Restaurants Have Lost $120 Billion in Sales, Permanent Closure Count Rising

Restaurants continue to feel the financial strain even as the economy continues to reopen.

Two new reports in the hospitality industry have come out with the research showing the dire situation bars and restaurants continue to face. The National Restaurant Association (NRA) is reporting that $120 Billion in sales have been lost from March to May and Yelp has announced that nearly 50% of restaurants that are currently closed, have closed for good.

Total Sales Lost Hits New Peak

According to the NRA’s latest data, $40 billion in sales were lost in the month of May due to the coronavirus, bringing the total to $120 billion when including $30 billion in lost sales from March and another $50 billion in April.

The effect is crystal clear when looking at unemployment numbers for NAICS industry code "72”, Accommodations and Food Services. It is by far the heaviest hit of any industry with over 6 million jobs lost according to estimates from the Bureau of Labor Statistics in March and April. Only 25% of those jobs have been clawed back with May posting a positive 1.4 million jobs gained. 

The National Restaurant Association and other advocacy groups are calling for federal support to curb the projected $240 billion possible total lost sales in 2020 for the industry. 

Permanent Closures Rising

Bar & Restaurant asked its readers if they believe the economic situation has improved or worsened over the last two weeks and found that 45% said it had worsened compared to 32% who were positive. Readers predicted that 42% of bars and restaurants would not survive 2020 which is not far off from research analysts.

Yelp has announced that 143,000 businesses have shut down on their platform and 35% of those are believed to be for good. Of that total number, 17% are restaurants, 23% include retail, and beauty makes up 13%.

Restaurants may be in line with retail and beauty for the percent that is temporarily closed but the conditions are drastically worse for permanent closures at 48%. Compare that permanent closure rate of 27% for retail and only 18% for beauty locations. This may be unsurprising given this industry’s track record of having the lowest amount of capital on hand (around 14 days according to J.P. Morgan) and the need for rent abetment and the difficulty finding staff continues to provide difficulty in surviving with reduced capacities and lower demands.

As a further threat, several cities across the country are looking at slowing their plans for reopening as COVID-19 cases spike. Houston and jurisdictions in Arizona and Oregon have publicly announced they are considering slowing down reopening plans or reverting to more stay-at-home orders.

On a more positive note, OpenTable's industry report showed reservations were only down ~65% across the U.S. on Friday and Saturday from this past weekend compared to the previous year. This is nearly a 15 point improvement from just two weeks ago.
 

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