Operations

Report: 80,000 restaurants have closed permanently due to COVID-19

A recent report revealed that nearly 80,000 restaurants across the country that have closed since the pandemic began will not reopen.

Datassential, an industry research firm, recently combed through the company’s proprietary “Firefly” database to compile the report. It found that the total closures represent 10.2 percent of the country’s total food establishment stock.

“This last year has been one the toughest the restaurant industry has ever faced,” Jack Li, Datassential’s CEO said in a statement. “But the good news is that the rate of closures is slowing, and the future is bright for those restaurants who have learned to adapt to the host of new challenges facing them in our new normal.”

The report considered food establishments broadly to include QSR (fast-food), fast-casual, midscale, casual, and fine dining as well as food trucks.

When compared by category, the report revealed that food trucks have been hit the hardest by the pandemic, resulting in a 22.5 percent closure rate. Conversely, the quick-service space largely remained vigilant during the pandemic, with only 9 percent of businesses closing.

Chain restaurants have closed at a higher clip than other types of restaurants. The largest chains—those with over 501 locations—closed at a higher rate than most independent restaurants, the report found. Chains with between 51 and 100 locations faced the highest closure rate of the group, with a 16.2 percent closure rate.

Restaurants offering French food led the way in closures when compared by cuisine type. 17.2 percent of all French-style restaurants closed as a result of the pandemic, according to the Datassential report. Mixed-ethnicity restaurants saw the second-highest closure rate at 12.5 percent. Meanwhile, Burger and Thai restaurants saw the lowest closure rates, at 7.3 and 7.5 percent, respectively.

While the total number of restaurant closures is startling, they are better than industry analysts originally predicted. Yelp released a report in September 2020 that said up to 60 percent of independently owned restaurants could close by the pandemic’s end.

Similarly, the National Restaurant Association sent a letter to Congressional leaders in December 2020 that said over 110,000 restaurants—or 17 percent of the total stock—had permanently closed. On average, the restaurants that closed had been in business for 16 years, the organization said. Another 16 percent of the closures were restaurants that had been around for 30 years or more.

While these factors are concerning, there is hope on the horizon. States across the country are adding more jobs as the nation’s vaccination rate increases. The job growth has caused businesses in some places like southern California to face a hiring crisis.

Restaurant critics are also rethinking their contribution to the industry as it slowly recovers, a report by Restaurant Business Online (RBO) found that some critics say it will be a while before they write another negative review. This is due partly to the critic’s job becoming obsolete during the pandemic and the struggles that lay ahead for recovering businesses.

Jeff Ruby, the dining critic for Chicago Magazine, told the publication that the pandemic made many newsrooms rethink how they cover local food scenes.

“The sky was falling before COVID, but COVID accelerated it,” he said. “Whatever the landscape of restaurants becomes, we need people doing reviews who can bring a new perspective to the job. I don’t see how publications can go back to one critic reviewing every restaurant.”

But, having positive advertising is only half the battle. Many franchise restaurant owners are still struggling to pay off ownership fees that corporations refused to cut during the pandemic. According to a report by RBO, ownership fees were one reason fast-food prices rose during the pandemic. Others felt the financial pinch from paying higher prices to suppliers and struggling to fill vacant positions.

As the industry continues to recover, one thing remains clear: restaurants need the support of their local communities now more than ever, whether through tax incentives, grant programs, or increased sales.

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