• The restaurant industry has lost an estimated 6 million jobs since shutdowns were ordered beginning in mid-March
  • Restaurants that depended on onsite dining before the pandemic hit will have a harder time reopening than those geared to delivery and take-out
  • Restaurants likely will need rent relief and tax breaks to survive

Running a restaurant is in Gabriella Lenzi Littleton’s blood. Her family has been in the business for four generations. Now she’s worried Illinois Gov. J.B. Pritzker’s plan to keep restaurant dining rooms off-limits through the end of June because of the coronavirus pandemic could threaten her Skokie eatery’s very existence.

“Before the pandemic hit, many restaurants were leveraged with mortgages and life savings, creating the potential for a total loss for those business owners of not only their financial livelihood but also their dreams,” Littleton said in an op-ed piece in the Chicago Tribune.

“Unless our state and local leaders take aggressive action, thousands of jobs will be lost, storefronts will stand vacant, neighborhoods will change and the vibrancy our restaurants contribute to this metropolis will fade.”

R.J. Melman, president of Lettuce Entertain You Enterprises, expressed similar worries.

“Illinois, where the vast majority of [Lettuce Entertain You] businesses are, was one of the first states to close restaurants, and now will be one of the last three to open,” he told the Chicago Tribune. “Best I can see, our restaurants will be closed for 17 weeks. I don’t know how we survive that. It’s not about loans, or grants, or anything; many Illinois restaurants won’t survive.”

The coronavirus pandemic and its mandated shutdowns have taken a severe toll on the restaurant industry. Nearly half of restaurant workers have lost their jobs and there are doubts about the future of both the fine-dining and fast-casual sectors.

The National Restaurant Association has called on Congress to provide targeted help to the nation’s eating and drinking establishments, noting 5.5 million jobs in the industry were lost in April on top of the 500,000 lost a month earlier, bringing employment down to 1989 levels.

“This is nearly three times more jobs than any other industry,” the association said in a statement. A survey of 6,500 restaurant operators indicated the numbers would grow further with sales off by an average of 78%.

Even if restrictions were lifted and restaurants were allowed to resume pre-coronavirus operations immediately, the question of whether patrons would feel comfortable returning remains.

Data from BentoBox indicate 88% of restaurant customers say staff should be required to wear masks and gloves, with hand sanitizer readily available for everyone. Their top worry is over the cleanliness of tables and food. Eighty-two percent said they would stick to take-out even after the economy reopens.

Permission to reopen will come with its own set of problems. The economics of the industry are built on 15% margins and 100% capacity. Social distancing requirements won’t allow for that, meaning fewer tables and less revenue are situations that could prevent 35% to 40% from reopening.

James Famularo, president of Meridian Retail Leasing, told International Business Times that restaurants will need help to survive, including rent concessions and tax breaks. Restricting capacity to 25% or even 50% likely will mean higher prices for patrons.

Nick Kenner, founder and CEO of Just Salad, said the decision to reopen will depend on the type of restaurant and what makes the most sense.

“Anything that can be categorized as casual or experience dining will have more of a struggle returning to normal business,” he said.

Christopher Muller, a professor at Boston University's School of Hospitality Administration, noted the restaurant industry has proved itself among the most adaptable sectors of the economy.

“Restaurants are the infrastructure of a modern service economy, accounting for roughly 5% of the [gross domestic product] and 10% of all adult jobs,” Muller said. “Everyone now realizes how crucial they are for us in our desire to be social, be entertained and be nourished.”

A more likely scenario than a return to eating onsite is a long-term shift to off-premises delivery and consumption, said consultant Adam Werner of Alix Partners LLP.

“A long-term shift from dine-in to off-premise delivery and consumption will likely materialize, reducing the importance of the restaurant store itself. Based on our recent consumer survey, 38% of consumers said they will dine-in at restaurants less after restaurants are re-opened,” Werner said.

“Operators that survive this crisis will be those that obsess over things like sanitation, strict cost management and cash preservation, and innovations designed to build off-premise revenue through things like delivery and new business models such as ghost kitchens and virtual brands.”

Dave Cesaro, executive director of vertical marketing at Valassis, said aggressive marketing will be necessary to get consumers back through the door.

“In opening up doors again, reopening or grand opening marketing strategies will be paramount – these include special promotions and limited-time offerings. As every restaurant is planning its comeback – competition will be undoubtedly stiff, and consumers will continue to place a heavy emphasis on value amid challenging economic market conditions,” Cesaro said.