Last year was one that most restaurateurs would like to forget—at least those still in business.
According to the National Restaurant Association, more than 500,000 restaurants of every business type—franchise, chain, and independent—are in an economic free fall.
The National Restaurant Association Research Group conducted a survey of 6,000 restaurant operators and 250 supply chain businesses in November. The findings were stark, and sobering.
• 87% of full-service restaurants (independent, chain, and franchise) reported an average 36% drop in sales revenue. For an industry with an average profit margin of 5%-6%, this is unsustainable.
• 83% of full-service operators expect sales to be even worse through the first two months of 2021.
Although sales are significantly lower for most independent and franchise owners, their costs have not fallen proportionally.
• 59% of operators say their total labor costs (as a percentage of sales) are higher than they were pre-pandemic.
• 58% of chain and independent full-service operators expect continued furloughs and layoffs for at least the next three months.
As of Dec. 7, 2020, 17% of restaurants—more than 110,000 establishments—are closed permanently or long term.
The vast majority of permanently closed restaurants were well-established businesses, and fixtures in their respective communities. On average, these restaurants had been in business for 16 years, and 16% had been open for at least 30 years.
Only 48% of these former restaurant owners say it is likely they will remain in the industry in any form in the months or years ahead.
Local Learnings
Closer to home, the Orange County restaurant picture is not as bleak, but it’s certainly not rosy.
“Everyone is cautiously optimistic about 2021,” says Orange County Restaurant Association founder and President Pamela Waitt, whose organization was formed in 2007 to promote and market the Orange County restaurant industry.
“I think the overall sentiment seems to be that it can’t possibly get worse,” she said. “Everyone is having some level of optimism and hoping that dining is reopened early in the year.”
Waitt noted that once the vaccine distribution increases and restaurants can return to indoor dining, “that’s when recovery will be able to fully happen.”
Unfortunately, not all will recover.
“Many are hanging on by a thread; some have remained open out of pure survival and still following protocols,” Waitt said. “They are counting on PPP [loans] or they will shut their doors. Unfortunately, we will see some sales of restaurants with people selling to other restaurateurs because they cannot survive anymore. Unless help arrives soon, we will be shocked at how many restaurants we will lose in the next month.”
Among the many elements contributing to restaurant failures: increased fees by third-party delivery services and increased tent rental prices to accommodate outdoor dining.
“Tent rental prices went through the roof,” Waitt stated. “It’s shameful to do that to businesses that are hurting. The restaurants put all this money into outdoor dining and then that is taken away from them. There is no data to substantiate why they have to shut down. It’s an emotional yo-yo. It’s a lot to cope with, emotionally and mentally, plus the added stress of making sure your staff is able to pay their bills.”
Waitt shared that her organization is putting together a “Taste, Explore and Experience” culinary tour for 2021 that kicks off with Orange County Restaurant Week in March and will continue with a Margarita Crawl and other events designed to drive businesses to restaurants.
Those events will include takeout dining packages.
“This year, we’re still going to have a heavy takeout audience,” Waitt said. “It’s not going anywhere. Orange County Restaurant Week has 200,000 diners that love that week—it’s one of the largest restaurant weeks in the nation, and we will mold it however the dining circumstances are, which will be dine in or takeout.”
Waitt said the Orange County Restaurant Association held a fall restaurant week last September to help restaurants, and she discovered that diners will go and pick up food from a restaurant to save on third-party delivery fees. That also helps restaurants, which can pay a fee of 30% or more to the delivery services.
One trend Waitt noticed last year is that diners are gravitating to quick-serve comfort food restaurants instead of fine dining takeout.
“Most people want to pick up tacos, or burgers, something easy to grab and take home. Restaurants may reimagine how they do things. Grilling kits did really well last summer, now with weather being different, restaurants are offering more family meals to go, fried chicken and things like that. Easy comfort food you can throw in the oven and warm up.”
Taco Time
And don’t forget about tacos, Waitt said.
“Taco Kits are fantastic. Taco Tuesday sales doubled in quarantine. People wanted to have something normal, and Taco Tuesday is a fun way to make everyone happy.”
Given those statistics, it’s no surprise that Waitt acquired the website domain TacoTuesday.com last year. She is waiting for the right time to launch it.
And despite the dire predictions of restaurant closures, Waitt said there are still new restaurants planning to open this year.
“Everyone is moving forward like they are able to open in time,” Waitt said. “They have to keep moving forward, but there won’t be as many restaurant openings as there have been in the past.”
Visit www.ocrestaurantassociation.org to keep up with local restaurant events.
