With Industry in "Free Fall," How do Restaurants Survive the Winter?

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With Industry in "Free Fall," How do Restaurants Survive the Winter? | NASDAQ

Times have never been more dire for the restaurant industry – and the upcoming winter months threaten to make the current situation sunny by comparison.

The National Restaurant Association, in a note to the U.S. House of Representatives in early December, described the restaurant industry as being "in an economic free fall." Since the start of the pandemic, 17% of the nation’s restaurants – over 110,000 establishments – have closed on a permanent basis, according to the trade group.

That number could go even higher in the next three months. The group says 83% of full-service eateries expect their sales to dip in the coming quarter – and 58% say they expect to continue furloughs and layoffs in that time.

In some cities, the situation is more dire than others. More than half of the 6,000 restaurant operators surveyed by the New York Restaurant Association said their businesses would likely not survive the next six months without federal relief. In New York City alone, 4,500 restaurants have already shut their doors.

“Since March, our members have been sounding the alarm that without sufficient governmental relief, New York restaurants will not make it through the pandemic,” said Melissa Fleischut, president and CEO of NYSRA. “Our once vibrant restaurant industry is suffering. Our members are in worse economic shape than most restaurants across the country, and … we need help now.”

Closings are common in the restaurant industry, of course. New locations open and close within weeks sometimes. But the businesses impacted by the pandemic are stalwarts in their communities. The National Restaurant Association says the vast majority of the shutdowns have been well-established gathering spots that had been in business for 16 years. Some 16% had been open for at least 30 years.

“The restaurant industry simply cannot wait for relief any longer,” said Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association. “Efforts in Washington to find the ‘perfect’ solution are laudable, but the lack of progress in the meantime has led too many operators to give up on the government and close down for good.”

So far, though, relief from Congress has been slow to arrive. Congressional Republicans and Democrats have been unable to strike a deal on a second coronavirus relief bill, despite both parties stressing the need to send relief before leaving for the holidays.

At the same time, outdoor dining, which has been a lifeline for many food and drink establishments during the summer months, will either be reduced or impossible, given environmental conditions. (Diners generally aren’t in a hurry to eat rapidly cooling food while they themselves shiver.)

The obvious solution to the elements is putting out more space heaters in outdoor dining areas to accommodate customers, but supply and demand issues are making that difficult.

“The challenge is there’s a shortage of space heaters and radiators and you can’t call up and get 20 or so for your restaurant in a matter of weeks. Now there’s a backorder,” says Dennis Gemberling, founder of Perry Group International, a business management consulting firm that specializes in the hospitality industry.

That challenge, along with others, will force food service companies to get more creative in the coming months if they don’t want to become just another statistic on the National Restaurant Association’s “closed” list.

“Now, more than ever, it is vital that [restaurant owners] are able to identify and connect with their most valuable consumers,” says John Kelly, CEO of Zenreach, which makes marketing software used by brick-and-mortar businesses. “If you have limited capacity … you want to make sure that you focus on bringing in your loyal, high-value consumers, and not the low-ticket, one-and-done consumers.”

It’s also critical to rethink the use of restaurant space, says Gemberling. If, for example, there’s limited outdoor space, look into lobbying the city or township where they operate to convert parking areas to dining areas.

Exploring new ways to utilize take-out and delivery – in a way that still makes it feel like a dining out experience – is also worth exploring.

“Some hotels are approaching restaurants allowing those [empty hotel rooms] to be used as private dining areas – so the hotel room is becoming an extension of the restaurant,” says Gemberling. “It’s still abiding by local regulations, but restaurants don’t have to create any new cooking facilities. It’s the delivery model meets the indoor dining one.”

It might also be a time to take a gamble with spending, says Kelly. Done right, it can be a show of confidence that actually brings in customers, even when things are tenuous.

“As counterintuitive as it may seem, now is a great time to boost online advertising for new customers,” he says. “Consumers are more likely to perceive brands who advertise during economic downturns as industry leaders who are more stable and reliable, which could translate to increased business both now and after the pandemic passes.”

Chris Morris

Chris Morris is a veteran journalist with more than 30 years of experience, more than half of which were spent with some of the Internet’s biggest sites, including CNNMoney.com, where he was Director of Content Development, and Yahoo! Finance, where he was managing editor. Today, he writes for dozens of national outlets including Digital Trends, Fortune, and CNBC.com.

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