Today, Yelp released its Q2 2020 Economic Average Report, which tracks business closures (temporary and permanent) to analyze how industries like retail foodservice are being impacted by the ongoing pandemic. Sadly, the latest findings around the restaurant industry are nothing to celebrate.
According to the report, which The Spoon was sent a copy of, the restaurant industry surpassed retail in having the highest total business closures. Of those closed restaurants, 60 percent are shuttered permanently.
From the report:
“As of July 10, there have been 26,160 total restaurant closures, an increase of 2,179 since June 15. Of the all closed restaurants in July, 15,770 have permanently closed (60%), accounting for 2,956 more permanent closures, a 23% increase since June 15.”
The report also notes that “Overall, permanent closures have steadily increased since the peak of the pandemic with minor spikes in March, followed by May and June.”
At the same time, however, consumer interest in restaurants, bars, wineries, and other food-related businesses is returning to pre-pandemic levels, according to the report. That makes sense, as we’ve all been cooped up at home for months now and more people are eager to resume their normal activities outside the house.
Those “normal” activities, though, seem like an increasingly bad idea, as Yelp noted a statistically significant correlation between an increase of consumer interest in restaurants, bars and nightlife, and gyms in May and an increase in COVID-19 cases in June.” Once the data for July comes in, I doubt much changes.
In the restaurant biz, that could mean more permanent closures, and it’s not hard to see why. Restaurants have historically operated off extremely thin margins. And even before the pandemic hit, the move to off-premises orders was steadily gaining momentum with delivery, drive-thru, and other to-go-centric formats. Restaurants that have historically never had to focus too heavily on the off-premises side of things now find themselves in a position where they must offer these formats or risk going out of business. Even when they do, the logistics, not to mention the cost, of doing off-premises can be so burdensome it can in some cases cause more harm than good.
How many states have to follow California’s lead and re-close parts of their economies will further impact the number of permanent restaurant closures over the next few months, and probably for the rest of the year. The hope is that by the time Yelp releases its Economic Average Report for Q3, the numbers for restaurants won’t be so dire. At this point, though, that hope is far from certain.