Restaurants’ COVID-19 challenges continue

Restaurants’ COVID-19 challenges continue

While we’ve all felt the impact of the COVID-19 pandemic in our homes and in our businesses, no industry has been more affected than the restaurant industry. 

As many across the country begin opening their doors for in-store dining, the harsh reality is palpable: the road to recovery — for the restaurants that survive — will be long and arduous. 

The National Restaurant Association’s June 15 survey of operators with temporarily closed restaurants shows 55% say there are not enough customers to justify opening. Those that do reopen are doing so at just 25-50% capacity due to distancing requirements. 

How the pandemic is impacting restaurants is as varied as restaurants themselves. Dayparts, ability to respond to off-premises dining, digital capabilities and population density all affect a restaurant’s top line. 

Those that adapted their business model to include delivery and takeout are faring better than fine-dining and others that don’t translate well to off-premises dining. 

Taken as a whole, losses continue to add up for operators. Sales at eating and drinking places in May hit $38.6 billion, an increase over April, but well below January and February sales by nearly $27 billion. In recent years, May has been the top sales month for restaurants, and this year’s numbers reflect a 40% loss from pre-pandemic forecasts. 

Overall, total lost sales for foodservice are estimated at $120 billion for March-May and a full recovery is far off. 

A June 17 Rabobank forecast says foodservice demand will not recover until mid- to late 2022, although sales declines are expected to moderate to 12-14% over the next 12 months. Rabobank further estimates that independent restaurant counts could shrink 15-20%, with overall restaurant attrition 8-10% over the next year.
 
Many operators are seeking rent relief from landlords. 

“We expect our landlords will partner with us during this difficult time period,” said Jack Hartung, Chipotle’s CEO. 

Rent usually accounts for about 8% of sales at restaurants; with reduced capacity, it can represent close to 20%. Generous unemployment benefits have also impacted operators’ availability of workers, with 23% of NRA surveyed operators reporting staffing concerns. 

While foodservice distributors have become agile and creative in the pandemic, with many now selling to retailers, exploring new customer segments, building new partnerships, and managing costs very tightly, challenges remain. 

Produce grower-shippers who supply the foodservice market would benefit from knowing and being sensitive to the new realities of operators. As individuals we can do our part by supporting restaurants and demonstrating patience as our operators, servers and support staff adjust to new realities of restaurants in the era of COVID-19.

Tim York recently retired as CEO of Salinas, Calif.-based Markon Cooperative. 

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