Since the COVID-19 pandemic began, the restaurant industry and all others they support have taken massive hits. According to many predictions, nearly half of all U.S. restaurants will not survive the elongated pandemic restrictions. Just last week, the New York State Restaurant Association discovered through a new survey that more than half of all New York restaurants are in danger of closing permanently. With several states, including California, reinstating stay-at-home orders, it’s more critical than ever that citizens and policymakers understand why so many restaurants will not survive, destroying jobs and related small businesses along with their demise.
As the owner of multiple restaurants across Nashville, I have personally experienced the negative impacts of these restrictions. Currently we are limited to 50 percent capacity, and no one can come inside after 10 p.m. While I am grateful to have businesses still in operation, restaurants in other parts of the country have not been so lucky. It is tragic to see a lack of understanding concerning how these restrictions create a ripple effect on not only the restaurant industry but also the economy, communities, and families that surround it.
The regulations that have been put in place to help protect our customers and employees — while viewed by many as necessary — have also produced a tremendous burden on our industry through decreased sales due to restrictions on the number of people allowed inside. There has also been an unprecedented increase in cost associated with required disposable items and other associated materials because of manufacturers’ increased prices. Manufacturers are struggling to keep up with the demand as so many restaurants have had to switch to carry-out orders only.
Many of the manufacturers we rely on have been shut down by other state regulations, causing product shortages. These have forced us to make substitutions, run out of menu items, or pay a much higher price as the demand is greater than supply. On top of this, many restaurants lost a significant amount of sales for weeks and months throughout this year and are still struggling to keep up with bills from the early stages of the shutdown.
Restaurant closings will impact hundreds of thousands of jobs. This is not only true for workers within the industry, as hospitality employs more people than any other industry, but also for repair people, suppliers, manufacturers, farmers, transportation, and more due to the impact of lost sales taxes for roads and schools.
There is a lot of talk about the Biden administration raising the restaurant minimum wage on top of these increased costs. Restaurants have the lowest profit per employee of any business. Raising the minimum wage now would devastate the industry and ultimately hurt the employees that it would allegedly protect.
As the minimum wage increases, the employer’s share increases much more than the amount paid to employees. Unemployment taxes and workers’ compensation insurance would increase because pricing is percentage-based. To make matters worse, employers will have to raise their prices to offset the increased wages they are required to pay and cover the incidental costs.
In the meantime, the government will get more taxes from both the employer and the employee, making it the only winner.
The restaurant bubble has burst, and we need to recover from that and not add more difficulties. Otherwise, we can expect to say goodbye to a huge portion of restaurants and the jobs, services, and experiences they provide.
The restaurant industry is like a boat that has capsized and is floating upside down. Politicians need to turn it right side up before they try to fix the motor.
One way to do that is to pass the next round of PPP loans so businesses have enough cash to get through the COVID-19 regulations. There should be a plan to stop the regulations on restaurants and manufacturing plants. This would certainly help the restaurant industry. Then, to be truly effective, these changes have to be communicated effectively, and, once communicated, they can’t keep changing. Continuing to move the target makes it harder for restaurants that are still open to catch up and stay upright.
Peter Demos is the author of Afraid to Trust, restaurateur, president and CEO of Demos’ Brands and Demos Family Kitchen, and leadership source expert.