Restaurant Revenue Being Eaten Away – Lee Chandler

Restaurants have been handicapped by the lack of protection from the Paycheck Protection Program. According to the program, 75 percent of loan proceeds were required to be used for payroll, which goes against the industry norm with payroll expenses typically totaling about only 30 percent of revenue (Kaufman et al., “Restaurant Revolution: How The Industry Is Fighting To Stay Alive”). Restaurants usually barely cover their expenses for the month, and since owners would have to distribute a vast majority of their loan proceeds to their employees, they would have to raise prices. The loan would not be worth the cost of leaving the restaurant open because in this current economy, consumers are not coming over and the owners still have many other expenses to pay. At that point, they realize that they might as well shut down.

The pandemic also warned people to place more focus on their health, giving them another reason to not eat outside. Kowitt and Lambert note that a survey conducted by Jefferies Financial Group found that “about 70% of respondents expect to cook more at home and about 80% expect to eat the same or more at home post-COVID as they did during COVID-19” (“The coronavirus pandemic is dramatically changing the way Americans eat”). One might argue that just because someone expects themself to do something does not mean they will actually do it, however consumers will focus more on budget rather than convenience due to the current economy’s struggles. Furthermore, since professional workers will be working from home for at least some days out of the week in the foreseeable future, they will have more time to make their own food at home, eliminating any inconveniences and time constraints they might have had while working in the office.

Claims that the restaurant industry will die out are exaggerated. There will always be an economic cycle, and people will eventually go back to the way they lived pre-COVID-19 with the exception of technological advancements. However, in the next couple of years, the successful restaurant business models will involve fast food and takeout because in addition to its high convenience, consumers will focus on spending less since the economy will most likely be in a downturn for a few years.

 

Jason Caci

References

“Increased Consumer Interest in May Correlates with COVID-19 Hot Spots in June, According to the Yelp Economic Average.” Yelp, https://www.yelpeconomicaverage.com/yea-q2-2020.html. Accessed 19 Aug. 2020.

Kaufman, Michael S., et al. “Restaurant Revolution: How The Industry Is Fighting To Stay Alive.” Forbes, 10 Aug. 2020, https://www.forbes.com/sites/hbsworkingknowledge/2020/08/10/restaurant-revolution-how-the-industry-is-fighting-to-stay-alive/#2841ec27f1eb. Accessed 19 Aug. 2020.

Kowitt, Beth and Lance Lambert. “The coronavirus pandemic is dramatically changing the way Americans eat.” Fortune, 21 Jul. 2020, https://fortune.com/2020/07/21/us-consumer-spending-food-dining-out-restaurants-coronavirus-pandemic-lockdown/. Accessed 19 Aug. 2020.

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