From the onset of the COVID-19 pandemic, it was clear that the restaurant industry would be one of the most affected sectors. Even now that eat-in options are permitted in some areas, most restaurants are forced to abide by 50% capacity restrictions, making profits even harder, if not impossible to attain. Ongoing lockdowns and residual restrictions are now forcing large chains to permanently close certain locations.
Nine large restaurant chains alone now plan to shut down a combined 600 locations. Independent and mid-level restaurants fare no better. These massive closures will result in equally-massive unemployment.
In early April, UBS financial analyst Dennis Geiger predicted that one in five restaurants would close permanently because of the pandemic. Now that even large chains are showing signs of cracking, it would seem the industry is headed for an eveen larger contraction.
Here is a list of the 9 large chains that have decided to permanently close locations:
- TGI Friday’s: Closing 20% of 386 locations, or around 77 restaurants. The company has been experimenting with outdoor tent seating to help comply with social distancing rules.
- Sweet Tomatoes/Souplantation: Closing ALL 97 locations. This buffet style restaurant was hit especially hard due to the nature of its service style. Buffets are less than sanitary under normal circumstances, amid a pandemic they lean toward dangerous.
- Denny’s: Closing 16 restaurants, 15 of which are owned by a single franchisee, Feart American Diners.
- IHOP: Closing at least 49 locations across Virginia, North Carolina, South Carolina, and Tennessee.
- Ruby Tuesday: Closed 147 locations since January 23rd. This is an example of a company which already struggled before the pandemic. The lockdowns were just enough to push most locations to shut down permanently.
- Speciality’s Bakery and Cafe: Closed ALL 33 locations. The company’s statement placed full blame on the pandemic and shelter-in-place orders for its closure.
- Brio Italian Mediterranean and Bravo Italian Cucina: Closing 71 of 92 locations. This comes after months of struggle, including 10 closures back in January.
- Steak n’ Shake: Closing 51 locations. The company has been unable to stay relevant for some time now. The pandemic was only a catalyst for closures.
- Le Pain Quotidien: As many as 63 of its 98 locations will close. LPD had already filed for bankruptcy, which meant closing all 98 of its stores. However, the cafe franchise has been able to negotiate a deal with Aurify Brands to reopen at least 35 stores.
Why These Businesses?
You might notice that all of these restaurants are fast-casual or casual dining establishments. There are a couple reasons that this type of business has been having a particularly hard time.
First, many of these locations are owned by independent franchisees, meaning the individual locations do not have access to the funds of the company they represent. While franchisees use the parent company’s regulations and brands, most franchised restaurants are run more like a small, local business.
Unfortunately, most consumers don’t think of national brands like community businesses. As the restaurant industry started to depend exclusively on delivery and take-out orders, many consumers chose to order-in from their favorite neighborhood spots to help support its local businesses and to get a quality meal. A chain like Denny’s, though independently operated, is unlikely to yield many take-out orders, with consumers deeming its food of lower quality and its financial sustainability of little concern.