs and lower margins might be better equipped and used to working in this way.

Operators who decide to ride out this storm by shuttering in the short term should take whatever measures are necessary to protect themselves. They can hoard cash by suspending bill payments to banks, landlords, vendors and staff in an effort to protect their own families. An effort should be made to communicate with these creditors to make whatever arrangements can be made. Remember that most owners are not in a position to collect.

It’s also difficult but probably best to furlough employees to let them take advantage of unemployment benefits and whatever other safety nets are put into place for them, before they are possibly suspended or run out. Letting them go now can also provide them the opportunity to fill jobs in industries like delivery, transportation, warehouses and supermarkets where positions are currently being added.

Analysts have been observing for quite some time that there is a glut of restaurants in the United States and have been predicting a thinning of the herd. There are too many restaurants, serving too few customers and charging too little money. Margins are currently too low as is pay for many positions and return for owners. These circumstances are unsustainable and likely to improve for employees and operators when there are fewer of them in the space. This crisis may speed this inevitable process.

People will eat out again soon and operators should do what they can to be prepared to serve these customers. Look to countries that are ahead of our timeline for clues as to how this is happening and what can be done to take advantage.

Photo by Gor Davtyan on Unsplash