Pandemic-related closures may have forever changed the restaurant industry.
Many bars and restaurants are beginning to open their doors once again. The mandated closures of the last few months are now slowly being lifted, as long as safety guidelines are met. Though in most states restaurants can re-open, some restaurants are financially unable to.
What Restaurants Felt the Most Impact?
Since restaurants had to quickly change their operation to strictly take-out and delivery when closures began, those with no regular take-out service took longer to adjust. An article by Business Insider shares that orders at full-service restaurants dropped 71% in the third week of March, and fine-dining sales dropped by more than 90%.
Independent and worker owned restaurants may also struggle more than chains, as they do not have the cash buffer to fall back on. A cash buffer is the amount of money a business has saved to support days with no income, while still paying their basic bills and wages. Data from a 2015 study by the JPMorgan Chase Institute found that half the companies in the analysis had a cash buffer to support 27 days of business, but the other half did not. These buffers dwindled as closures went on, spelling a long-term struggle for many restaurants.
Government Financial Support for Restaurants
Most restaurant owners found themselves in the small business category under the Paycheck Protection Program. According to an article by CNBC, the CARES Act provided around $350 billion in aid to small businesses. This article also shared that restaurants reported a loss of $30 billion in March, with an estimated $50 billion in losses coming in April.
In a letter penned to Congress in April, it was said “4 in 10 restaurants have closed their doors, some with no hope of reopening.”
Restaurants That Won’t Return
The months of closures forced some restaurants to shut down before having the opportunity to re-open. The National Restaurant Association shared that by the end of March, 30,000 restaurants had indefinitely closed their doors, with over 100,000 closures expected to come in April.
MPR News has shared a running list of popular Minnesota restaurants that have permanently closed or have closed some locations, including The Bachelor Farmer in Minneapolis, Pazzaluna, Bonfire, and Izzy’s Ice Cream.
Restaurants will have to continuously evolve to meet new guidelines as the phases of re-opening continue. The closures of the last few months have brought financial hardship to many restaurant owners and staff. If you have found yourself under financial stress as well, contact our bankruptcy attorneys at hoglundlaw.com to see how they can help.