This is what prompted my response, and I suspect it did the others too. You literally stated that “people will forget what a restaurant is”.
Yeah I think you at least have to qualify the profitable minimum capacity % with how often that has to be true. Lots of places are open from lunchtime to fairly late in the evening 6 days a week. Only the most overwhelmingly successful are largely full that whole time, every day.
We used to go a mainly waffle place (that eventually adopted a bigger menu). They lasted for years absolutely packed for brunch on weekends, line down the street. But we never went except at our typical fairly late lunch time on weekdays, and were not rarely the only people in there. Although, they did go belly up fairly recently (but well prior to COVID).
So like lots of stuff hard to quantify and generalize. There are dozens of restaurants within walking distance of us: very densely populated, and a popular place to come eat/drink from other places in NJ just short of venturing into Manhattan. No way are the same places all coming back, not a few have for lease signs already. But things do adjust over time when it’s particular forms of consumer spending that become less popular. Some other kinds become more popular. Assuming it’s not enough of an impact (and considering govt stimulus efforts) to lower aggregate demand a lot. If you know that net macro impact and its duration you can get really rich in the markets. Because nobody actually knows that. Lots of restaurants can go bust and not have much effect on that.
Also, if there are not other eateries or other businesses eager to replace the restaurants, commercial rents on our main drag will go down. That market isn’t perfect, you often see individual cases where the landlord is just stubborn leaving a place empty for too long seeking a previous rent (or ‘I must being able to make my big rent increase stick with somebody, because this place has become so trendy’). But in general people who own buildings realize it’s better to get something than nothing so rents equilibrating is another factor in a high rent area like this. Again unless there’s a lots of new types of business which easily replace the bust restaurants, which means there isn’t a big overall effect.
In Northern Illinois, White Pines Resort closed as a casualty of Coronavirus after 31 years in business. Here’s an article in RRStar about it:
My point was relatively simple; I’m not saying restaurants won’t fail. I’m not even saying that there may not be fewer restaurants in the short term as a result. But when the lockdowns are over and the pandemic is done, it’s going to be a sort of explosion of restaurants- kind of like the way species evolved post-Cretaceous. You’re going to have people trying to fill restaurant niches that are vacant all over the place.
Until the lockdowns are over and the pandemic isn’t a thing anymore it’s true that they’ll likely fail at a higher rate than normal, and not be replaced. But once they are over and we’re looking at this in the rearview mirror, look out- we’re going to see a lot of restaurants open up. They may not be the same kind, they may not be in the same locations, and they may not be in the same format as before, but they’ll be there. I am absolutely not convinced that a few months of lockdown are going to effect major societal and behavioral changes in most people.
There have been a few of these in my area, or the business model is reformatting.
There are people who could never imagine not getting up and going to work everyday, out of sheer routine over 40yrs. Lots will have discovered that retirement isn’t the hellish thing they dreaded. They’ve had a chance to test things like; do I have enough money, will I miss my workmates, will my spouse make me crazy. And may have discovered that there are still things that interest them, that they suddenly find time to pursue. Sort of a retirement trial run. This looks like failed Mom and Pop business, on the surface, but if you asked their kids they’re probably glad to see it.
Secondly, if this pandemic has illustrated anything, it is surely that the business model of razor thin financial margins, shaky supply chains, little or no savings against a bad turn, too much debt, isn’t really sustainable. Not just businesses big or small, whole industries and our households too. So, some of those businesses that aren’t going to reopen are also ones that were running on zero wiggle room, to withstand even the mildest of storms. Again, on the surface, that looks like another victim of the pandemic economy.
Third, there are always businesses, especially small ones, literally circling the drain. Those owners are going to take this opportunity to close shop. It saves them face, ‘victim of pandemic, a crying shame!’ They’ll get a lot of sympathy and most likely some government assistance, which is not too bad a turn, if your business was going down anyway.
Nice post on a number of fronts. The second paragraph in particular is what’s been on my mind: we’re seeing the dark side of the efficiency machine that we’ve created. The working poor have little to show for our economic gains over the past 10-11 years, and then they’re hit with this.
It breaks my heart to think about all the shuttered storefronts we might see in the coming months. Without doing something dramatic like forcing landlords to waive rent for the indeterminate future, I don’t see how we avoid this.
I do see opportunities, though. Like, last weekend I went to a soul food-Mexican fusion joint. It was take-out only, and the wait was long and boring. There was a little Africana shop next door, and I noticed that many of the folks waiting for their soul taco orders were dipping inside the shop to look around and possibly buy stuff (I might go back and get me some incense). Pre-Covid, this probably didn’t happen as much since people weren’t forced to mill around outside to wait for their orders.
I know of at least one hairdresser who when faced with the fairly stringent county requirements to reopen, they decided to see a handful of clients that they’d already booked before knowing what she was required to do, then pack it up. She didn’t reopen legally for those few days and that doesn’t surprise me.
I was at a notary last night. I wore my mask, as did the other party. The notary had a sheet of plastic (painter’s drop-cloth) stapled to the ceiling, separating us from her. Cheap, but effective.
The hair stylists shop I went to had hardly any customers. But 3 stylists waiting. She said that after reopen they had a 4 hour wait but now business is slow.
Also they are haircuts only. No shampoos, washing, or coloring. None of the expensive stuff.
Like someone said above, online is where its at. No reason to invest in a space for a retail store.
Sort of ironic that online killed off a lot of stores and now even more people are buying online. Amazon just announced a new warehouse in my town even though they have one 20 miles away. And they are opening a really big warehouse 20 miles away in the other direction.
Yeah, and at those times, the restaurant is losing money.
It is those peaks times, a couple hours on weeknights and a few more on weekends, that put an eatery into the black. The rest of the time, they are just open for cashflow, not profit.
If they can never capture those times, and have to be at 50% capacity, even on a Friday night, then they cannot break even, much less be profitable.
Still not seeing where I said “all.”
I’ll grant that my point was slightly ambiguous, but now that I’ve clarified, it would be rather counterproductive to hold onto your interpretation, and even less so to hold me to it.
Once again, you are saying a few months. It is going to be at least another year before we have a vaccine and are allow restaurants to open up to full capacity.
You are also assuming that we do not have a massive recession that cuts into people’s eating out budget.
You are assuming that people will have the liquidity or the credit to open up their own business.
You are assuming that they will not need to raise prices, which will decrease the demand for their product.
You are assuming that they can but food from vendors at about the same price as they could before Covid, and I don’t think that we can take that for granted.
I think that, so long as we don’t get a few more shoes to drop, that the industry will probably mostly recover, over the course of a decade or so.
I just think that your idea that we won’t even see a dent within a year is extremely optimistic, and IMHO, from having spent a couple decades running restaurants, unrealistic.
One thing about that… If you have a lease, then your landlord can hold you to it, even if you go out of business.
They may not want to rent it to you for less than they are currently charging the leaseholder, even if the current leaseholder cannot pay.
As soon as they sign the lease over to a new tenant, they no longer can charge the previous holder of the lease rent.
Wow. Just watching all that money walk away… My partner has been doing almost nothing but color, which involves at least one shampooing. It also involves getting $200-250 per client. All by appointment only, which is how he worked pre-pandemic anyway.
Its a rule in Kansas. Other states might be different.
The shop I went to the stylists worked salary, not commission. So they could get unemployment while the shop was closed.
I think we’ll see some restaurants moving into larger spaces. A hundred diners in a space rated for 220 is within the capacity limits, and won’t cause appreciably more labor expense than 100 in a space rated for 110. (Rent and other expenses directly related to square footage will increase, but perhaps not by all that much if accompanied by a general decline in retail rents as lots of establishments go out of business, due to the pandemic and/or the ongoing bricks-and-mortar retail apocalypse.)
The landlord being able to hold you to a lease and the landlord being able to collect on that lease are two different things. The landlord driving the current leaseholder into bankruptcy and the write-off of the debts doesn’t really help anybody, including the landlord who is now SOL, although I’m sure there are landlords who will do it anyway.
Locally, I haven’t heard too much about local businesses closing. We have lost one small local chain (Chronic Tacos); the owners blamed the shutdown. Their old storefront in Wake Forest was quickly filled by another taco restaurant. Some locally-owned restaurants have been doing better than others with takeout-only; one of the two that I visit frequently has drastically reduced its menu due to both a lack of demand for certain items and disruptions in supply chains.
I visit the Portland area of Maine often enough that I’ve gotten to know a few local shop owners. One of them retired a few years before the shutdown; she operated her shop online for a while, but closed that part completely very recently. She has said repeatedly how glad she is that she’s not in business anymore, and that the shutdown would have killed it. She’s currently having a blast with her old hobbies of knitting and loom work. Another small store owner (who had been in Portland for over 40 years) recently went into retirement as a result of the shutdown; she’s currently liquidating the remaining contents of her store (online, of course), including several bolts of fabric.