Coronavirus: ‘The worst thing that has ever occurred to the restaurant industry’

This has been one of the hardest weeks the restaurant industry has ever seen. There’s no other way to spin it. Black Box Intelligence took a five-day pulse check and found full-service restaurant sales dropped, on average, 74 percent. The National Restaurant Association estimated lost sales in the neighborhood of $25 billion for the first 22 days of March. And you need to consider that figure through a narrower window really, since this crisis didn’t really pick up until the beginning of last week. Once Starbucks decided to shut its dining rooms, the storm was on.

First it felt almost cautionary. Akin to how some industries followed the NBA’s lead when it decided to suspend games. But the sweeping arrival of state and city mandates ordering restaurants to shutter dining rooms hit like a sledgehammer. It’s been one blow after another since. Just between Landry’s and The Cheesecake Factory, we’re talking north of 80,000 workers furloughed. A record 3.28 million filed for unemployment in the week ending March 21, a large portion of which came from the foodservice industry, according to a report from the U.S. Department of Labor. What’s staggering about that is it’s a full 3 million more than just the prior week. Three. Million. And the previous high for unemployment filings in a single week: 695,000. When did that happen? Nearly 40 years ago (October 1982).

Craig Ganz, a bankruptcy specialist and litigation partner out of Ballard Spahr’s Phoenix office, told my colleague Ben Coley (who has been working nonstop all week) that “The impact of the virus on the restaurant industry is literally the worst thing that has ever occurred to the restaurant industry. I can’t come up with something that would be similar or what No. 2 would be.”

Hard to argue. Also, what doubles down on this is the reality the true after-shock isn’t here yet. Many chains were undercapitalized before COVID-19 struck, and holding onto the ledge with one hand. Ganz said he doesn’t expect a jump in bankruptcy cases in the next 30 days because many restaurants are closed and landlords are working with them.

But once locations begin opening in the next couple of months and operators evaluate how bad the situation is, the spike will begin.

Even if things level out soon and restrictions lift, there will be a lot of restaurants unable to pick up the pieces. I did read recently that those restaurants that do survive to the other side will be glad they did. I agree with that as well. I’d bet the house people head to restaurants in droves to help reestablish regular routines. Restaurants have always played this role in society because a., we all have to eat. And b., it’s a social experience that, relatively speaking compared to other outlets, doesn’t break the bank. Additionally, I really feel like people want to support restaurants right now. There’s just a fear factor many can’t get over. Not to forget, the financial strain on much of American today is leading people to cut back where possible. Eating out is often one of the first places people crunch.

But the question is, what will the industry look like after the crisis? Many chains and independents will simply absorb too many hardships to remain upright. Others will get there with so much strain in their wake that, to Ganz’s point, they’ll need to restructure to keep the lights on.

I wouldn’t be surprised whatsoever if a rash of M&A enters the mix during this recovery period. Private equity will dive into the space just like it did following the financial crisis. We could see many public chains go private, especially on the full-service side.

Will this new world actually be a healthier one for restaurants? I’ve heard this argument, too. And there’s validity to it when you consider the biggest issue facing brands before COVID-19. The landscape was oversaturated. The labor pool was too tight. Too many options. Too few customers. Not enough money to go around.

It’s a reality retail weathered back in 2008, and then took on exponentially when ecommerce invaded customer behavior. Similar dynamics were unfolding for restaurants with delivery, digital ordering, and the rush of fast casual into the lexicon.

It suggested we were headed for a course correction, just like retail, that would leave many restaurants behind. So, did COVID-19 simply accelerate this? To some extent, the answer probably is yes. But it will also sweep a lot of great restaurants that deserved to grow behind. That’s the tragedy at hand. It’s a course correction on steroids that takes no prisoners. And what’s happening to employees is, in my view, the worst element of it. By far.

How the $2 trillion stimulus package comes into play is something we’ll all keep an eye on. I wrote about this yesterday and it made my head spin. I’m a former high school sports writer who used to cover Little League games on weekends. But I did my best to try to understand the logistics and how it will affect restaurants. It appears to offer some much-needed hope, but I’m not ready to embrace it with two arms just yet. We’ll see how it makes it through Friday’s proposed vote and then observe from the ground up. I try to always be a vehicle for restaurant operators to tell their story and what they’re seeing. And once I watch that recovery in action, full force, through their eyes, I’ll begin to believe.

Let’s hope. It’s the best we can all do right now.

Like last week, I’ll share all of our articles on COVID-19 so far. Again, my line is open if you think I can lend a hand.

The week of March 23

Switching to Takeout and Delivery Only? Here are 7 Critical Things to Know

House Passes $2 Trillion Stimulus Package

10 Perseverance Tips During COVID-19

Wow Bao Launches First-of-Its-Kind Off-Premises Strategy

The ONE Group Goes from 4,000 Employees to Under 100

Navigating Unprecedented Times: 5 Ways to Boost Your Restaurant’s Mobile App 

The Cheesecake Factory Furloughs 41,000 Workers

Bankruptcy Cases Expected to Rise Significantly Due to Coronavirus Pandemic

What to Know About Supply Chain During Coronavirus (podcast)

COVID-19 Considerations for Restaurant Franchise Systems

Communication Key to Cousins CEO in Time of Crisis (podcast)

Small-Town Restaurant Life During the Coronavirus Crisis

The First 22 Days of March: Restaurants Have Lost $25 Billion

McDonald’s Suspends All-Day Breakfast Menu

Record-Breaking 3.28 Million File for Unemployment

Wendy's: 90 Percent of Sales Coming Via Drive Thru

Cheesecake Factory Says It Won’t Pay Rent

5 Strategies for Restaurant Survival to Implement Now 

Senate Passes Groundbreaking $2 Trillion Stimulus Package

Full-Service Restaurant Sales Drop 74 Percent in Five Days

Top Chef Masters Winner Floyd Cardoz Dies from COVID-19

How One Fast Casual CEO is Keeping Positive (podcast)

Landry’s Furloughs 40,000 Employees

Coronavirus Hope No. 1 for Restaurants: Keep Staff Employed

Communicating About Coronavirus: 10 Ways Restaurants Should Engage

Yum! Brands Has 7,000 Restaurants Closed Globally

Punch Bowl Social Closes, Lays Off Majority of Employees

Texas Roadhouse CEO Gives Up Salary to Help Front-Line Employees

Senate, White House Strike Historic $2 Trillion Stimulus Deal

Can Kiosks Help Restaurants Stay Alive Through COVID-19?

Yelp: Consumer Interest for Restaurants Down 67 Percent

J. Alexander’s Furloughs 3,400 Workers Due to COVID-19

2020 National Restaurant Association Show Cancelled Due to COVID-19 Concerns

Luby’s Closes 35 Units, Furloughs Most of Corporate Office

Tech CEO: We Feel for Restaurants Right now

Email Marketing During COVID-19: Is Your Brand Still on Autopilot?

Should Your Restaurant Add Third-Party Delivery, or Start its Own Network?

Here’s Where Restaurants and Workers Can Get Relief Funding During Coronavirus

Tips for Keeping the Lights On with Fazoli's CEO (podcast)

Grubhub CEO: 30 Percent of Restaurants Could Close

Fine-Dining Restaurants Adjust to a Brave New World

Restaurant Rescue Action Items for COVID-19

Frisch’s Adds Groceries to Help Guests During COVID-19 Crisis

When Delivery and Carryout Isn’t an Option for Restaurants

6 Ways Restaurants Can Drum Up Funds During the Coronavirus Pandemic

Senate Fails to Move Forward on Stimulus Package

Bankrupt CraftWorks Closes 261 Restaurants, Furloughs Most of 18,000 Employees

McDonald’s to Shutter All U.K. Restaurants

Starbucks Shuts Cafes Nationwide for at Least Two Weeks

The week of March 16

Chinese Restaurants Feel the Pain of the Coronavirus Pandemic

The Rush Away From Restaurants Continues

Adjusting Your Service Model on the Fly (podcast)

Casual-Dining Brands Bolster Cash Reserves in Uncertain Financial Future

Darden CEO Not Taking Salary as Company Braces for COVID-19 Impact

Where is All the Restaurant Traffic Going?

How Firehouse Subs' CEO Navigates Coronavirus (podcast)

This LA Fast Casual is Working to Stop Hunger

Trump Signs Law Granting Sick Leave for Employees

Tamper-Proof Labels Drive Consumer Confidence During Coronavirus Crisis

Eatertainment Venues See Huge Losses Amid COVID-19 Pandemic

Cameron Mitchell Ceases Operations, Furloughs 4,500 Employees

Are You Sending the Right Message? Five Ways to Navigate Social Media During Coronavirus

Is Your Restaurant Liable if Workers Test Positive for COVID-19?

Critical Planning and Communication for Restaurants Today

Inside the Chicago Restaurant World's Fight to Survive a Pandemic

José Andrés’ Restaurants Transform into Community Kitchens

One Restaurant’s Survival Idea? Become a Grocer (podcast)

Nearly 30 Percent of People are Afraid to Eat Out

Danny Meyer’s Union Square Hospitality Group Lays Off 2,000 Workers

Economist: COVID-19 Presents Different Threat than Great Recession

National Restaurant Association Expects $225B Impact, 5–7M Jobs Lost from COVID-19

Restaurants Discount Kids’ Meals in Wake of Coronavirus

New York Eases Alcohol Delivery Law Amid COVID-19 Crisis

KFC to Close All Dining Rooms Starting March 19

Amid Outbreak, Some Brands Rush to Support Employees (podcast)

DoorDash Wants to Generate $200M in Additional Sales for Restaurants

Report: 85 Percent of Upscale Restaurants Feel Traffic Hit from Coronavirus

Trump Encourages Fast-Food Brands to Keep the Drive Thru Open

A COVID-19 Cure for Restaurants: Reaching Older Diners

McDonald’s to Consider Rent Deferrals

McDonald's, Dunkin', Wendy's End Dine-In Service to Slow COVID-19

President: Avoid Gatherings of 10 or More People

Inspire Brands Closes Dining Rooms at Sonic, Arby's, and Jimmy John's

Noodles & Company to Close Dining Areas, Reduce Operating Hours

Uber Eats to Waive Delivery Fees, Donate Meals

Restaurants to Offer ‘Dining Bonds’ to Lift Income

Where Fast Food Fits in the Coronavirus Crisis

Reports Differ on Possible Nationwide Curfew

Responding to COVID-19: Fast Food Focuses on Drive Thru, Pickup

Shake Shack's Dining Rooms Close Amid Coronavirus Spread

Why a Takeout-and-Delivery-Only Model Could Save Your Restaurant

Chick-fil-A Temporarily Shutters Dining Areas

Officials Across Country Close Restaurants, Bars

Coronavirus Crisis Communications for Restaurants: A Checklist

Starbucks Closes Seating in Favor of To-Go Model

The week of March 9

Golden Corral Employees are Washing Hands Every 20 Minutes

Halo Burger to Close Down Dining Rooms

Grubhub Suspends Commission Payments to Help Independents

New York Cuts Capacity for Restaurants as Coronavirus Concerns Mount

Noodles & Company Implements Emergency Paid Sick Leave Policy

What Customers Think About Restaurants and Coronavirus

Which Brands are Getting Hit the Hardest by the Coronavirus? Full-Service Spots

Why February was the Lull Before the Coronavirus Storm

Starbucks Expands 'Catastrophe Pay' for Coronavirus Care

McDonald’s to pay Quarantined Employees at U.S. Corporate Stores

Starbucks to Feel $400M Impact from Coronavirus

Darden Now Offering Paid Sick Leave for Employees

Here’s How Your Brand Should Prepare for COVID-19

Resources

Keeping Track of States Shutting Down Dine-In Service

The National Restaurant Association's Coronavirus Information Page

CDC's Interim Guidance for Businesses and Employers

World Health Organization on How to Get Your Workplace Ready

Everything Franchisees Need to Know from the International Franchise Association