Restaurant Closings Estimated in Latest Survey

Posted by Robin Gagnon on Dec 18, 2020 10:30:00 AM


The word from the National Restaurant Association reveals closures of more than 110,000 restaurants in the wake of continued government shutdowns and limits to service models.  The results parallel what the Restaurant Brokers at We Sell Restaurants are seeing from sellers with fast casual chains still performing well and dire conditions for full service and independent restaurants. 


The latest research conducted by the survey arm of the National Restaurant Association went to Congress as part of an overall request for aid to the industry.  Here are the findings from a survey of 6000 restaurant operators and 250 supply chain businesses.  This is the most timely data available since it was conducted the last two weeks of November 2020.

  • Eighty-seven percent of full service restaurants (independent, chain, and franchise) report an average 36% drop in sales revenue. More than eight in ten (83%) expect sales to be even worse over the next three months.

    This is in line with what the Restaurant Brokers at We Sell Restaurants as seeing for full service concepts.  The concepts that have not shifted gears or don't have the ability to revamp their offering into take out and delivery have been the most devastated by closures. 
  • Fifty-nine percent of operators say their total labor costs (as a percentage of sales) are higher than they were pre-pandemic.  This is actually not in line with the profit data we are seeing from fast casual chains who are reporting lower labor costs because there is more predictability in orders from online and no staffing of dining room space.
  • The labor outlook for the industry that employs more than ten percent of all Americans is not good. Fifty-eight percent of chain and independent full service operators expect continued furloughs and layoffs for at least the next three months.  This signals why the industry is so critical.
  • Their key point is this. Of those surveyed in late November, 17% of restaurants – more than 110,000 establishments – are closed permanently or long-term.
  • The vast majority of permanently closed restaurants were well-established businesses, and fixtures in their communities. On average these restaurants had been in business for 16 years, and 16% had been open for at least 30 years. From the perspective of the Restaurant Brokers of We Sell Restaurants, that is an accurate assessment.  The closures we are seeing are for the most part, mom and pop businesses, independent, full service concepts who have done everything asked of them and still remain closed. 

    As we wrote in our book, Appetite for Acquisition, many years ago, "Restaurants are the fabric of our culture. The neighborhood restaurant is where we go on our first date, celebrate a promotion, and gather the family to announce our engagement. In today’s society, the neighborhood restaurant or pub has taken over the corner for the place to gossip, hang out, and learn your neighborhood. In a high-tech world, the restaurant is a high touch environment where we still interact with one another."
    They were present to serve the engagement meal, provide  the rehearsal dinner and host the baby shower of generations of the same families.  We may never witness that for the next generation in towns large and small across the country.

    Only 48% of these former restaurant owners say it is likely they will remain in the industry in any form in the months or years ahead.

The National Restaurant Association is asking for Congressional relief for the vital industry and provided this plan for a proposed second draw from the Paycheck Protection Program (PPP) for the specific need of the restaurant industry.  

The Association’s full Blueprint for Restaurant Revival that includes the long-term recovery needs of the industry is available for review  here.

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Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE is the co-founder of We Sell Restaurants and industry expert in restaurant sales and valuation. Named by Nation’s Restaurant News as one of the “Most Influential Suppliers and Vendors” to the restaurant industry, her articles and expertise appear nationwide in QSR Magazine, Franchising World, Forbes, Yahoo Finance, and BizBuySell. She is the co-author of Appetite for Acquisition, an award-winning book on buying restaurants.


Topics: Selling a Restaurant

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