Indoor Dining Goes Dark Across U.S., Deepening Restaurants’ Pain

Restaurants already endured lengthy shutdowns that hobbled the industry. Now, a new wave of bans on indoor dining from Philadelphia to Seattle is threatening the weakened industry.

With a record-breaking Covid-19 spike, governors and mayors across the U.S. are bringing back limits to businesses and once again, restaurants are seeing the tightest restrictions. Illinois, which was one of the first to reinstate a shutdown, is a focal point. Michigan, Kentucky and Washington state governors have also issued statewide bans on indoor dining, and it’s not allowed in most of California. New York state now has a 10 p.m. curfew, and a similar ban is “just a matter of time.”

Indoor Dining Goes Dark Across U.S., Deepening Restaurants’ Pain

This means that restaurants’ already acute pain is about to get worse. Nationwide, October restaurant sales dipped on a seasonally adjusted basis, falling to $55.6 billion from $55.7 billion in September, the first monthly drop since the end of the spring lockdowns.

“Another round of shutdowns nine or eight months after the original ones have a potential to be a lot more damaging,” said R.J. Melman, president of Lettuce Entertain You Inc., a Chicago-based operator of 130 restaurants across six states and Washington D.C., which has started laying of workers who earlier this year it expected would be furloughed temporarily.

It’s worthwhile to take a look at the wreckage that the pandemic has already inflicted: One in six U.S. restaurants, or about 100,000, have closed permanently or long-term, according to the National Restaurant Association. Looking ahead, 40% of operators in a September survey said their establishment is unlikely to be in business in February without federal aid. The U.S. currently has more than 2 million fewer restaurant jobs than before the pandemic.

Colder Weather

Bruce Grindy, the chief economist of the National Restaurant Association, said in a Nov. 17 report that the October sales decline is troubling because last month likely represented “some of the last opportunities for outdoor dining in many parts of the country.” With the indoor restrictions, winter is shaping up to be “an extremely challenging period,” he said.

Federal aid remains a wild card: A Senate bill, called the Restaurants Act, has bipartisan backing and would establish a $120 billion “revitalization fund” to help restaurants. There are few signs, however, that lawmakers are close to breaking a deadlock on providing additional aid in the short term.

Many businesses aren’t in a position to wait. Jamie Boudreau, the owner of the Canon cocktail bar in Seattle, said his business will stop offering takeout and delivery, closing down until at least spring. The announcement came days before the state banned indoor service. He said he’s trying to hold out until a vaccine brings patrons back.

“This has been the most difficult thing, physically, emotionally, that I’ve ever done,” Boudreau said. “Right now, if you put a gun to my head and said, ‘Are you going to reopen?’ I honestly do not know.”

‘Absolute Hell’

Illinois in particular is being watched as the canary in the coal mine amid a Covid-19 resurgence. The state could see as many as 30% of its 25,000 restaurants close next year if current restrictions persist, according to a forecast from the Illinois Restaurant Association.

Sam Toia, the Illinois group’s president, has been advocating for a reopening of dining rooms with capacity limits as well as federal aid. He said he’d be “surprised” if industry sales this year top $20 billion statewide. For comparison, Illinois restaurants reported more than $30 billion last year.

Indoor Dining Goes Dark Across U.S., Deepening Restaurants’ Pain

Starting Friday, Governor J.B. Pritzker’s indoor dining ban goes into effect statewide along with a slew of other recent mitigation measures. Chicago Mayor Lori Lightfoot, who earlier this week acknowledged that this year has been “absolute hell” for the city’s hospitality industry, also has issued a 30-day stay-at-home advisory starting Nov. 16.

The state and city, which are both trying to close deficits given plunging revenue from business closures and the recession, have limited ability to provide assistance. Illinois’s efforts have included about $19.5 million to restaurants and bars as part of a broader program. In Chicago, Lightfoot has started a grant program for restaurants and bars totaling $10 million, among other initiatives. She’s trying to cap delivery fees from third parties like Grubhub Inc. and DoorDash Inc., which consume significant amounts of restaurants’ profit.

“We are trying to do everything we can to throw our restaurants a lifeline,” Lightfoot said earlier this week when the 30-day stay-at-home advisory began. “Unfortunately, no doubt some will not make it.”

‘Ping Pong Balls’

A key problem in Illinois and beyond is that the changes in restrictions and capacity limits every few months make it difficult to plan. Staffing levels need to be quickly altered along with spending on everything from meat and vegetables to napkins and hand sanitizer.

“Our industry is not built to go back and forth like ping pong balls,” said Alpana Singh, owner of the Terra & Vine Italian restaurant in Evanston and the host of “Check, Please!,” a restaurant review show on local public television.

As the newest round of restrictions looms, exhaustion is setting in for the industry.

“People in this industry are tired,” Lettuce Entertain You’s Melman said. “They have been fighting daily to keep restaurants open, to keep people healthy, to balance emotional feelings and to balance safety.”

Indoor Dining Goes Dark Across U.S., Deepening Restaurants’ Pain

Monteverde, an Italian restaurant in Chicago’s West Loop, has cut its staff to 60 from 90 this year. It has lost money every month through the pandemic and tapped savings to cover additional costs such as protective gear, according to co-owner Meg Sahs, whose employees wear N-95 masks.

The restaurant has reinvented itself by offering meal kits, live video tutorials with its chef and working with a service that aggregates orders for delivery to the suburbs. Pick up orders have risen to 30% of sales from 10%.

“We are disheartened” by the indoor dining ban, said Sahs, who said she’s determined to keep the business running. “Sad to see so many restaurants are not going to make it.”

©2020 Bloomberg L.P.

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