Global Restaurant Industry Shutters Down
First, we must eat… So a round of applause for the hundreds of thousands of workers in food production and supply worldwide keeping us stocked up.
But while the supply keeps flowing, Coronavirus means we have no choice but to eat at home, leaving eating and drinking establishments not only empty but also threatened with permanent closure.
Takeout and Delivery a Lifeline for Few
While many restaurants are shifting from dine-in to take out and delivery, which is most countries affected by the outbreak still allow, many have learned that such moves barely put them on the path to survival.
Food delivery orders have plummeted, as many workers who used to order in lunch are confined to their homes, concerned about the risk of contagion.
According to the Financial Times, one executive of a company working with food delivery apps said that order volumes have fallen by as much as two-thirds in the past week. The drop has been even more extreme in central London, where lunchtime orders to office workers have all but disappeared.
Trillion Dollar Industry at Risk
The industry is massive. In the U.S., the over 640,000 establishments bring in a revenue of $833 billion, created by nearly 15 million workers – that’s a full 10% of the U.S. workforce. In Europe, revenue in the sector in 2017 was $508 billion and in Asia $1.1 trillion.
In the U.S., 48% of people’s food budget goes on eating out. That might be higher than other areas of the globe, but, still, it brings home the enormity of the problem facing all types of eating places.
For those working in the sector the problem is especially acute. In Australia, 79% of workers in hospitality are casual workers and these are the first to be laid off in a crisis. In the UK, 13% of all part-time workers work in hospitality compared to 4.8% of full time workers.
Many restaurant owners have already sacked thousands, including high-profile industry names such as Gordon Ramsey, who sacked 500 of his restaurant workers.
Also in the UK, Carluccio’s, the restaurant chain, has announced it has gone into administration and closed its 73 branches putting 2,000 out of work. The story is the same for hundreds of thousands around the world.
But it’s not just the kitchen staff that are suffering. Many restaurant owners have seen their dreams and lifetime savings crushed by a storm few saw coming.
In the unstable economic conditions pre-Coronavirus, the food industry had already been suffering.
In the U.S. by the end of 2017, restaurant unit numbers had declined by 2%. As expected in times of economic uncertainty, that decrease was absorbed by the small, independent units. The chains, having more monetary resources, actually grew by 1% and fast casual chains grew by 4%.
The effects of the pandemic on an already contracting market will be colossal, with more than $225 billion restaurant losses predicted in the U.S. alone.
Spain, Italy, and France attract a whopping 236 million international tourists every year and the high seasons kicks in right before Easter. With the beginning of the season already derailed, there is deep anxiety that the entire season could be compromised.
Tourism and the restaurant industry represent a massive source of employment and revenues in these three countries and this year’s outlook is bleak to say the least.
Small Businesses at Risk of Permanent Closure
But while the virus is a great leveler in that it disrespects social class, the economic system is set up so that the financial effects of it will hit the smaller guy more than big business.
Starbucks, for example, closed 2,000 stores in China at the end of January this year. By mid-March, as the peak of the pandemic began to pass, they announced the stores would be opening again by the end of the month, telling shareholders “we believe the impacts to our business will be temporary”.
Big chains have the resources to weather the storm. But a two-month closure does far more damage to the small and independent establishments. Of the over 647,000 restaurant units in the U.S., over half are independents . And most of these operate on razor-thin margins. That means “when the COVID-19 prevention lockdowns are lifted, some restaurants and bars are likely to be lost forever, never able to bounce back after being buried by mountains of debt”, writer Philly-based journalist Danya Henninger.
This tragedy will pass. And when it does hopefully the industry will pick itself up and continue on the path Forbes predicted of a period of growth leading to $1.2 trillion sales by 2030.
When this happens, patrons should not forget that the hundreds of thousands of small, independent, passionate restaurant owners need them most. They are the ones that make our neighborhoods lively, make delicious food based on local produce and don’t have the financial cushion of large corporations to weather this storm.