85% Of Independent Restaurants May Close Permanently, Report Says
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.
Alain Ducasse Refines The Air To Reopen His Paris Restaurant Allard
French celebrity chef Alain Ducasse revealed a new air ventilation system at his restaurant Allard in the chic Left Bank of Paris. Without it, the small restaurant would not be able to reopen while meeting social distancing requirements. The $50,000 ventilation system uses the same high-tech air filtration devices employed in hospitals, which both slow down and eliminate air particles from each diner’s table before they reach nearby tables. “If you’re a virus carrier, the people just beside you will be safe,” said Arnaud Delloye, one of the air filtration designers. France’s state health agency INRS validated the system, saying it “allows a significant reduction in the risk of virus transmission in a restaurant.” The new system will allow Ducasse to reopen Allard at 80% capacity, making it economically viable. If the ventilation system works well, Ducasse plans to roll it out at his other 40 restaurants worldwide.
New York City Establishes $3 Million Fund For Small Restaurants
To help restaurants recovering from the pandemic, New York City announced a new program that will give $3 million to 100 small restaurants in 27 neighborhoods, including Bed-Stuy, East Harlem, Mott Haven, Jamaica, and Stapleton on Staten Island. Eligible restaurants can get up to $30,000 specifically for helping with payroll costs. Restaurants that take advantage of the funds are required to pay workers a minimum of $20 per hour before tips until the end the program. Restaurants must also provide workers with longterm financial support and offer free meals to members of the community suffering disproportionately from COVID-19 such as high-risk seniors and low-wage essential workers.
Eligible restaurants will not have immediate access to the funds, as restaurants must pay employee wages up front then file documentation of wage payments for reimbursement. NYC’s Human Resources Administration is overseeing the program and will provide up to 25% of the total funds awarded up front to eligible restaurants. The program will favor restaurants that can “commit to ‘high-road’ employer practices” after the program ends, including race and gender equity initiatives at every level of employment and paying every employee the minimum wage of $15 an hour before tips within five years of the restaurant’s reopening.
Black Chefs Prepare For Poignant Juneteenth
Juneteenth commemorates the date of June 19, 1865 when enslaved Africans in Galveston, Texas, learned from Union General Gordon Granger that they were finally free, two years after Abraham Lincoln signed the Emancipation Proclamation. Often considered African-Americans’ independence day, this year’s Juneteenth comes amid the coronavirus pandemic and a resurgence of the Black Lives Matter movement fueled by police brutality. While social distancing may alter the holiday, black chefs around the country look forward to reaffirming the importance of this historic day.
Eduardo Jordan, the James Beard award-winning chef-owner of JuneBaby, Lucinda and Salare restaurants in Seattle, says that JuneBaby’s mission has always been to educate diners about the foodways of the African diaspora. Since the pandemic began, Jordan has been feeding essential workers from his restaurants, and he’ll continue that mission well past the June 19 holiday.
Danielle Bell operates the L.A. catering company and dinner series called de Porres, and she is making her annual Juneteenth celebration different this year by sending out a newsletter menu from which customers can place orders for barbecue and other traditional foods. Barbecues are central to Juneteenth celebrations, and those traditions live on regardless of social distancing. “It’s different from any other cookout,” said Jonny Rhodes, the owner of Houston’s Indigo restaurant in Trinity Gardens, a mostly black and Latino neighborhood. “It’s a time of collective freedom.” Indigo transformed into a grocery store to stay afloat during the pandemic, and this Juneteenth, Rhodes remains focused on the importance of his primary business goal: ownership of the 800-square-foot building that houses his business, as well as six acres outside of the city.
Thai Seafood Restaurateurs Given 723 Years In Prison For Fraud
Apichart Bowornbancharak and Prapassorn Bowornbancha, two executives at Laemgate Seafood restaurant in Thailand, were accused last year of selling low-price tickets for seafood buffets. About 20,000 customers ordered and paid online, but the orders were canceled without refunds when the owners claimed they didn’t have enough food to fulfill the orders. About 350 people filed complaints with the police, asking for refunds totaling $64,300.
Apichart and Prapassorn were found guilty on 723 counts. Each executive was sentenced to 1,446 years in prison, but since they confessed, the sentences were reduced to 723 years. They were also required to pay a fine equivalent to about $116,300. While the restaurateurs were sentenced to 723 years, Thai law limits jail terms to 20 years. Each defendant has one month to appeal the judgment.
Russian Chefs Get Naked To Protest Restaurant Closures
Hundreds of Russian restaurant owners and chefs have stripped down for social media photos protesting restaurant closures as other businesses open back up. “We are naked because we are left with nothing,” said Arthur Galaychyuk, owner of the Relab Family bar chain in Kazan, whose 20 employees took part in the campaign. Russia is still in the process of reopening and so far hair salons, shopping malls, book stores, food stores and pharmacies have been permitted to operate. But restaurants have been left waiting for approval.
Restaurateurs And Delivery Apps Clash In Fight To Survive
As delivery becomes critical to the struggling restaurant industry, restaurateurs and regulators are scrutinizing high delivery fees. Major cities like New York, Chicago, Los Angeles, San Francisco, and Seattle put a cap on delivery app fees until lockdowns were lifted. Now that states are reopening but restaurants are still operating at reduced capacity, delivery fees are taking a big chunk of their bottom line. In Columbus Ohio, Pierogi Mountain’s owner Matt Majesky primarily used Grubhub until he calculated that Grubhub was collecting more than 40 percent of his average order. Grubhub spokesman Peter Land said Mr. Majesky’s fees were higher than usual because Majesky agreed to take part in marketing programs that increased the restaurant’s visibility on the app. In Denver, owner of Freshcraft restaurant Erik Riggs sued Grubhub for creating a website for his restaurant without consent and labeling the restaurant as closed on the site or “not taking online orders” when this was not true.
Grubhub has since removed the language about similar restaurants “not taking online orders,” but these deceptive practices sting at a time when analysts predict that 85% of independent restaurants will ultimately close as a result of pandemic lockdowns. At the end of May, restaurant spending fell by about 35% from a year earlier, while delivery service revenue rose by nearly 140%, according to data from M Science. For most restaurants, the fixed costs of labor, food, and rent swallow about 90% of total revenues. With that business model, many restaurateurs say that delivery service fees of 20 to 30% on each order are simply unsustainable. Even with fee caps, a recent survey of San Francisco restaurateurs found that 62% percent were losing money on delivery and takeout.
PPP Flexibility Act Goes Into Effect, Aiding Restaurant Industry
President Trump has signed the Paycheck Protection Program Flexibility Act, a boon for America’s struggling independent restaurants and small businesses. The Paycheck Protection Program was first signed into law in March, but the $2.2 trillion coronavirus relief packaged had allowed businesses only eight weeks to spend federal loans. The new bill extends that time to 24 weeks, aiding independent restaurants, many of which have only just begun to resume limited dine-in service. Originally, PPP also required that businesses spend 75% of loans on payroll and 25% on non-payroll costs, but the new act change eases those numbers to 60% and 40%, respectively.
Both the National Restaurant Association and the Independent Restaurant Coalition have been lobbying for these changes for weeks. The travel industry will also benefit from the changes, says Tori Emerson Barnes, executive vice president of public affairs and policy for the U.S. Travel Association. Travel businesses have continued to incur expenses with nearly no revenue due to lockdowns and social distancing requirements. Barnes even called for PPP to extend eligibility to non-profit and quasi-governmental entities.
Robots Offer Helping Hand At Dutch Restaurant
After seeing robotic waiters in China last fall, Shaosong Hu adopted the idea for his Dutch restaurant, the Royal Palace. Hu says that the robots will help ease service for both staff and customers at his pan-Asian restaurant locations throughout the Netherlands. The red and white robots will serve food and drinks and return used plates and glassware to the kitchen.
Dutch restaurants have been closed for more than two months and, as of Monday, reopened restaurants are limited to a maximum of 30 customers. As he reopens, Hu says the robots will help maintain new social distancing rules and help curb the spread of COVID-19. When asked about whether the robots were stealing human jobs, Hu responded that the robots are not replacing humans. On the contrary, the robots will help free the Royal Palace staff from mundane tasks, he explained, so that the staff is able to give customers even more personal attention.
High-End Restaurant Delivery From Ghost Kitchens May Be Here To Stay
Krispy Rice is just one of many new fine-dining restaurant concepts with no actual dining room. The bento box delivery service comes from SBE, the hospitality company behind California’s popular Katsuya sushi restaurants as well as Bazaar by José Andrés, Umami Burger, and others. Here’s how it works: when a customer places an order at Krispy Rice, the order is sent to the ghost kitchen nearest their location, then the meal is prepared and delivered. A series of ghost kitchens fulfilling Krispy Rice orders broadens the restaurant’s delivery area, reduces delivery times, and keeps the food fresher, helping to solve the problem of plated restaurant dishes not traveling well.
Beautiful and functional packaging is key, and the concept has been catching on. Consumers have come to rely on restaurant delivery, and many are willing to pay a premium for high-quality, expertly plated meals delivered to their homes. Even Uber founder Travis Kalanick is getting into the game. Since leaving Uber, Kalanick has been opening CloudKitchens in major metropolitan areas to serve as ghost kitchens for restaurant brands. SBE is also poised to rapidly grow its ghost kitchen footprint, as the company is nearly half-owned by Accor, the world’s biggest hotel chain. After successful trials in Los Angeles, SBE plans to expand into New York and other cities. “We’re looking at 34 to 35 locations by the end of the year and each of those locations brings five brands to the table,” says Martin Heierling, SBE’s chief culinary officer.
