Restaurant Revolution How the Industry Is Fighting to Stay Alive

It’s been difficult to earn money in the restaurant business. A highly fragmented industry dominated by 70 percent independently owned restaurant owners, operators, and proprietors. The average annual revenue of a restaurant is around $1 million, generating operating profits of 4 to 5 percent. A viable and sustainable entrepreneurial model for smaller independents can take time to come by.

When a catastrophe like COVID-19 worldwide pandemic causes restaurants to close, and their profits drop to zero in a matter of hours,, the consequences are particularly severe. Contrary to the oligopolistic air industry in which a handful of significant companies can quickly join forces to push for support from the government however, the issues of restaurateurs as well as the unique reality and challenges of their industry, are primarily ignored by programs of the government designed to aid small-scale enterprises.

After two months of the outbreak, 40% of American restaurants had closed, and 8 million workers were out of work, three times the loss of jobs experienced by any other sector. Although some restaurants reopened in May and June, most of them offered takeout delivery, outdoor or dining options because of local restrictions. In June, the number of people dining June was down by more than 65 percent from year to year. In addition, it was reported that the National Restaurant Association projected an industry-wide revenue gap of $240 billion for the entire year.

The second-order consequences of restaurant closings are felt throughout the American economy, causing economic harm to fishermen, farmers, foragers, ranchers, manufacturers, and other producers who provide the industry. Also affected are suppliers who transport goods across the nation.

“IT’S GOING TO TAKE SOME TIME TO RETOOL OPERATING MODELS TO BE ABLE TO SUCCEED IN THIS NEW ENVIRONMENT.”

As we entered 2020, the industry of restaurants was flourishing. In just a few months, we are now seeing a drive retracing its feet, shattered by a force external to the industry that is so that it’s almost impossible to comprehend.

The impact of this interruption will persist and be made more difficult due to the requirements of several local governments that the capacity to dine-in be restricted to 25-50 percent after restaurants be reopened. There needs to be a way to know whether American people will feel going back to what was once their most beloved pastimes.

In the end, the industry of restaurants that can emerge from the pandemic in the world will be very different than the one it was at the beginning of March. How will the COVID-19 situation alter the face of the business, and what will restaurants do to stay afloat? And what can consumers be looking to return to their favorite restaurants but need clarification on whether it’s safe to go there, be expecting?

Stories from inside

Prospects for the industry are significant to us. We have a collective 35 years of food and restaurant industry knowledge, working our way through the ranks of bartenders and waitstaff, executives and senior chefs of restaurant groups, and the primary trade association, as well as the beverage and food brands that supply these companies. We’ve poured our money into the industry and served in corporate roles as board members and as leaders of industry coalitions. Lastly, we are now educators who train the next generation of founders and managers of restaurants to operate in this particular industry. We’ve spent the past few years studying the restaurant industry to develop and present an MBA-level class within Harvard Business School called Opportunities and Challenges within the Restaurant Industry.

Through this effort and the knowledge gained, we arranged in April a diverse set of chefs, restaurateurs, industry leaders, and investors to participate in a closing panel discussion about the COVID-19 crisis and what it will mean in the long-term future for our business.

We heard restaurants were in severe economic crisis and that poorly-conceived government bailout schemes weren’t helping stabilize them. We also learned that restaurateurs remain steadfastly devoted to their mission of nourishing and feeding people, offering an oasis of comfort and community in an enigmatic new world.

Our discussions with the panel and our field research inform our outlook for the future of the restaurant industry. We also provide tips for restaurant owners, employees, customers, investors, and staff that we provide below.

Different types of restaurants faced the storm in different ways. People used to takeout and drive-through service survived the storm easily, and others, who depended on dining-in restaurants, suffered a total loss of income.