‘On the Brink’ of Economic Collapse: COVID-19 Response Is Killing the Restaurant Industry

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The entire restaurant industry is “on the brink” of economic collapse as COVID-19 shutdowns and restrictions have cut sales nearly in half in some cities, according new figures released by the Independent Restaurant Coalition.

The group estimates that five out of six restaurants face permanent closure, and up to 16 million jobs could be lost.

Well-known TV chef Andrew Zimmern is behind a new TV ad detailing the restaurant industry’s politically-induced woes. The ad is narrated by Morgan Freeman who intones in that way of his that restaurants are “facing extinction.”

At the Denver Post, Josie Sexton adds:

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It’s not too far of a stretch. The restaurant industry is currently leading all other sectors in terms of closures nationwide, according to data released last month by the customer review platform Yelp. It’s ahead of retail stores, beauty salons, bars and fitness studios.

This comes as no surprise. The restaurant industry has high fixed costs and razor-thin profit margins typically not much better than 3%. A smart owner cut back staff and supply orders as soon as the shutdown, but other expenses are baked in:

Unfortunately, even though you may have more than one revenue stream, the sky’s the limit when it comes to expenses. Between labor, inventory, payroll, rent, utilities, advertising, credit card processing fees, equipment repairs, restaurant POS technology, general maintenance, and the dozens of other fixed, variable, and above-the-line expenses thrust upon restaurant owners, it’s common to feel underwhelmed at what’s left after you’ve made all the necessary deductions.

Even in good times, most restaurants go bust in their first year.

Here’s the ad they’re running in major markets across the nation:

Restaurants in my home state have been hit particularly hard, thanks to Democratic Governor Jared Polis’ severe and seemingly capricious restrictions. As Noah Siebenaller, the executive chef at Beasts and Brews explained it to me a few weeks ago, Polis “allows” Colorado restaurants to operate at 50% capacity or 50 customers — whichever number is smaller.

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A restaurant with seating for 100 people and a restaurant with seating for 250 people are both restricted to the same 50-customer limit. That’s Polis’ diktat, even though the latter could still practice safe distancing for 125 customers and likely has much high fixed costs — especially rent — than the smaller restaurant has.

For an industry where the major metric for profitability is the average cost per customer, Polis’ arbitrary limit has driven costs far beyond what most restaurants can long sustain.

“Economic collapse” might sound like hyperbole, but it really isn’t as restaurant sales are down 40% on average across all of Colorado, according to the Denver Post report.

In certain Democrat-run big blue cities, restaurants have taken a double-hit.

COVID-19 shutdowns have hurt tremendously, but that financial strain is made worse by rioters and criminals the demoralized (and soon to be defunded) police can’t do much to stop.

Chef Thomas Keller in happier times before the economic collapse
(Chef Thomas Keller in happier times before the economic collapse/AP Photo by Eric Risberg)

Even popular restaurants run by internationally know celebrity chefs are feeling the pain of impending economic collapse. Thomas Keller is “the first and only American-born chef to hold multiple three-star ratings from the prestigious Michelin Guide” and “the first American male chef to be designated a Chevalier of The French Legion of Honor.” His Napa, California restaurant The French Laundry is the only eatery on my entire bucket list.

Nevertheless, Keller just announced that he’s forced to close his hugely popular TAK Room and Bouchon restaurants at Hudson Yards in New York City.

Keller told the Wall Street Journal on Wednesday, “We could not find an economically viable path to continue operating.”

Presumably, Keller won’t be missing any meals and knows exactly where his next car payment is coming from. The same might not be true of the waitstaff and kitchen workers he’s been forced to let go. The situation in Bill de Blasio’s New York City is so bad that its fabled Fifth Avenue shopping district is getting hollowed out as retailers and restaurants flee the broken city.

That’s a story you’ll see repeated across the nation: Already successful restauranteurs will take hits, sure, but it’s the mom & pop places — and all the people they employ — whose businesses, savings, and dreams will be crushed by this economic collapse.

“Two weeks to flatten the curve” has morphed into “however long it takes to crush the economy.”

That’s not COVID-19. That’s your city or state government at work.

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