Restaurants Brace for Second Wave of COVID-19

Written by Aaron Wise
Wednesday, June 17, 2020 at 05:08pm CDT

As New Jersey and New York reopen outdoor dining at restaurants and progress to “Phase 2” reopenings, hospitalizations are soaring in Arizona, Texas, Florida, and Tennessee. Global daily new cases are nearing another all-time high, with new outbreaks shutting down major cities like Beijing again this week. 

Just yesterday, deaths from COVID-19 increased 1.9% in Florida, likely caused by Memorial Day celebrations and beach reopenings during the past three weeks. Total cases in the U.S. now exceed 2.1 million, including 116,862 deaths.

Although the permanent closure rate of restaurants is officially just 5%, seated diners are still 66% lower than pre-coronavirus levels, according to OpenTable’s online, phone, and walk-in reservation. Buffered slightly by takeout and drive-thru, sales for the restaurant industry during the month of May were 40% lower than what would have been expected without COVID-19.

Noncompliance Persists

Unfortunately, many restaurant attendees are not abiding by FDA and CDC recommendations, including both rules for workers as well as patrons. Half of Los Angeles County restaurants inspected over the weekend were not following coronavirus regulations. Our own channel checks across Florida’s Lee County reveal that the majority of restaurant workers are not wearing masks, citing discomfort as their primary rationale. Restaurants in Jacksonville are voluntarily re-closing due to fears of a second wave.

The FDA has a guidebook with its recommended safety practices for food businesses. In addition, state officials provide additional rules to supplement and reinforce those guidelines. An overview of the most common rules can be found here. Around the country, many restaurant owners are sadly not providing free masks and gloves for their workers.

Second Wave Incoming

Although U.S. residents have certainly tired of months of self-quarantining and social distancing, a vaccine or effective treatment for COVID-19 is still months away. The U.S. government’s most ambitious pharmaceutical partnership in history, Operation Warp Speed, has a goal of finding a vaccine for COVID-19 by January 2021, with manufacturing tens of millions of doses extending until at least March 2021 at the earliest.

Today alone, cases have jumped 13% in Florida, 20% in Arizona, and a staggering 23% in Oregon. This puts the country squarely on a path toward rolling lockdowns at a minimum, and a possible renewed shutdown by August. When asked if “there’s any chance that we could see widespread lockdowns again in 2020-21” in an interview of Raoul Pal of Global Macro Insiders on Friday, “It will be sporadic lockdowns of certain areas. And that will be global. And it’ll be ongoing. The actual thing is here, if certain cities lock down, it creates a behavioral change in the margin for the entire population. And that’s what really drives consumer behavior and business behavior.”

The ex-Goldman Sachs macro fund manager predicts negative business growth and more lockdowns in the months to come. “I think a situation of rolling lockdowns just keeps the year-on-year GDP growth well below zero, and drives that risk of the kind of solvency events and a longstanding recession. I mean, basically, most recessions are around two years. So I think it would be a bloody miracle to expect this one to be less.”

According to a May 23 U.S. Census Bureau survey, 86% of small businesses have experienced a “large or moderate negative effect from the COVID-19 pandemic.” According to a survey by the National Restaurant Association, 75% of restaurant operators do not expect to achieve profitability within the next six months. U.S restaurants have lost $120 billion of revenues from March to May this year due to the coronavirus, with lost revenues for the full year expected to exceed $240 billion.

Photo by Tai’s Captures on Unsplash