America’s Restaurants Will Need a Miracle
If we fail to help them immediately, their crisis will be the entire economy’s crisis.
The spread of the coronavirus across the United States has caused a generalized shutdown of public life. Schools are closed, sports are canceled, and concerts are over. This is entirely appropriate. A pandemic is war, and public gatherings at the moment give aid and comfort to the biological enemy.
But this shutdown will crush the economy, starting with the restaurant industry. In the past 48 hours, several states, including Ohio and Illinois, and major cities, including New York City and Los Angeles, announced that restaurants will be closed or limited to takeout and delivery. Shelly Fireman, a New York restaurateur who runs several diners, called the fallout “worse than after 9/11.”
The consequences of these widespread closures may be hard to grasp. Americans now spend more at restaurants than at grocery stores—something they had never done before 2015. This modern dining revolution has made restaurants one of the country’s most important sources of work. In 1990, manufacturing employment was almost three times larger than the food-service industry, but today there are about as many jobs in food service as in manufacturing. Restaurants are the new factories, and without them state and local economies across the country would fall to pieces. Food-preparation and food-service jobs now account for more than 10 percent of all employment in Nevada, Hawaii, and Florida. What’s more, with the disappearance of brick-and-mortar retail stores from many cities, restaurants have become a rare bright spot. In 2019, restaurants and bars accounted for almost half of all new leases in Manhattan.
Social distancing has changed that landscape almost overnight. According to the booking website OpenTable, which publishes information for all 50 U.S. states and dozens of cities on a daily basis, online bookings held steady through February. But in the past week, reservations cratered by more than 40 percent in New York, Los Angeles, Boston, and Denver. In Seattle, where the outbreak is especially virulent, bookings last weekend were 60 percent lower than on the same day last year.
New executive orders ending dine-in service across the country could cut reservations to zero in most cities, threatening the employment of America’s nearly 3 million waiters and waitresses.
“We are in uncharted waters,” said Steve Salis, a Washington, D.C.–based entrepreneur with several properties, including the BBQ restaurant Federalist Pig and Kramerbooks & Afterwords Cafe, a long-standing bookstore and restaurant. Same-store sales across his businesses had already declined up to 50 percent, he told me on Sunday, with the deepest pain at full-service restaurants.
Now that D.C. restaurants have officially shuttered for dine-in customers, Salis is looking to completely overhaul his business to keep workers paid and the community fed. “We have implemented more promotions around delivery,” he said. He also plans to expand catering-size orders available via “curbside pickups.” National chains are following the same script. On Monday, McDonald's, Starbucks, and other other fast-food franchises announced that their locations would be temporarily take-out only. This is the near future of American restaurants: Dine-ins are transforming into drive-throughs, and their chefs now operate de facto neighborhood groceries for prepared food.
How long this transformation lasts is unclear. Arguably, however, these measures are an acceleration toward the future rather than a break from the past. Last year, analysts predicted that in 2020 Americans would for the first time spend more money “off-premise”—on takeaway and delivery—than on dining in restaurants. The coronavirus outbreak all but guarantees that this prediction will come true.
Restaurants in a pandemic are like beachfront properties in a hurricane. Their devastation is both a tragedy and an omen of greater havoc to come. Already operating at paper-thin margins, restaurants face the loss of their entire dine-in business, but they will still have to make rent. In the same way, hotels, airlines, and the entire face-to-face services sector are looking ahead at several months without customers, yet they will still have to make regular payments on corporate loans.
This is our great economic crisis in a nutshell: Consumers are vanishing, but financial obligations are not. Without a major intervention, the entire global leisure and retail economy—and soon, perhaps, the entire economy, period—is facing mass layoffs, mass bankruptcy, or both.
There is only one solution to this problem: The public sector must step in and play consumer for several months, until the virus passes. Salis calls for a comprehensive financial-aid package that can help companies “[subsidize] labor, vendors, loans, rent or mortgage, and other payments through these significant disruptions so businesses can come out on the other side empowered to move forward and not shut down operations indefinitely.” Perhaps this will require a one-time $1 trillion infusion of cash to U.S. households to protect people from the inevitable downturn. Perhaps it will require hundreds of billions of dollars in grants or cheap loans to affected businesses. Very likely, it will require a bit of both. As with social distancing, economic solutions that sound rash and extreme today may sound conservative and inevitable in 48 hours.
A global pandemic is a planet-size pause button for public life. The right stimulus ought to press a similarly large pause button to freeze in place the financial well-being of U.S. families and businesses. “Restaurants are the lifeblood of many communities throughout the country,” Salis told me. “When this pandemic is under control—and it will be—we look forward to seeing people reconnect in profound ways over meals. It’s one of life’s greatest pleasures.”