The first wave of COVID-19 hit us hard and fast. Although there were early indications at the end of 2019 and early 2020 that this virus may affect more people than past communicable diseases, things didn’t become official until mid-spring with the global lockdowns.
All areas of life were disrupted, from education to mental health to transportation. There were a few economic bright spots, such as medical supply manufacturers and home electronics retailers. But it also resulted in significant downturns in several economic sectors.
Some data is still coming in, but food service in general was one of the hardest-hit sectors due to a combination of factors.
According to the U.S. Bureau of Labor Statistics, the food service and accommodations industry had one of its best months in February 2020, but two months later it had lost 6.9 million jobs, and total restaurant sales fell more than 49 percent.
“Some restaurants felt they needed to close to follow various state and local restrictions or their owner’s guidance. Some wanted to stay open, but customers were staying away due to their health concerns,” says Matt Frauenshuh, chief executive officer of Fourteen Foods and principal at Frauenshuh Inc. At the same time, many suppliers had their own health and operational challenges, which meant they weren’t always able to provide enough products for restaurant clients.
These factors led to businesses making tough calls about whether to stay open with reduced staff and reduced orders, change their business model, close temporarily, or just call it quits. (Sometimes this decision was made easier by key employees quitting or even passing away.)
Numbers vary on the number of restaurants and other food service establishments which permanently closed, but the data isn’t pretty no matter the source.
In July 2020, QSR, an online trade magazine, reported Yelp’s news that more than 26,000 restaurants had closed since spring, and 16,000 reported they were closed for good. More closures were anticipated in the next quarter.
By January 2021, the National Restaurant Association reported that there was 110,000 shuttered food and drink establishments nationwide and 2.5 million restaurant employees lost their jobs – a $240 billion loss.
By the summer of 2020, some closed restaurants began opening again, but there were differences in the ways many operated.
- Limited seating. Some sit-down restaurants re-opened but closed their dining areas and only offered meals to go. Some continued to serve but used fewer tables to encourage distancing or only offered outdoor seating. In winter, these restrictions continued but some restaurants put up plastic partitions and space heaters to separate parties.
- Limited hours. Because of the challenges of keeping staff, different dining habits, or generally higher costs, some restaurants changed their hours of operation. A place that used to offer meals all day may have switched to lunch or dinner only, or close earlier in the evening.
- Limited menus. Supply challenges continued, so some favorite items were either no longer available or available in smaller quantities.
- Higher prices. As raw supplies cost more, restaurants continued to look for ways to recoup some of their losses.
While the number of diners going out to eat remains lower than it did pre-COVID, the pandemic did lead to an increase in food delivery options.
“It makes sense, to consumers,” says Frauenshuh. “You could get the same food but have it delivered right to your door, often for just a small extra fee. Then you wouldn’t have to risk your health by going outside.”
Some restaurants began offering curbside pick-up and local delivery, and third-party delivery companies also saw a boost.
These were just starting to catch on before COVID, and the number of deliveries doubled from 2019 to 2020, especially in urban communities.
Customers like convenience, restaurants like getting some business, and even drivers may prefer it. For instance, ride-share contractors reluctant to deliver “people” for personal safety reasons, such as through Uber, may be more inclined to deliver food through Uber Eats.
Different labor outlook
Depending on which side of the negotiating table you’re on, COVID has created some benefits for restaurant employees but challenges for owners and managers.
Traditionally, restaurant work has paid little, especially for lower-end help like servers. Some states were even able to pay less than minimum wage with the expectation that the person could receive an adequate amount of tips, even if they still had to be divided with others. Conditions could be difficult with long days, unstable schedules, and physical demands.
COVID added to the challenges. Not only did some restaurant staff get paid little (sometimes just $1,590 a month) but they now had to potentially risk their lives to show up for work. Then, because some co-workers quit or became sick, the employees with good attendance ended up with larger burdens.
“Midway through COVID, many restaurant workers collectively began looking for better options,” says Frauenshuh. “Some knew they could make more money and be treated better on unemployment, while others found employers who promised to treat them better and improve their conditions.”
The restaurant culture soon became much more employee-friendly, with wages going higher and even some signing bonuses attached.
Soon, employers who tried to keep their wages close to the state or federal minimum levels found themselves offering amounts that would have seemed ridiculous five years ago, like $20/hour in some areas for entry-level fast-food workers.
Of course, a larger payroll can impact a restaurant’s bottom line, which can hurt even more, since many are already dealing with more expensive supplies and fewer customers.
About Matt Frauenshuh
As Chief Executive Office for Fourteen Foods and Double Seven Development, Matt Frauenshuh has led his family’s business to become the largest Dairy Queen franchisee in the U.S. Fourteen Foods currently owns and operates over 240 DQ Grill & Chill Restaurants in 13 states. He leads the company modeling the core values of faith and family. Matt has sat on the boards of the National Prayer Breakfast CEO Panel and United Heroes League.