Another Sign Coronavirus Has Dealt Restaurants An Extra Harsh Hand

At New York’s Koreatown over the weekend, throngs of diners packed the midtown area nearby Empire State Building, where some streets were closed to accommodate outdoor seating. Except just steps or short blocks away from the scene of revelry, silence was just as palpable from now darkened restaurants, large and small. And the same eerie contrast can be seen across the city. 

New York isn’t alone. In the Commerce Department’s latest reading Wednesday on how American consumers are spending, August sales at food service and drinking places, while having improved by 4.7% from July, slumped 15% from a year earlier. In comparison, total retail sales rose 2.6% from a year earlier, led by demand online and for home-improvement supplies, grocery and sporting goods gear.

For the first eight months of this year, restaurant sales fell 21%, with the decline only outpaced by a 35% slide from clothing and accessories retailers, a segment that was already struggling even before the coronavirus pandemic upended how and where people shop. 

Nearly one in six restaurants, representing about 100,000 restaurants, is closed either permanently or long-term six months after the first coronavirus-led government-mandated restaurant shutdowns in the U.S., according to a survey released Monday by trade group National Restaurant Association. Most restaurants saw higher operating costs while their average sales declined by a third, the group reported, adding most businesses “are still struggling to survive” without expecting their situation to improve over the next six months.

The trade group expects the industry is on track to lose $240 billion in sales by the end of this year. 

“Our lease expired on August 31st and we were not able to come to an agreement with the landlord on how to move forward both during and after the pandemic,” said The Mermaid Inn in an open letter announcing its decision to close its popular East Village location in New York after 17.5 years. “What began as a little 29 seat restaurant on a sleepy stretch of Second Ave grew into a place that had welcomed hundreds of thousands of guests and employed thousands of people over the years.”

U.S. employment in food services and drinking places is down by 2.5 million since February despite job gains in recent months, according to the latest Bureau of Labor Statistics data. The restaurant industry has suffered far more job losses than any other sector, according to the National Restaurant Association. 

Restaurants in cities like New York that have lost travelers and commuting office workers have been among the hardest hit. About 56% of U.S. adults said they are aware of a restaurant in their community that permanently closed during the pandemic, with that percentage rising to about two-thirds for urban residents, a separate consumer survey by the restaurant trade group showed.

“The past few months along with the unexpected pandemic was especially hard for us and now we have lost our lease,” said a sign on the door of what was formerly Terri, a small counter-service vegan sandwich place nearby New York’s Flat Iron Building that had been in business for over 10 years. 

As much as many cities and states have allowed their local restaurants to reopen for outdoor dining instead of just limiting them to takeout or delivery orders, indoor dining is still not allowed in places like New York. (New York will finally allow indoor dining with a 25% capacity on Sept. 30.) Meanwhile, many restaurants are in locations that aren’t conducive to outdoor dining while takeout or delivery orders weren’t enough to make up the operating costs. 

“Delivery, while keeping a few people employed, does not provide any profit for the restaurant,” said the Mermaid Inn’s East Village “farewell letter.” “Many of our restaurants have storefronts that are too narrow for it to make any sense to put tables outside….Other restaurants are in front of a no standing zone, a bus stop or a turning lane….And re-opening at 50% for many restaurants is a nonstarter. How can a 75 seat restaurant that only makes money in the best of times given the cost of doing business in NYC, reopen with 40 seats and no bar?” 

That’s not to mention outdoor dining also subjects to the whims of weather.

The letter also blamed the city and the state for lack of clear guidance that led to “maddening” uncertainty for a sector where small “restaurants operate owing vendors 30-40 days’ worth of bills.” 

Different lawsuits have reportedly been filed, including a class-action lawsuit representing 300 restaurant owners against New York state for having banned the city’s indoor dining even as eateries in places like nearby Nassau County on Long Island within walking distance have been allowed to open at a 50% capacity. 

And what’s going on in New York is just one telling example of a tale of two cities that’s repeatedly told across the country.

Related on Forbes: Century 21, a ‘dangerously addictive’ place, just became the latest coronavirus casualty

Related on Forbes: As Bed, Bath & Beyond plans to cut 2,800 jobs, it’s squandering other opportunities

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