By : Jalalaisa Geleto
The lockdown that started in March has caused hundreds of thousands of businesses to close down, but the restaurant industry has been hit the hardest.
The reason restaurants have been suffering more than any other business is because of the small margin of profit they make. According to ‘Restaurants 365′ the average margin of profit a restaurant makes is 3 – 5 %. For bigger chains like Mcdonalds it’s around 10%.
During the first few months of lockdown restaurants were completely closed meaning they had to sustain workers, supplies, and a building, while making no money to pay them at all. Because restaurants tend to make smaller profits there was only so much money the owners could save up to pay all their future bills.
Restaurants couldn’t pay up because restaurants’ financial model isn’t effective at all without customers for a long period of time.
16,000 restaurants have been permanently closed since the beginning of the lockdown, that’s 60% of all restaurants that closed form the pandemic according to ABC News. The restaurant industry is not going to recover from this for a very long time.
Now that the lockdown has loosen up, restaurants are now allowed to open up but only under strict guidelines. This helps the surviving restaurants very little because they have to spend extra money (which they probably don’t have) on the safety guidelines that their state demands, and serve less than half of the customers they would usually get before the pandemic.
This will lead to restaurants laying off workers because they support their full work force when they already have to pay for equipment to reach their states safety guidelines and their customers being cut in half. As I stated before, restaurants have a very small margin of profit therefore they are going to sacrifice a lot of things to even get there again.
ABC News reports that around 40% of the surviving restaurants believe they will make a full recovery with government assistance by the end of the year. Only 6,400 of the over 26,000 restaurants closing this year plan on making a full recovery this year.
Many business owners want the safety guidelines to go away so they can go back to when things were normal, but state governments have ignored their cries.
More restaurants might close in the future but they have definitely slowed down for now.
Things might start to fully open up again and the state mandated guidelines might go away allowing restaurants to go back to their old ways and hire more waiters and cooks. Only time will tell.
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