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Report: Delaware restaurant industry facing $700M in losses

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Reduced to takeout and delivery, Gallucio’s Italian Restaurant said in May it was one month away from closing for good. The Delaware Restaurant Association reports that 20 to 30% expect to close for good by the end of the year. | DBT PHOTO BY JACOB OWENS

WILMINGTON — Devastated by the economic fallout from the COVID-19 pandemic, the Delaware restaurant industry has lost about $700 million and shed 23,500 jobs in the past five months.

The Delaware Restaurant Association also reported this week that 81% of its members predict operating at a financial loss for at least the next six months. Between 20% to 30% of restaurants are still expected to close their doors permanently unless more financial aid arrives or regulations are relaxed, officials estimated.

Already the list of closures is beginning to pile up in Wilmington and Newark, where the office workers and college students who supported franchise and locally owned restaurants alike have been missing for months.

“On a surface level, people look and can see that restaurants are open, but they’re fighting for every customer and every dollar that they earn at this point,” said Carrie Leishman, president and CEO of the Delaware Restaurant Association. “What’s troubling is the uncertainty of the economics and earning trust of the consumers, and there’s so much economic fallout that could come down the line.”

Restaurants were the first businesses to shut down when Gov. John Carney ordered them to cease dine-in service days after Delaware had its first coronavirus case in mid-March. The Delaware Division of Revenue reported that March revenue from restaurant gross receipts plummeted to 10% of the revenue collected in March 2019.

Despite easing some restrictions in May, state revenue collected from restaurant gross receipts was still less than 50% of May 2019 receipts. While that has slowly ticked back up, it remained less than 38% of year-over-year receipts in July. Delaware restaurants are now able to seat up to 60% capacity in Phase 2 and there is no timeline of when Phase 3 would start.

While U.S. Small Business Administration Paycheck Protection Program loans helped some restaurants tread water and maintain staff, Leishman pointed out that it only goes so far for an industry where many business owners are already in debt. In comparison, she said the state’s Hospitality Emergency Loan Program (HELP) has not been as popular with restaurants due to its $10,000 cap.

“This industry doesn’t need more debt,” Leishman said. “When you’ve already borrowed about $50,000 and your doors are closed and the bills start piling up, you need to find a way to bring in revenue and keep the lights on.”

More concerning, two out of three restaurant workers are out of work. The industry had an unemployment rate of 21.8% in July, dwarfing the state’s unemployment rate of 12% that month. Youth employment in the state overall is at 18%.

“We’re America’s first-time job, and one of the things that keeps me up at night is whether parents are telling their kids they don’t want them waiting tables,” Leishman said. “If you look at the [Delaware restaurants unemployment] numbers, we’re still under-employed and not even at full seating capacity. It’s uncertain whether those jobs will return in the next six months, especially with an estimated 20% restaurants will be closed for good.”

Critically, restaurants need to continue to earn back the trust of consumers who are leery of lingering in public spaces. The Delaware Restaurant Association hired an independent contractor to host informal compliance checks in July and August at 75 restaurants. In those checks, 94% had tables 6 feet apart and 86% of staff wore face coverings.

Beyond the economic repercussions of the pandemic, it’s unlikely the restaurant industry will look the same once coronavirus is in the past. COVID-19 has uprooted the restaurant business model and forced decades of change overnight, Leishman said.

“There’s going to be technology use in restaurants like we’ve never seen before, from contactless payment to hosting a California winemaker for a wine night. There’s going to be creative floor arrangements and takeout menus,” she said. “This change is happening now, and restaurants have no choice but to change with it.”

By Katie Tabeling

[email protected]

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