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There are a number of reasons why restaurants fail – some are predictable and avoidable, while others can catch a business off guard.  None, however, are as devastatingly out of the operators control as this pandemic.  Even the best operators are at a loss for solutions.  There are short-term band aid solutions such as takeout, delivery, or even conversion into retail markets where wine inventories and local necessities take over space once occupied by diners, but they are not a replacement for a steady turn of tables.  Restaurants have been relegated to outside dining or limited indoor space with loads of protocol limitations (some that are even more stringent than what is expected of other businesses) – this doesn’t pay the bills or keep a staff employed.

The pandemic is an “all hands on deck” problem that can be somewhat contained through simple precautions, but until there is mass vaccination of a population – these precautions dig at the heart and soul of a business that is essential to our way of life, our psyche, and our social health and wellbeing. 

There have been well over 100,000 restaurants that have closed their doors permanently as a result of the pandemic.  Many of these restaurants have been around for decades or even generations.  They just can’t survive the pain of lost business for months on end.  Now, this alone might not keep the average consumer or politician up at night, but what they fail to understand is that restaurants are at the center of a broad eco-system of businesses that are inter-dependent.  When your favorite restaurant closes its doors it is disturbing and sad, but it is also part of a domino effect that can tumble out of control.

Here are some of the other businesses that suffer when a restaurant closes, sometimes they too cannot survive as a result:

[]         Regional Farmers:  A significant percentage of farm crops are dedicated to restaurants.  A reduction in restaurant business leads to crop waste, unplanted land, and serious cash flow problems for farmers.  Already living on the edge – smaller farms cannot withstand this loss of business volume.

[]         Fisherman:  The end consumer’s love of fish cannot sustain a fisherman’s need to catch and sell a quantity of product to offset their expenses.  Restaurants account for a large percentage of a fisherman’s direct or indirect business volume.

[]         Ranchers:  Have you noticed that the price of beef, pork, and chicken has increased significantly over the past few months?  Those processing plants need to cover their substantial operational costs now that restaurant business has all but disappeared.  If processing plants cannot find an outlet for their end product then this trickles down to the rancher who is saddled with cattle, pigs and chickens without a market.  The end result is reduced herds, increased cost of feed, land without sufficient grazing, etc., etc.

[]         Cheese Makers:  Cheese, although there are exceptions, is still a product with a shelf life.  When restaurants fail or reduce their product needs, then cheese makers must do the same.  Inventories wane, waste becomes a real concern, decreased cheese product means a reduced need for milk putting a strain on dairy farmers, and the lists goes on and on.

[]         Equipment Manufacturers:  Restaurant kitchens are home to some very expensive equipment – when sales volume evaporates then restaurants are faced with aging equipment that they cannot replace, and delays in opening new operations that require equipment purchases.   There is no other outlet for this specialized equipment.

[]         Breweries:  Sure, maybe consumers are directing their beer purchases to their local package store, but breweries know that this direct to consumer cycle is not sufficient to support their growing expenses.  It is the restaurant segment of their business that creates a steady flow of cash to support their endeavors. 

[]         Distilleries and wineries:  The same holds true for those who market distilled beverages, and of course the wine industry.  Restaurants are the mainstay of business for vintners both domestic and imported.

[]         Table Top Manufacturers:  Restaurants are constantly buying and replacing china, glassware, and flatware for their restaurants.  It is a business that is predictable and dependable – until purchases stop.  Every restaurant that tries to survive during these difficult times will commit to tightening their belts and deferring any purchases that are deemed non-essential.  Those companies focused on tabletop have found that their business has disintegrated.

[]         Local Musicians:  Musicians need to play.  That wonderful local talent that graced the stage in bars and restaurants, and at banquets and festivals no longer has an outlet.  There is literally no opportunity for them to play and earn a living.  The need to survive will have a long-term impact on the availability of live music for quite some time.  Musicians depend on the restaurant business.

[]         Florists:  Sure – florist shops do very well on Mother’s Day, Easter, and Valentine’s Day – but the rest of the year involves a full-time focus on weddings, banquets, reunions, anniversary parties, and daily restaurant floral displays.  When this business goes away (there are no conferences, large wedding receptions, business gatherings, or restaurant floral displays during the pandemic) then the florist is left with unsustainable cash flow.

[]         Linen Companies:  The vast majority of restaurants do not have laundries where tablecloths and napkins, and restaurant uniforms and side towels can be laundered, starched and ironed.  These restaurants rely on linen companies for this service as they rent all of the above.  When business dries up in restaurants – so does business disappear for linen companies.

[]         Wholesalers:  Those companies that collect, deliver, stock, and bill for essential ingredients in restaurants depend, almost exclusively, on restaurants for their business.  Unless they can change their business model and supply ingredients directly to consumers – then wholesalers are left with a greatly diminished amount of business volume.

[]         Clothing Stores and Uniform Companies:  Those local clothing stores take a direct and indirect hit from a faltering restaurant industry.  Directly – those clothing stores that have relied on providing restaurant uniforms have found that their business model is void of customers.  Indirectly, as fewer people take the risk of dining out and shelter at home during the pandemic, they also cut back on clothing purchases that they can display when enjoying a night at their local restaurant or bar.

[]         Coffee Growers and Roasters:  The direct to consumer market for coffee roasters is certainly important, and at some level the take out business and home brew option is still strong, but still a large section of their wholesale business has dried up as restaurants fail at an alarming rate while others have seen business volume decrease by 50% or more.

[]         Landlords:  Building owners have been a target during the pandemic as restaurants have found it impossible to meet the requirements of a lease.  In the end, the landlord also has to pay bills and when a restaurant defaults – they find themselves in a very difficult situation.  “Should we cancel a lease for non-payment and evict the tenant, or should we try to compromise?”

[]         Bakeries:  Most small to medium sized restaurants cannot afford the space or talent needed to produce their own breads and other baked goods.  So, they rely on local or regional bakeries for those goods.  Many bakeries have built their business model on this type of wholesale as their mainstay.  When restaurants fail – they take your local bakeries with them.

[]         Culinary and Restaurant Management Colleges:  With a decrease in the number of restaurants and significantly lower volume of business – there is far less need for those young, eager graduates.  Schools are experiencing dramatic declines in enrollment and challenges in job placement.  Every day brings another college program closing.

The list could go on and each of these listed businesses has their own eco-system of impacted operations.  The point is that that failing local restaurant is only part of the dilemma.  If we allow restaurants to fail, then we allow the entire ecosystem to fail as well.  If restaurants are financially healthy then the system works well.  Right now the restaurant industry needs help from the Federal government.  Without extended PPP benefits, bank loan deferrals, help for landlords, and business recovery training for small restaurants – this system will crumble.  Restaurants cannot wait until 70 or 80% of the population receives a vaccine.  Restaurants cannot survive until the fall of 2021, restaurants cannot continue to wonder from week to week whether they will be able to accept indoor customers or not and they cannot wait for politicians to find a way to talk respectfully to one another.  They need help now!  If this is not provided then an important part of our culture, a major employer of people, and the heart of the food ecosystem will not survive.   Write to your representative, speak your mind through the media, stand in support of your local businesses and do your part.  We have lost too much over the past 9-months; don’t add your local restaurants to the list.

PLAN BETTER – TRAIN HARDER

Harvest America Ventures, LLC

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