Running a restaurant is tough even during the Good Times. But the strain put on restaurants now was beyond imagination not long ago.
By Wolf Richter for WOLF STREET.
The number of “seated diners,” a daily measure with which OpenTable tracks walk-ins and diners with reservations, in the week through January 20 in the US was down on average by 57% from the same period last year. But it was up from the multi-month low of -67% just before the Christmas holidays.
The calendar shifts in 2020 of Labor Day, Thanksgiving, Christmas Day, and New Year’s Eve – holidays in 2020 were matched with regular weekdays in 2019 – make for some peculiar year-over-year comparisons around those holidays, as the spikes and troughs show. The “-100%” in April indicates that there were essentially no seated diners due to the lockdowns. And this has been showing up again in some cities that we’ll get to in a moment:
Whatever this phase of the Pandemic may be – I heard on the radio this morning that it’s “the end of the beginning” – it has been a catastrophe for restaurants. Many are already gone, along with their jobs and rent payments. Indoor dining has been shut down in many areas.
Even outdoor dining has been shut down in some areas, after a restaurant survival strategy, the indoorification of outdoor dining, became standard practice, where plastic buildings with heaters appeared on the sidewalk that were in essence like indoor dining rooms with the windows open. This is in San Francisco, an illuminated span of the Bay Bridge in the background. The arrangement is now closed:
Cities in the West and Hawaii:
Hawaii had locked down in September when the number of seated diners plunged by 100% to about zero and then gingerly reopened its restaurant industry with many restrictions. But the tourism business has collapsed, and so the number of seated diners in the latest week in Honolulu was down 72% from a year ago.
As catastrophic as this sounds, this was far better than the cities on the US West Coast, where the number of seated diners collapsed between 90% in Seattle and Portland and 100% in San Francisco and Los Angeles, with even outdoor dining being closed:
The daily data on seated diners is based on a sample of 20,000 restaurants that shared the information with OpenTable, and includes walk-ins and diners with online and phone reservations. I’ve converted all data here to a moving seven-day average.
Cities on the East Coast:
Restaurants on the East Coast struggle with renewed restrictions along with the impact of winter weather on outdoor dining. The number of seated diners in the latest week, compared to a year ago, plunged between 62% in Pittsburgh and 95% in Baltimore. In New York, the number of seated diners was down by 87%:
Cities in the Southwest and in the Rockies.
The number of seated diners in the six cities in these regions was down between 35% in Houston and 52% in Phoenix. In Denver (red line), restaurants were able to re-open their indoor dining facilities in early January, with big restrictions.
Cities in the Midwest:
Restaurants in Minneapolis went into strict lockdown on November 20, causing the number of seated diners to plunge by nearly 100%. Indoor dining with restrictions reopened on January 11, and business recovered some; in the latest week, seated diners were down 61%. In Chicago seated diners were down by 82%; in Cincinnati by 37%. The calendar shift massively distorted the year-over-year percentages in the top three cities over Christmas and New Year’s Eve:
Cities in the South.
The number of seated diners in the latest week was down between 16% in Miami to 66% in New Orleans, with Atlanta, Charlotte, Louisville, and Nashville in the -48% to -58% range. Here too, the calendar shifts massively distorted the numbers over Labor Day and New Year’s Eve:
Like many Americans, I’m looking forward to the moment when it’s safe for everyone to sit down at a crowded noisy bar of a thriving restaurant, have some Fed-free liquidity, and some delicious food, served with a friendly smile and maybe a joke about the bad old days of the Pandemic. The restaurant business is always tough, even during the Good Times. But the strain put on the industry now was beyond imagination not long ago. Meanwhile, we’re trying to support our favorite eateries with takeout – those that are even able to keep their doors open – and hope they can hang on.
From fake “office shortage” to historic glut in no time. Read… San Francisco Techsodus & Unwind of Office Hogging Sink Office Market. Sublease Explodes, Leasing Freezes up, Rents Drop
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To quote my father, “Starting a restaurant is the fastest way I know to go broke.”
Or maybe it “the surest way”… I forget.
and to think our family made it special outing during holidays
but now HOLIDAYS ARE OVER AND SO is our dining out
btw steaks(sorry File Mignon) and chicken breasts(coated with teryaki) are excellent
Last I saw the tavern business had the shortest of all lifespans averaging about 2 years.
lenert,
The reason taverns or bars only last about 2 years is because the proprietor or hired help usually drink up all the profits.
The advantage of a bar over a restaurant is that the Barriers to Entry AND Exit are low.
Restaurants cost an arm-and-a-leg to start up… are harder to manage (personnel, marketing, cleanliness, food purchasing)… and have lower profit margins. Fixed AND Variable costs are high.
A bar can be as simple to start as buying some used furniture and a liquor license. All you really need is a marketing gimmick (pool tables, sports televisions, live music, whatever) to draw the kind of crowd you want. Profit margins on each drink are high and labor hassles are minimal. If it doesn’t work out by the time you have to renew the liquor license… just put the furniture out by the curb and move on.
It is a nickel and dime business. If you’re not serving liquor forget about it. And liquor licenses here in San Francisco will cost you a fortune. Its a labor of love that most likely ends in heartbreak (or bankruptcy)
MarkinSF,
If you open a bar remember rule # 1:
“Don’t get high on your own supply.”
I don’t get this sort of sentiment. What are all these businesses that aren’t tons of hard work and with a high risk you’ll go under?
I ran a small business selling electronics widget, and it was like swimming in treacle to make progress. Every step forward was a mammoth effort. Sure it probably looked like I was doing well, but I have never worked harder in my life.
Before the days when you could make an easy 20% on your investment portfolio during a pandemic, that sort of work was just considered the price if you wanted to get ahead in life. Now it seems we just denigrate these people as foolish suckers for punishment.
Very strange times we live in.
Everybody is smart and successful when they all buy stocks in the middle of an economic catastrophe. Then when they go to sell and realize their gains… In the meantime who needs hard work when you have appreciating wealth? This is like the trillion dollar coin fandango, it’s worth what you say it is, achievement out of thin air. We continuously live in a confabulatory wonderland, and they say it’s only bad to visit this place via drugs!
I long for the days when hard work was rewarded, not speculation.
Yes, if you are running a real business you have to work your ass off and are subject to real economic risks. It is much smarter to just buy stocks. If the market drops by 5% or more there will be a support package that same afternoon to prop up the market.
If one gambles trying to find the easier way out, it will not succeed long term. It is hard to be exceptional at anything; there are a lot of smart people out there. Above all take time to enjoy, and really understand things. This is more of a morning prayer for myself than a response to you. LOL Amen
Agreed!
Fair point. Even on Wall Street, if no one tried to create new businesses then there would be nothing worth investing in.
But as an oil wildcatter that was in my Reserve unit said about starting a restaurant, “There are better ways to work that hard for so little money.”
Yes .. but its also such an exciting adventure .. a hop skip & a jump .. to going broke.
I waited tables every now & then when I needed extra dollars .. its almost like being in showbusiness.
The knack for the hospitality industry
You’re born with or you are not ..
Pizza restaurant eat in take away Lygon St Calton, Vic.
Frank went to Italy .. his dad was ill ..
“Here are the keys Mira .. call Joe if you need help, Paolino will show you what to do.”
Mario was to help Franco in the kitchen.
“Why didn’t you help Franco, it’s you job?”
He stood behind the counter with a ball of pizza dough in his hand & fumed ..
“What?” I said.
And he threw the ball of dough at my head .. it went over my head & stuck to the wall for a bit .. the whole restaurant was silent waiting for episode 2.
Nothing else happened so they all started laughing.
I Do Know Very Well About This G/L
Cloud kitchens is the way to go nowadays. It can be a “win win” if done properly. Without rent, these cloud restaurants can reduce their operating cost, perhaps even significantly. There’s also no need to serve nor wash dishes, etc.
Cloud kitchens is new to me heard of a lot of other cloud “whatever” but what is a cloud kitchen. Is the kitchen hosted in a data center?
They’re basically commercial kitchens that were used pre-covid by food trucks or catering services who wanted to abide by health codes. Now operators can just throw an UberEats or DoorDash front-end.
I’ve been hearing about ghost restaurants, basically trucks with kitchens, who cook for delivery and park in different places on different days. The best ones have apps where customers can order and find their locations. If this takes off, the RE and tax base is permanent toast. Why bother with taxes and regulation if all they do is destroy your business.
Now if we just do cloud homes
Speakeasies for food and get together places with block chain keys to reserve.
Built on a sky hook, tell the assessor to take a hike!
I think those are called RVs.
“Why bother with taxes and regulation if all they do is destroy your business.”
But…but…tax dollars pay for the awesome might of the US military, ensuring sterling intelligence and extremely short wars of necessity.
And an awe inspiring medical industrial complex that consumes a mere 20% of GDP and coordinates communicable disease control that is the envy of the 1750’s.
I live in a rural resort area with a lot of restaurants. Quite a few independents vs chains. It amazes me to see the national taco chain with 25 vehicles in the drive thru lane waiting 20 minutes plus to order and get fast food. The local Mexican full service restaurants take online orders and will bring it to your car with a minute or two wait. Yet the fast food gets all the business with mediocre food at a price close to the independents with much higher quality. Only in America!
“…tax dollars pay for the awesome might of the US military,” — Yup – $750 Billion DoD budget and the US Capitol gets taken over by Duck Dynasty.
We have had them here in Texas for a long time. They are known as “Roach Coaches”! Mostly driven/operated by Hispanic folks and parked near construction sites.
Not the same thing aa,,, or at least not the same as the Roach Coaches that used to come to the construction sites in CA, OR, FL, etc., ”back in the day.”
Those were just a specialized bed on a pickup, usually with ice only for cooling, food pre-prepped, and no cooking. Food marginal at best, frequently worse.
What I have seen in recent years is a whole new level of mobile food prep, (though some seem to be consistently on the same spot for a long time.)
The modern ones are large to giant – think largest RVs – and may have full electric and gas cooking equipment, electric cooling, 3 compartment/legal sinks, and sometimes the best or at least very good examples of whatever are their food specialties.
Many municipalities now welcome these new food trucks, and, of course, collect sales and other taxes and license fees. Some places have set aside specific locations for them.
We have great food trucks in Phx Metro. They all use cloud kitchens to pre-prep the food.
You can go online and find out where each truck will be on a certain day. On Fridays, there are a lot of them at one large park downtown. Other than when we had a semi-hard lockdown at the beginning of the pandemic here, they seem to be doing very well.
I was thinking about this .. is anybody paying tax.
The large supermarket chains have had their customer base cut in half .. or worse.
Their range has gone by 30% .. shopping is an excursion so if we are ordering in grocery shopping why not order read to eat instead.
The governments are printing money so there is no shortage of cash .. “No Tax Need Be Paid By Those Who Assist Us” other wise how are they getting away with it ??
This is bigger than juggling the figures in the books.
Cloud kitchens are the best solution to support off-premise operations, since they do not require FOH workflows. The issue is that cloud kitchens are only practical for off-premise sales. When the world opens up again, the drive-thrus will be less congested and mobile ordering becomes an after thought. On-premise sales generate larger margins and offer a more intimate dining experience, leading to higher customer retention.
“FOH workflows”
Definition please?
As for onsite dining being intrinsically preferable post C19…I’m not sure.
Easy at home ordering may continue to eat into onsite dining even post C19…for some of the same reasons people preferred Netflix (and chill) to movies even pre C19.
Especially if ghost kitchen savings get shared with customers.
At home consumption likely encourages,
1) More experimentation with untried restaurants and
2) Greater ordering frequency since the customer doesn’t have to do personal prep work simply to eat. And people eat every day.
But restaurants need to share ghost kitchen savings and reduce meal expense.
Cas127
Here ya go: Google (or do the duck) “FOH def” or, even more exotic, “FOH restaurants”.
I’m always amused at (presumably somewhat) computer literate dudes asking others to do their searches; I do assume almost everyone has installed a search engine; that might be wrong.
JC it used to be decorous to define your acronym the first time you use it eg we teach french (WTF) and once you have done that then you can use it freely. WTF
Cas127,
Most acronyms and corporate speech are utilized in conversation to define who is “in” and “out”. If you don’t know what it means, you must not be part of the “in”. You would only define your acronym if your goal was to communicate clearly.
Foh = front of house. Servers, order takes, runners, bussers
Boh = back of house, the kitchen
I expect the appearance of FoodCoins: the food baked by the heat coming from mining farms…
Cash is still king, however the block chain could be used for reservations with a crypto app, and the transfer of digital money to dollars if desired. The keys to the cloud restaurant. It would help further to be a non profit or religion, and have everything be a donation :>{)
It may come to pass for the mainstream of mankind that meals are donated from some great big kitchen in the sky .. meals with Made In China / Made in India stamped under the packaged microwave receptacle housing dinner.
“Meanwhile, we’re trying to support our favorite eateries with takeout – those that are even able to keep their doors open – and hope they can hang on.”
Bravo, Wolf, us too. Fortunately, we live in a state that has not ‘cancelled’ in-restaurant dining, so we try to eat out more frequently just to keep the economy greased and keep people employed. Plus, we are intentionally buying more bread from local specialty bakeries. These people are my neighbors.
Intentional is the word.
Economic theory can be debated forever. In the world we live in today it can be tough to know what is a moral economic decision. Is it better to tax a rich person or let the rich person build a yacht and employ a lot of people in the process? I think we all feel better if we help people we know than people that we don’t know.
I only heard one economist say he hated the double talk of a public employee as a public servant. Who says that person is a public servant more than the person producing toilet paper in a factory?
Well, one self satisfied preening political cohort produces a lot of sh*t…while the other labor cohort works 4x harder to wipe it away.
That is US “socialism” in actual practice.
Economic theory can be debated forever. In the world we live in today it can be tough to know what is a moral economic decision. Is it better to tax a rich person or let the rich person build a yacht and employ a lot of people in the process?
Problem is that rich person increasingly speculating with his money by buying productive businesses and stripping them like Bain Capital. IT’s now Finance Capitalism.
Same here.
Our business boomed from the urban flight.
We make sure to frequent our local bars & restaurants.
We now ask ourselves before we purchase…can we do it locally?
Crazy to think I have not visited a menards
or home depot since 4/20. Local stores , hardware, lumber, and fabricators have gotten our personal & business$$.
Came across a 7 minute video a couple days ago by a guy (hippy-liberatarian? goes by name Styxxhecenhammer666) in Rutland, Vermont describing how the local and state politicians have ruined once was a thriving local business community. Surprise! Only China ?? Mart thriving! I’ve been through that town over the years and was surprised they let in the first place.
Yep destroy mainstreet.
Mission accomplished.
Now they reach out to ole joe and say we will help you roll out the cure.
At least the guard learned were
They rank.
Tom,
That’s excellent and partiotic and environmental. However, I hope you are using cash in those businesses. Immediately available to the merchant, no bridge loans from banks, no service fee deductions from credit cards, highly simplified for taxes. etc
You might be waiting awhile for things to get back to normal.
“New York State employment is not expected to reach its pre-pandemic peak until 2025…”
— Gov. Andrew Cuomo, 1/20/21 (Yesterday)
There will be no return to normal, that is not planned at all.
See Klaus Schwab, of the WEF:
‘People think we are going to go back to the good old days. That is just fiction. The cut has been to deep.’
Welcome to the ‘Great Re-set’ and ‘Build Back Better.’
That’s going to be our normal.
I listened to Klaus Schwab a while ago ..
Thinking, thinking, thinking, .. who does he remined me of ??
WEF founder: “We have to prepare for a more angry world & how to prepare .. it means to take the necessary action to create a fairer world .. to see that we provide everybody with the necessary healthcare .. that those left behind ..”
Sounds great .. only that this does not happen today & we will see it in a new world .. wow!!
\\\
An owner of a restaurant with quite a few hostel rooms, half a year ago went ahead, and repurposed his space to a large number of indiviual offices. The idea was to lease out office space to small companies or indiviuals at a fairly low price with a minimum 2 year contract, after which he intends to return to business as usual (he made sure everyone understands he is going back to his rest-hostel business in 2 years). There is a receptionist always present and the usual cleaning staff on need. In two months with some investment (was done in phases once it was clear how much interest there was on the market) he rented all the space.
Why I am mentioning this is becaue the restaurant was also converted to office space and it was the hottest selling realty he had at hand…
\\\
He could serve lunch and clean up on both ends of the business arrangement.
The situation is even worse in Portland than the data suggests. Over the last 10 years would-be restauranteurs streamed in to town with experience under their belt from cooking in bigger burgs. Portland had the rep as a place for trendy food with an adventurous dining public and lower startup costs than San Fran or NYC. This created a big tourist draw as people would travel to PDX for the beer and the food. At its peak (about 2016) you could get great food in even the scruffiest brew pubs. But most of these start-ups were lightly capitalized and the really successful ones expanded to multiple locations. When covid hit most of these places were wiped out shortly. Now there is not much left. I have many friends in the business who were wiped out, left town or have just disappeared. Mostly just chain restaurants, food carts and few old family restaurants left.
Observation:
Is it my subjective perception that more biz windows, in dwtn PDX, are being boarded up w/each passing day? The perception that PDX is a broken/damaged & hopeless city is reinforced everyday. Zero, zip leadership is the norm.
Whereas Motorcity seems upscale in temperament vs. PDX toxic ghetto energy.
PDX metro police response (for 911 calls) is to utilize FIDO [F##k It Drive On] upon arrival to a scene if a situation is not requiring urgent intervention.
Freeway arterials crowded (where are all the occupants going in middle of the day?) while miles of parking are empty in dwtn.
Again, just my observation(s). Ymmv.
Addendum: In 2017 PDX was ranked the third most desirable RE mrkt US.
In ’21, it now ranks 66th out of 80 cites on Urban Land Institute’s list.
An exceptional rapid descent from upper altitudes.
Yyyyyep. I’ve been living in PDX since the 90’s. This is what happens when you take a city and advertise the s#!t out of traits that make it a hot destination for one type of person (lazy woke LA hipsters). Instant inbred.
It’s also vital to consider the food trucks. Who’s tracking that data? Nobody.
I drove up A1A in Miami Beach the other day and saw the same thing, a lot of permanently closed businesses.
It’s very depressing what COVID did to our economy and so many small businesses, while our idiot Congressmen decided the way to “help” was to print trillions for Wall Street (yes, I know this was the Fed, but the Fed ultimately answers to Congress) and to dole out hundreds of billions of dollars so that people could splurge on Chinese-made durable goods.
The Fed answers to Congress? When did that begin?
@BobbyD – The Fed answers to Congress through mandatory testimony before Congress. The Fed cannot create new money without Congress and the creation of debt by the Treasury.
Covid did not “do this to our economy”. Covid impacts the circulatory system of humans. POLICY did this to our economy (and society) as demonstrated by the varying results shown in the charts. It was a choice with predictable fallout that will be playing out for generations.
“The end of the beginning” could not be have been spoken untill 12:01pm 01/20/21
How about the ” beginning of the end” .
Time is infinite so it makes no difference haha
The probability that this has been done before in another galaxy or universe is high
Eating out is amazingly inexpensive in the United States; it is basically an arbitrage; I suspect chain restaurants can purchase food at good prices, and most of the employees don’t get health insurance. So now with covid, I have not eaten out, and don’t get enjoy it; there is something about it that seems kind of exploitation to it; elderly people on medicare (being paid by government at levels more than they paid in) are eating out while college students who have to take out debt, are waiting tables. No wonder young people wonder about socialism.
See the story about the McRib as pork future arbitrage? The thesis is basically now McDonald’s is more commodities broker than restaurant.
Nobody is getting rich off of their SS and medicare benefit. Even if you get to collect retirement/disability, with 10 kids as dependents, they cap the benefit per family.
I paid into social security at the maximum for 44 years. Now I am retired and getting social security. Do you really think I am getting more than I and my employer paid in? I think not, unless I live to 100.
Fairly easy to confirm the numbers hj:
SS has a record of every penny you earned and was paid into your account.
A friend was not even going to claim hers, as she thought it would make her a socialist to take social security.
( Another friend was able to convince her it was all her money with a much lower return than if she had been in a private scheme, so she did take it.)
As Pet said earlier, nobody’s getting rich with SS, but it does help with the liquidity budget, eh?
HeyJude
“…Do you really think I am getting more than I and my employer paid in?”
Depends on how long you live.
Given what you said in your post, you have paid in around $170,000, when matched by your employer, that totals cash inputs of $340,000. Given average inflation over that period, that’s probably worth $500-600,000 (most was paid in during the last 15 years of your working life). That gets you a lifetime annuity of about $30,000 (LINK: https://www.newretirement.com/services/annuity_calculator.aspx).
My VERY back of the envelope calculation shows the commercially available life annuity for your estimated $550,000 is LESS than the Gross SS payment (before medicare premiums & other adjustments) – now it just depends on how long you live.
“being paid by government at levels more than they paid in”
The elderly are not being paid by Medicare. The drug monopolies are, though.
I think Dan would be shocked to see what some of us retirees pay for Medicare and supplemental insurance (plus drugs). It cost my wife and I over $10,000 per year for Medicare/Sup insurance premiums. Our drug costs are about $3,000+ out of pocket per year. Medicare is not FREE. Medicare by itself is crappy insurance that a lot of doctors won’t accept unless you have additional coverage.
I stated paying into the SS system in 1961 and quit in 2017. That’s a lot of years to pay in. I am not alone with this.
Right On aa,,,
1958 to 2019,,, if you think I’ll ever get all my money out I have a bridge I want to sell you!
Petunia suggested recently the idea of updating SS with the real inflation the last 20 years or so, likely at least 3 times the raises of the SS benefit actually given due to the manipulations of the various indexes.
Certainly would appear to be one of the very most stimulating policies that the guv mint could adopt, to this old boy!!
Careful my friend… giving nice things to working folks who earned it and thought they paid for it is called “moral hazard.” Giving free trillions to the rich is called Quantitative Easing, Stimulus, Job Creation etc.
Your employer gives the same amount for you that you give. I believe that most people that live past the actuarial determination of average death age getting money over the amount earned.
Medicare is a huge place for fraud at every level. The government does not prosecute to a large degree. Read the NY Times about the doctor fraudsters Trump pardoned with tens of millions ripped off. A prosecutor once told me the problem with insurance fraud is that most juries think it is ok and normal behavior. Go long on health insurance. Health care may well hit 30 percent of the GNP in a year or so and the outcomes suggest that tons of tax and private money is leaking out. Between me and my wife it is close to 900 per month to Medicare and that is before the supplemental. I figure about half is for fraud to include unnecessary treatment and that might be conservative. But one has to have insurance.
Fraud on both sides. Medicare uses algorithms that often punish small business specialist in a general field. An alert pops up for practitioners that do not do a varied amount of billing items under the L codes. These specialized practitioners are often small businesses that don’t have the variety of services and procedures of big business public companies whose businesses are used to determine “the norm” .
In addition, the small businesses do not have access to the accountants and lawyers that Medicare requires to defend themselves like larger entities. The small businesses are squeezed out with all the paper work that the large businesses lobby Medicare to require in “the best interest of the patients”.
Just pointing out that the government is often fraudulent in their pursuit of the easy targets that have done nothing wrong. You are guilty prior to any court dates and the IRS automatically puts liens accused accounts. The IRS likes to go after targets that don’t have a slew of accountants and lawyers on their payroll because everyone wants to win at all costs.
Considering what the government has done to the yield on my savings of 47 years I have no compunctions about taking whatever I get from SS, even if it ends up being more than I and my employers contributed. With no ZIRP and with historical rates I wouldn’t need SS. I was self-employed for 25 years and contributed both halves. I have a problem with “students” having a good ‘ol time spending money borrowed from the government on non-educational “expenses.”
If it replaces even a third of your pre-retirement income you’ll be lucky – or you worked a lifetime of low wages.
My SS is way less than what I paid annually in income taxes. Way, way less. I didn’t expect to need it. Until ZIRP came along. And stayed.
Income taxes are for the army.
I worked, or declared and paid taxes, exactly the minimum 40 quarters to qualify for SS/Medicare. Now pay a couple hundred a month for coverage, for what it’s worth.
When I worked on a raise the minimum wage campaign the local waiters who signed my petition told me they make middle class wages from the tips.
Who in hades wants to eat at a cloud restaurant or a restaurant where the workers are robots?
The tech billionaires must be anti social greedy psychos.
Human beings are social animals, so there might be a niche in the future to go to family restaurants and small businesses where humans wait on you. It could be a popular trend.
Window shopping is a fun activity and hanging out in a coffee shop is a social activity.
The billionaires and trust fund babies are psychologically messed up and they need therapy.
I lived in a fairly small PNW town, before, during and after the GFC.
Here’s a short story. In about 2006, a new upscale-ish strip mall/plaza was built. The city was expanding and a small boom was in place, but almost as soon as this plaza was built, signs of a recession were blowing in. The plaza was fairly small, with maybe a dozen retail spaces available. Nobody leased space as the recession phased in, but apparently, leases were adjusted to reflect the lack of demand.
In walks a dude and his family with a big dream to start a cool restaurant, taking on the largest space, then filling it up with expensive decor, and high end gourmet stuff, as if money didn’t matter.
They had a grand opening and closed the door maybe 6 months later.
Time went by, another Asian place filled the space — gone in about 6 months.
Time went by, the plaza owner’s son wanted to try a bar, gone in 6 months.
Thirteen years later, still empty, as are many of the neighbor spaces. Nothing has ever succeeded there, except for small coffee shop.
All these people had dreams of owning cool places. but essentially none of them understood business and marketing, let alone net profit margin.
Bottom line, these types of wannabe dreamers are getting slaughtered globally with the pandemic and going forward, the concept of starting a little business aint gonna matter to anyone.
I will never understand how spaces where a restaurant failed will then open another restaurant that fails … and then another …
I just can’t understand how these people can’t learn from the mistakes of the people who came before them. Do they all think that they’re so special that *they* will succeed when several others have failed before them?
I’ve seen this too. We have a plaza in Cupertino called The Oaks, it’s had so many restaurants start and close. It should be obvious to anyone that the location does not work. It’s on the fringes of the retail part of the city with difficult access. It’s obvious that no restaurant will last there. And yet people keep trying and failing. It’s sad but it’s harder to have sympathy for people who intentionally run into a brick wall.
Anyway I think it’s going to be razed soon to build high density housing. That’s what I heard anyway …
To paraphrase Reagan’s phrase regarding optimism…”There must be a pork chop in there somewhere!”
One guess…the landlord may charge these serially failing restaurants little more than a revenue share “percentage” rent to 1) provide *some* incremental visitor flow (people gotta eat…why not here?) and to keep the aggregate rent roll artificially high (why, yes, potential strip mall buyer, all my storefronts are “leased”)
I’m actually surprised when I see the opposite…why have a gaping empty storefront when you can shanghal some/any biz by offering a pure percentage lease on a month to month basis?
Restaurants are weird. We have a strip of storefronts a bit out of the way. In 10 years about 6 restaurants, of all sorts, in a corner slot, always closed within 6 to 18 months. For the past 5 years and currently – a success – a sit down Mexican/Chinese. Food and service great. And they are hanging on with carry-out and limited seating.
It’s the “hobby business model”. Have seen it over and over. Women, usually married to high income men, all think that they have great taste and know what other women will want.
Their husbands are trained dogs that obey them. Women think other men will act the same. That is what starts many restaurants and boutique businesses. Reality defines whether they are succesful or not.
From Mr & Mrs Swamp
“the indoorification of outdoor dining, became standard practice, where plastic buildings with heaters appeared on the sidewalk that were in essence like indoor dining rooms with the windows open”
With these above modifications we can still go out and have a nice time as long as there is some sun and not too much wind down to about 40 degrees. Just dress appropriately. DC has a lot of days over that temperature even in Jan. We’re supporting our local Pub during this pandemic. We consider it a patriotic duty. Also, we want to keep the employees working.
Could never understand this.
If you eat in an indoor restuarant which will recirculate the air 10 times per hour with a decent HVAC system. Attach some HEPA filters and UV light and you got fairly clean and constant air for all customers.
But putting up an outdoor tent in the parking lot with zero air circulation, that actually traps the stale air is awesome and safer.
I’m on board, 2,
A lot of CDC quality thought processes have prevailed in this pandemic…while blindingly obvious solutions are “discovered” 6 to 12 months into the chaos.
Why, golly! Air circulation levels make a difference! Eureka!! I must leap from my warm bureaucratic bath to inform the World.
And…might viral dose levels…make a difference!?! Could it be?!
Etc.
“If you eat in an indoor restuarant which will recirculate the air 10 times per hour with a decent HVAC system. Attach some HEPA filters and UV light and you got fairly clean and constant air for all customers. ”
Techincally good, but COVID is not like falling off a bicycle- you don’t get to try again if you catch it. Eating out today is like dodging bullets. Eventually you’ll hit the COVID jackpot and possibly spend the rest of your life regretting it. Not worth it for a Burrito.
As a person who has professionally dealt with these issue I can point out the flaws in your logic.
How do you know the restaurant is using the right air filters or even if they are the correct ones, how did they ascertain the ‘correct amount’ of turnover cycles? Does their HVAC system have the proper amount of air flow, and is the restaurant closely monitoring how often the filters need to be changed? UV bulbs with the right intensity and wavelength can be expensive and I doubt most restaurant will invest in them, or monitor them to determine whether they’re spent. All far too expensive for most restaurants.
If the person at the table next to you is a super-spreader, then HVAC system or no, you’ll probably be exposed to COVID. What we really need are tests to determine who is at risk for developing symptomatic COVID and who is likely to be a spreader.
Forty degrees, a great temperature for sushi.
I prefer mine at 98.6.
First there was a huge over supply of restaurants why would people work 12 hour days for no money as small business owners probably don’t understand profit margins everything to do with restaurants have expense written in terrible business especially dine in McDonalds put in double drive thru lanes food service companies have a 5 tier pricing policy based on how much u buy
Ron, you lost me after …money as small business owners probably….
Translation: vodka.
January 21,2021
Now that the new post is restaurants and bars, this YouTube is On Topic:
Jan. 16, 2021, MedCram: “Ventilation and Filtration Prevent COVID19….”
Guest Dr. Joseph Allen, from Harvard, at MedCram, in a lively discussion of ventilation, filtration, masks for COVID19, air travel, schools, home filtration and ventilation, ….easy to listen to all 42 minutes, full of information. He covered just about everything but restaurants, but the connection between them, and ventilation and filtration is obvious.
In desperation, there are a number of restaurants that have figured out that if they are tantamount to a speak easy-in not having a mask policy, they are attracting like minded naysayers who want a ‘normal’ dining experience. An odd survival strategy, but it beats not having any customers must be the thinking.
I haven’t ate inside a restaurant in 10 months.
There is one restaurant we frequent, rather, used to pre Covid…… for lunch. Dinner not so much because our home cooking is simply better than bought. Anyway, this lunch favourite quickly switched to take out 10 months ago and we support them as much as we can. I pay cash, round up, and always give a very generous tip. Always.
Apparently their receipts are the same as pre pandemic, but their trade changed to fewer lunches and more dinner takeouts. They open at 11:30am, and close at 7:00pm. They have the same amount of staff. The owner and main cook started with a food truck outside a local nightclub about 25-30 years ago. Customers and staff are all on a first name basis, it’s that kind of place. I asked the owner why he reopened when he did and he told me his cook had just bought a house and would not qualify for the mortgage unless he was working full time. Like I said, it’s that kind of place. He’ll be around long after others are gone.
First they came for out money; Their fiat for our gold. We said nothing, because we were wealthy.
Then they came for our industrial jobs. We said nothing, because we had our factory jobs.
Then they came for our white-collar jobs. We said nothing, because we had our retail jobs.
Then they came for our retail jobs. We said nothing, because we had our service jobs.
Then they came for our service jobs. We say nothing, because they tell us that doing so is “hate,” “conspiracy,” insanity,” and “terrorism.”
Oh, my poor country.
Its disappointing. We are off grid but every so often we go to town. There is nothing open in the small towns. Broken. Bust. Out of business. Heck, it was tough even before all of this.
We aren’t starving. But city people, how do you get by without the Cosco, the Wallymart, Safeway, etc.?
We raise pigs. We can’t sell them for the shelf prices. People used to want sourced food. Seems now they will buy whatever from the store that is packaged. OTOH, hunting license revenue is through the roof.
It is really hard to gauge what people do.
“It is really hard to gauge what people do.”
True. OTOH, statistically people in large demographic groups can be fairly predictable.
Anyway, you sound like you are at an advantage by living off grid and raising your own food. You should do well no matter what spasms urbanites (food inflation, taxes, employment upheavals, societal breakdown, and grinding inflation overall) are going to go through before this is over.
It is the starry-eyed folks still holding on to the American Dream that are in for the real reckoning– trying to maintain the illusion of prosperity by buying that large expensive suburban house, with several late-model cars in garage, leveraged to the hilt, and a house full of China gadgets, doohickeys, and landfill fillers.
I used to work one day a week in a local ‘start your own business’ advisory service operated by the city as part of my employers CSR. My boss told me to go and help as l had “plenty of experience to share” ie l was old and useless. I told everyone who came with the idea of starting a restaurant not to bother as it would fail (the stats showed 95% of small food businesses go bust in their first 3 years). When they occasionally asked what they should do instead, l suggested there was a great market gap in making and selling handmade shoes. “But what the h*** do l know about making shoes”, was the frequent reply, to which l answered, “about as much as you know about running a restaurant, l would reply.
Very well put kk,,, and completely consistent with the statistics I have heard and read for many years, and I especially like your last sentence.
A friend with about 20 years experience working as prep chef, line chef, kitchen manager was offered the financing to start her own restaurant in a fairly good location when an employer decided to retire.
She not only said no, but hell no, because she knew very well who would do wayyyy too much of the work, and be there from early to late every day for years,,, etc., etc.
Of all the decent one off restaurants I have known, from Wolfies, Zinns, Berns, and a few others in FL, to ChezP, Ernies, and The Blue Fox in SF bay area, it has always seemed it is a labor of love AND the passion that comes with that love that is the foundation of that success.
My hat’s off to all of them!
Starting a restaurant is a great way to start a new life. All your current conflicts are eliminated. You will have one life – 24×7 at the restaurant.
For exactly 6 months anyway
“the end of the beginning” …
I think by it’s by conspiratorial design ( many gears moving in sync) .. now that Orange de’Julius has been pushed off the edge of the Blu Flat Earth! All is FINALLY well, now that WE’RE in Charge!
“Restaurants” .. be free to once more put forth your labor” …. and bring in that bounty of clientele you soarly need .. or what’s left that is … for those of you who still remain ‘whole’ ….”
How to start a crime wave
Lincoln Steffens, who flourished around the turn of the last century, was possibly the greatest American investigative reporter who ever lived. His Autobiography is still relevant to understanding how American politics and government worked. In one chapter he told how he and his chief competitor, Jacob Riis, started a crime wave when Theodore Roosevelt was chairman of the New York City Police Commission.
It seems that Steffens was taking a nap in one summer afternoon in the basement of police headquarters, where the detectives like to play poker because it was cool. Because they thought he was asleep, they told a story about how a naive young policeman helped some men load up a wagon because their stuff was cluttering the street, and the men turned out to be burglars who had cleaned out the house of a Wall Street broker.
He wrote up the story for the New York Post. His main competitor, Jacob Riis of The Evening Sun, was reprimanded by his editors for being scooped, and he then came up with a crime story that Steffens’ didn’t have. Both redoubled their efforts, and soon the New York newspapers were full of crime stories. This was embarrassing to Roosevelt, because he was supposed to be a reformer.
Roosevelt called the two reporters into his office. Riis confessed that he had unauthorized access to police reports because they were pigeonholed in a certain desk. Steffens told about his naps. They called a truce, and the “crime wave” ceased.
https://philebersole.wordpress.com/2010/06/30/how-to-start-a-crime-wave/
Sheep! We’re all sheep! It’s that simple!
Data Smata…
Don’t be pessimistic, hope is not to be shackled by these baseless data that ignores the bright future. The long dark winter is coming to an end, the deputy to the Audacity of Hope is in charge, and a bright dawn is coming.
Haven’t you heard, 100M US citizens will be vaccinated under the guidance of the new administration. As of yesterday, the curve started to flatten because the virus is terrified of the beacon of hope that is taken over the bastion of power in DC. The virus is on the retreat everywhere thanks to the shift to science and facts.
Big cities like Chicago and NY are rushing to open up as the virus beats a hasty retreat. Restaurants everywhere will be rolling in more dole than they know what to do with in a few weeks. Their workers will bask in the glory of a new Federally mandated minimum wage as they take charge.
For those that still need help, the rental eviction moratorium and the stimulus will incentivize them to get back on their feet as useful members of society. These are the facts.
Don’t believe in the baseless drivel from malcontents, seditionists, and those who would foment insurrection.
P.S. dear joe, I can do a much better job than your current speech writers, hire me…
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Don’t worry! Be happy!
Never fear, Joe is here!
To make all your problems disappear!
Wes,
you need more meat on the bones here, simple is good, but when you stuff it with flowery language, (and shove an apple in its mouth) that’s when you get attention.
We need Joe Sixpack mesmerized and bedazzled by big words like science, data, things that they know make the world go around but have to accept on faith because the experts are telling them to.
See. Authority based on language is much more palatable.
It’s like when Wolf uses the word hedonic and half the readers rush to look up the meaning wondering if it’s something even deeper than hedonistic. Fancy words can take you far. The data proves it. No one should argue with the data, right?
See how I leveraged that mighty word without ever explaining what it means. The implication here is if one has to ask, then one could not hope to understand what it means anyway.
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Ink was not even dry on his executive order and he and the settled science gang were violating it. Classic.
I will say two things that I know to be true:
My son teaches in the City University system in NYC. He is now teaching on line. I would call it a part time job with full time pay and excellent benefits. He just got a 2 grand raise. NY claims to be nearly broke. I don’t think so.
I know for a fact that my son’s room mate a NYC resident went to Pennsylvania and voted in his former hometown. Evidently this is common place in NYC.
No… that’s not right.
Democrats = good
Republicans = evil
That’s the message. However, that’s a message that been propagating now for decades with educational institutions being one of the primary mediums used for dissemination… or should I say… insemination.
See, we have to tailor message to the audience, kids are too easily bored by fancy words, they tune out. So we give them cartoon caricatures, and simple messages they can relate to. We adapt the language as they get older as their BS detector gets dumbed down by the educational institutions and the media.
Wolf, from your article the other day: “Sales at Restaurants & Bars fell 4.5% in December from November, as new restrictions due to surging virus infections were put in place. At $51 billion (seasonally adjusted), sales were down 21% year-over-year:”
Reading this made me scratch my head, as this seemed like things in the closed down US were going much better than the supposedly open (so Americans think) Sweden where e.g. my local town centre is completely dead during evenings/weekends because absolutely nothing’s opened.
But this article I’m commenting under now makes it seems more similar in the US to how it is here. What am I missing? Is fast-food take-away really such a large part of the business that even though seated diners are dead, the business as a whole is only down about 20%?
Certainly where I’m at, take-away only (traditionally) represent a very small portion of all restaurants and frankly, going past take-away/delivery type restaurants; They don’t seem to be doing very well either.
What does seem to be doing well here is take-away grocery shopping. And home delivery groceries. Every grocery store does it now and they’re booked weeks in advance even though they’ve gradually scaled up. Not least the type of specialised (often no store, just internet) where they deliver a certain number of “dinners” per week – I.e. all ingredients+recipes for 3-5 dinners for a household of 2-4 (different price range alternatives, vegan alternatives etc)
Jacob M,
The restaurants here are the ones that take reservations. So these are nicer non-fast-food places. The other article referred to all eateries and bars, including fast food, cafés, beer dives, cafeterias, drive-through restaurants, delis, etc. Many of these places never shut down.
Well I figured. But I’m still surprised at the numbers. And it somewhat makes me think that maybe restrictions aren’t that more restrictive in the US than they are here – in practice. There is e.g. a reason why there’s a line to buy alcohol starting before the store even opens here. The week before Christmas the line ran from one town square to the other town square throughout the week (several hundred meters).
There are fairly strict limits to how many people are allowed in a premise, e.g. today when my brother went to the pharmacy, too many people had entered the premise and a member of the staff started shouting that if two people didn’t leave AT ONCE, they would have no choice but to close for the day. For places serving alcohol, these restrictions are much more strict in terms of number of people allowed (as people are expected to behave differently when inebriated)
Also, no alcohol allowed to be served after 22:00. combined with the very strict limits on allowed number of patrons and the risk of losing alcohol permit, this is making most places that serve alcohol decide that the potential income simply isn’t worth the cost of being open at all.
I don’t how any of these places can survive, but I suspect that once the smoke clears, it will show that most didn’t.
A lot of restaurants will stay until their leases are up and then just fold, like why bother signing your life away for another 2 or 3 years and go for personal as well as corporate bankruptcy. Next to me is a mall where leases come up for renewal in February and March, and the going out of business signs and sales are all well underway, including restaurants. Plus we just closed a Starbucks….in fact Starbucks in closing 20% of its locations in Canada…not sure that counts as a restaurant, but Give me a V, for V-shaped recovery….or maybe its a B-shaped recovery for BS….
Starbucks closing ? Sounds like a good thing to me Overpriced coffee and cake People will be better off without them
You have to own the building. That’s the secret sauce.
Bingo.
I sure am glad I moved to Tampa last summer.
We get the government we deserve. Minorities and young people, who I see working in these restaurants, are the ones getting hammered. Is it really that strange? Capitalism for the poor, socialism for the rich…on and on…well its a service economy and they came after services with the lockdowns. Many blaming restaurants for the spread of COVID. Many believe that a simple 2 week shutdown of the country would’ve made the virus go away. The media has so much influence now, with devices in people pockes sending *BREAKING NEWS*. Get real. We’ve done this before and we know how it ends. The weaker economies will form alliances (dependencies) on the bigger economies, then someone kicks over the lantern and its WWIII. Real people work in these restaurants, that seems to be forgotten in this blame game. People that won’t forget this for the rest of their lives, however long or short they may be. Picking and choosing who is essential is every bit as anti capitalist as fixing interest rates.
Yep… well many would argue that if the Russians had lost to Germany, at best WWII would have ended in a stalemate with UK being a giant aircraft carrier for the US, and the National Socialists running Europe.
Don’t think so If Russia had lost to Germany, I believe England would have fallen as well in due time But that’s just my belief
Oh no… did I just accidentally conflate Nazis with socialism. Sorry… sorry… sorry…
I must cancel (temporarily) myself in the name of equality and justice.
I will now exercise my right to self criticize as has been amply demonstrated in the PRC.
Me bad…
Me should be more careful in my words and comments…
Words can hurt…
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Two thoughts:
Everyone who eats think they can run a restaurant.
An owner of a restaurant can be there 24/7 and he can be sure of one thing—they are stealing from him.
No one has quoted Livy yet – you know when chefs become celebrities it is a sign of decadence and foretells the collapse of the civilisation thing – the pandemic seems to have moved us past that phase and into the weird.
There is an Arab version of that saying by Livy:
‘When people start to grow oranges, the state is doomed.’
The explanation being that bitter oranges were an indulgence of the rich, a mere luxury used for display.
Another one from the great historian, philosopher and Sufi, Ibn Khaldun:
‘The candle is brightest just before it goes out.’
I wonder how all of this is going to affect the CPI going forward (and the CPI is very interesting because it could tie the hands of the Fed).
Many restaurants have gone under and survivors will probably come out with more debt that needs to be serviced. In addition to that, minimum wages will probably rise.
To be still profitable under these conditions, they will have to raise prices, and perhaps a lot. Of course that deters customers, but they will gain customers from the restaurants that didn’t survive.
This dynamic might play in other sectors too. Survivors need to make up for previous losses and supply is more restricted now because many went bust, giving the survivors more pricing power. So I wouldn’t be surprised to see big price rises.
Anyway, I cannot afford to eat in restaurants anymore because of ZIRP. But Tesla or bitcoin hodlers can pay any price right now. And the CPI is just a basket of goods and services, so it doesn’t matter if less people can afford these things. It measures what people who can afford it pay for it.
YuShan, your last sentence says it all. The government CPI is a very selective basket and a carefully manicured measurement. I await the new and improved CPI that eliminates all items that have increased in price.
I just did a takeout at a dim sum place 5 mins from home. They raised the price again. It used to be $2.80 for a portion size of 3. Then they raised it to $3. In December, I brought it for $3.25 and this morning, I paid $3.50.
Now this place is not hurting. It was always a takeout place even before the Pandemic. I imagine their business is booming due to all the old and new customers. I wonder why places like these are raising prices. But I can see inflation going much higher but no fear as the FED will see nothing.
I wonder when I’ll be able to get a licence for my food business idea: a roadside Squirrel Kebab stall?
‘Mighty good eatin’ ‘, as a Kentucky girlfriend used to say.
The budget option will be rat.
When faced with lab-grown ‘meat’ and vegan state rations -which will be imposed – you might well like the idea……
My uncle in Vermont who was a Veternarian ate squirrel occasionally I’ve never tried it though
Not just Kentucky.
Good eatin in WI as well.
We call em tree rats here.
Will pass on the rats….maybe offer possum.
Put me down for an order of possum McNuggets and cup of squirrel pudding…
Wonderful to start the day laughing- wit writ large above from too many to list here-
THX all, and of course, Wolf
LOLOLOLOL
“I’m looking forward to the moment when it’s safe for everyone to sit down at a crowded noisy bar of a thriving restaurant, have some Fed-free liquidity, and some delicious food, served with a friendly smile and maybe a joke about the bad old days of the Pandemic.”
Ha! Good luck my friend. Does anyone really believe this wave of complete bureaucratic control is going to recede…..ever? It is no different than expecting a crack addict to suddenly return to work on Monday and be productive.
From CPI-U Sept 2020
Relative Importance Aug 2020
Food at home 7.822%
Food away from home 6.277%
Shelter 33.315%
The total comes to 100%, I just added shelter for ref.
Eating out and in are almost dead equal. When growing up middle class in the 50s we went out to eat MAYBE once a month, as did most neighbors. Nobody’s wife had to work. 900-1300 sq ft homes. 1 car.
Other than candy and through our mom’s (cereal, etc) kids were not monetized, we entertained ourselves….dirt clod wars was one of our favorites. Most stores were locally owned. Stock market was something “rich” folks did.
How did we get forced to be such consuming pigs and by whom? WHY?
The hippie movement was a failed attempt to stop consuming so much, because we just weren’t political enough, but our message was clear, and scary to those with other ideas about what a “good life” was.
Carter was driven out of office for daring to point this out, one last time.
I have no idea in hell what happens next.
When I was a young child growing up in the 70s, only rich people had credit cards. Now you’ve got welfare mothers with two or three. Do the math.
My father owned a successful commercial mortgage company. He would make over $100k on a single deal, and this was in the early 70s. That was great money back then. Yet he never financed a car or even bought it new. It was always used and something us kids would groan about – a station wagon.
The house I grew up in was paid for in cash, and it was fairly modest considering my dad’s income. It was a rancher on a half acre.
Our family rarely ate out. We weren’t even allowed to eat fast food save for the extremely infrequent trip to Wendy’s for Frosties since my mother loved them.
We were given a small amount for clothing before each school year, and the girls were allowed to buy one or two name brand items with it, or a larger volume of off-brand stuff.
As a boy who was hard on his stuff, if I ripped holes in my pants or ruined my shoes, tough luck, I had to wear them until the following year.
Going to the movies was a novelty, not something to be enjoyed on the regular. We didn’t even get a color TV until probably everybody in our entire city had one first. My friends used to laugh that we were still watching black and white. Bless my mom’s heart, she was a never a complainer. Cable tv? Forget about that. My parents shot that down immediately. Back then it was HBO.
Our bikes were purchased used, and nothing fancy. If I wanted something nice, I was made to work for it. I had a paper route when I was 10.
I could go on and on, but the differences between my childhood in the 70s and today are vast.
Well OK, for you, Horatio! You might yet get your gilded age back and find you are with the folks in the tenements, where you can really SHOW your stuff….and not just write it.
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Owning a restaurant or being a landlord will be the worst 2 activities possible in the new COVID world.