Restaurants Are Fucked — Unless They Get a Bailout

Across America, restaurant dining rooms are empty. Some have locked the door; others have skeleton crews working to fulfill delivery and carry-out orders as customers hunker down in their homes, waiting to see what happens next.

The coronavirus pandemic — fast-moving, and endangering people who spend time in public spaces — is uniquely poised to take down the restaurant industry as we know it. As if tailor-made to render restaurants unusable, the pandemic is a time bomb. And restaurants will not be able to delivery or takeout their way out of it.

Many of the restaurants that close during the pandemic will not reopen their doors. Diners should also brace for a restaurant landscape that will be entirely different by the time — however near or far off it may be — they can be safely encouraged to enjoy a crowded night out again.

“We are about to see a lot of places go broke forever.”

On Saturday evening, Georgia-based restaurateur and Top Chef judge Hugh Acheson tweeted the existential dread that so many in the restaurant industry are feeling in the wake of restaurants closing to halt the spread of COVID-19, first as a choice to protect staff and community, and now, increasingly, by order of local governments. The next night, after some states started seeing mandatory closures, Acheson tweeted, “We are so fucked.”

Just hours ago, the White House issued a recommendation that Americans avoid dining in restaurants. Over the last few days, governors and mayors across the country have announced escalating measures to keep people away from crowds. The on-the-ground conditions for diners and operators have changed so much in the past few days, evolving from “go out if you feel healthy” to mayors calling for restaurants to halve their capacity to governors issuing full restaurant shutdowns. For large cities without any mandated capacity reductions or closures, it’s likely a matter of when, not if.

Even before the mandatory closures, some of the highest-profile restaurateurs in the country were closing their doors. Tom Douglas shuttered 12 of his 13 Seattle restaurants. Danny Meyer closed all Union Square Hospitality restaurants in New York and D.C. David Chang closed all Momofuku restaurants in D.C., Los Angeles, and New York. A statement from the restaurant group called the current moment “unquestionably the most difficult moment in Momofuku’s history. The severity of the COVID-19 crisis has put our business and community in completely uncharted territory.”

A crisis of this scale and scope, so uniquely damaging to restaurants, is indeed unprecedented. And for now, restaurants are doing their best to stay afloat, ramping up delivery, offering curbside to-go service, promoting merch, offering gift certificates, begging diners to reschedule rather than cancel pre-paid reservations. But the truth is, compared to full dining rooms night after night, these are Band-Aids, temporary stopgaps to stop hemorrhaging money. Gift cards, which are effectively microloans to the restaurant owner, also do little to help workers in the short-term — or restaurants that don’t have the infrastructure to sell them.

Independent operators need a major infusion of cash — cash that’s more readily available from the government than from their stressed-out customers — to make it. They need rent alleviation, eviction protection, and tax deferrals, at a minimum, to live through this body blow. Who knows what they’ll end up getting.

As ordered, restaurants around the country that are staying open are attempting to do so by transitioning to takeout and delivery. Already, some restaurants are reporting that delivery hasn’t kept pace with the loss of in-person customers. And while Grubhub has suspended some of its fees, the fact remains that as of right now, delivery services take a hefty cut of the restaurant’s share with each order placed. There’s work involved in making the shift to delivery and takeaway — time and money that a restaurant likely does not have to spend. In the best-case scenario, the model effectively turns restaurants into so-called “ghost kitchens,” eliminating the need for nearly all front-of-house staff. David Chang has called the pivot to delivery “fools gold.”

But that’s a problem for a potential next chapter in this pandemic. Across the industry, workers are losing tips, shifts, and jobs right now. They need to eat and pay rent. For line cooks, for servers, for bartenders — really for most people who had restaurant jobs even last week — prolonged closures mean the loss of wages. Even for workers from those restaurant groups that are continuing to pay wages and offer health care coverage for the rest of the month, those jobs, and the wages and benefits that come with them, are effectively over.

The restaurant industry is contracting on both ends. Workers in need of jobs will (hopefully) find their ways to gigs in other industries. Companies that make their money servicing restaurants — equipment repair, cleaning crews — face similar prospects. “I just got laid off because of COVID-19’s effect on the restaurants to function safely. The irony is that we won’t be able to find other restaurant jobs bc more are closing everyday due to the virus,” one restaurant industry worker tweeted over the weekend. “Where’s our relief?”

This need for relief is compounded by the fact that many of the more than 15 million workers of the restaurant industry, like small-business restaurant owners, also live precariously; only an estimated 25 percent of restaurant workers work in localities with mandated paid sick leave. Crowdfunding for catastrophic illnesses and injuries is all too common for restaurant workers because paid sick leave and health insurance aren’t guaranteed industry-wide and many live at or below the poverty line.

Restaurant workers in America have been living as precariously as the businesses that employed them.

Run on shockingly thin margins, few restaurants can survive a bad week, let alone a bad season or a bad year. “It has been some tough times overall for many restaurant owners in the last few years,” Acheson tweeted over the weekend. “Costs up, rents up, employees scarce, wine tariffs… sucked our bottom lines... I was worried a year ago, but nothing like this.”

Both the large groups that have enough cash at hand to “mothball” and the restaurants that can run a successful delivery operation are on borrowed time. This outbreak has no clear end date. There will be businesses that simply cannot afford to stay furloughed or continue doing delivery.

And when those restaurants that survive do reopen, they’ll do so with their pocketbooks depleted, without an emergency fund to spare should some other unexpected issue hit (and in the restaurant business, there’s always an expense around the corner). They will also reopen their doors to a new world of challenges, not least of which is facing a dining public likely either coming out of or in the midst of a global recession. Those diners who lost income after supply-chain disruption and nationwide business closures due to social distancing will simply have less money to spend on dining.

Opening new restaurants will likely also pose unique challenges after the pandemic passes. The groups most targeted by xenophobic, racist backlash during the crisis may face discrimination when it comes to getting loans; restaurateurs from marginalized communities might not be able to return to restaurant ownership at all. Even the big players may find themselves struggling to secure funding if a global recession makes investors skittish. Simply put: Don’t expect all, or even many, of the restaurants that close because of this to just bounce right back.

This is not to say that diners shouldn’t do their part immediately to help support these businesses. Order delivery while it’s still widely considered safe to do so; order more than needed to up the check average; tip generously; buy gift cards for future use; buy restaurant merch online; reschedule prepaid reservations rather than requesting refunds. If you have the money, consider stepping up like NBA players and personally transferring wealth directly to restaurant workers. Call your local representatives and demand that they provide relief to this industry.

Restaurants are an invaluable part of the social fabric of our towns and cities. We rely on them to nourish us, to host us as we celebrate, to provide us community, to provide us entertainment. It’s unthinkable that they will not be there to meet us when we come out of this.

But the American restaurant industry — and the people who work in it — was always perched on a cliff. The fast-moving, widespread nature of the novel coronavirus pandemic is poised to push both the businesses and its workers over the edge. We don’t know what comes after the fall. The restaurant industry in America’s cities certainly won’t look the way it did before. It may never again.