A new report from consulting company Compass Lexecon and commissioned by the Independent Restaurant Coalition (IRC) found that 85% of independent restaurants may go out of business by the end of 2020. Independent restaurants are defined as those not part of a national chain and having less than 20 locations. Independents comprise 70% of all U.S. restaurants, employ 11 million Americans, and account for 4% of the nation’s Gross Domestic Product with at least $600 billion in annual sales.
As small businesses, independent restaurants operate on very slim margins and most spend 90% of total revenues on labor, food, and rent, according to the report. The pandemic lockdown and closure of restaurants nationwide has cratered sales for months. Delivery has helped some restaurants survive, but even in cities that have capped delivery fees at 15% until lockdown restrictions are lifted, most restaurant owners say that high delivery fees may force them into bankruptcy. A recent Eater survey of San Francisco restaurant owners found that 87% would not be able to continue operating on delivery and takeout alone with 60% reporting that by staying open they are losing money.
As restaurants slowly reopen around the country, reduced capacity limits are likely to remain in place until a vaccine is developed, which analysts predict will be in the first few months of 2021 at the earliest. These dine-in restrictions and high costs of doing business will force 85% of independent restaurants to close, according to the IRC’s 51,000 members. Restaurant closures will also devastate local food supply chains and communities. To help prevent widespread closures, the IRC report has been sent to members of Congress, urging them to support restaurant-specific pandemic funding in addition to the Paycheck Protection Program. Oregon Representative Earl Blumenauer has proposed the RESTAURANTS Act (Real Economic Support That Acknowledges Unique Restaurant Assistance Needed To Survive Act) to provide $120 billion in grants to help save independent restaurants. Read more here at Business Insider.