Harvest America CUES BLOG

Numerous people have asked me, over the past few months, what I think about the future of restaurants in America.  Of course, this is a question without scientific studies to back up an answer – this is pure speculation.  However, there are a number of indicators that point to a very challenging few years ahead.  The simple answer is nobody knows for sure, but it doesn’t look good.  Please read through till the end, because it’s not all doom and gloom.

Here are the challenging indicators

In the short term:

1. A capacity limit of 25% or 50% simply doesn’t work for an industry with substantial fixed costs and low profit margins.
2. The difficult labor situation pre-Covid was tough, it’s even worse now, as many people have decided that a job in the restaurant business is just not worth it.
3. Landlords can only be forgiving for a short period of time – they have bills to pay as well.
4. Customers may put their toe in the water and test the safety of going to restaurants now, but all that it will take is an outbreak traced back to a restaurant to change everything.
5. The industry, in many parts of the country, had a decent summer season, but that was because of outside dining.  In many parts of the U.S. that is beginning to change as winter looms large.  Dining inside is just not as attractive right now.
6. Un-employment and under-employment eradicate unnecessary family expenses – so restaurants are right back where they were after the 2008 economic crash – they are not essential.
7. Small restaurants, in particular, are just like their employees.  They cannot endure long periods of time without a revenue stream.  Many restaurants cannot survive past a month or so without throwing in the towel (It has now been more than seven months).
8. Our government just doesn’t get it.  Restaurants are important to the economy, they are important to American’s piece of mind, they are effective ways of bringing people together especially when everything else seems to push them apart, and restaurants tend to define a community or neighborhood – they are the heart and soul of what makes a community gel.
9. It is estimated that as many as 50% of the nations restaurants will close and never re-open as the virus continues to thwart any chance of financial survival.

In the long term:

1. Restaurants don’t want a bail out – they want support and real help.  This means that American entrepreneurs need the support and advice of experts to help them figure a way out of this business mess.  These restaurants need training and mentorship, they need easier access to low interest loans, they need some type of easement on their rents (which requires federal support for landlords), they need extended unemployment benefits for their employees and they need a national marketing program to focus on the importance of your neighborhood restaurants.
2. This pandemic has revealed significant problems with the U.S. supply chain.  This is just as important as talk about infrastructure rebuilds.  Without real dialogue that looks hard at centralized production and distribution vs. a return to a more de-centralized model – there is little doubt that the supply chain will continue to show its weakness.
3. Low profitability and intense need for lots of hands to get the job done are issues that have plagued the success of restaurants for many decades.  The country needs a load of great minds to figure this one out.  With an increased failure rate among restaurant start-ups, soon enough we will see a decreased interest in becoming a restaurant entrepreneur.
4. Low pay and meager benefits have been associated with restaurant work forever, finding a solution to this is long overdue.  Ask yourself: “Why would anyone want to work in a high stress, physically demanding, unpredictable, labor deprived powder keg industry when pay is below the national average for skilled workers, employer paid healthcare is impossible to find, sick leave is even rarer, vacation time is questionable, personal days are non-existent, and predictable schedules are impossible?
5. For seven months people have become accustomed to avoiding restaurants, cooking more at home, and saving money that would have normally been spent for a dine out meal.  Will they return at some point as though this period in time was just a slight inconvenience?
6. As restaurants suffer from low participation and in many cases – closure, so too have culinary schools who had the job of training tomorrows cooks, chefs, and restaurant entrepreneurs suffering from low enrollment and less than stellar placement opportunities for graduates.  This adds to the draining of the labor pool.

So, indications for long-term recovery and success are not great.  But, this does not mean the restaurant industry will not recover and regain strength over time.  These factors simply change the face of an industry that has evolved very little over the past 50 or so years.  There is, and will be, real opportunities moving forward for those who can recognize and solve the immediate problems, accept the need to change – really change, and approach tomorrow with passion and enthusiasm.

This is what I (again, no scientific data to support my theory) think will occur over the next few years:

• There will be a wholesale culling of restaurant numbers.  Those who are not business savvy with disappear, those who fail to recognize that they need to re-invent will disappear, and those without quality leadership will not have the heart and energy to carry on.  This breaks my heart to see; yet it is the most likely scenario.
• Those who stand tall and admit that they need help, seek out those who can encourage change and show them the path, and those who relish the opportunity to become truly different will find a path to renewed success.  Of this I am certain.
• Those who re-design their systems to reduce the number of hands required in a restaurant while increasing efficiency and quality will be able to pay their employees better and find a way to create improved work/life balance for their most important assets – people.
• There will be a movement towards more reasonable dialogue and contractual agreements with landlords.  There is a space for effective compromise here.
• More and more – mobile options for restaurants will gain traction.  This means more food trucks, more appropriate licensing and tax burden sharing with communities, and wider acceptance of this as a long-term answer.
• Take out food will rise to a new level of excellence as most restaurant realize that although this will never be their most profitable way to present a meal – it will be an expectation and they had better do it exceptionally well.
• Consumer education will become the norm through on-site classes, video chef demonstrations, and instructional links for take out customers – how your food was prepared and how to refresh it at home.
• Partnerships between schools and restaurants will provide opportunities for certificates and degrees in culinary arts that cost less and result in better-trained graduates.  Schools will need to speed up the process of learning, ensure that what they teach is relevant, and build hybrid delivery experiences that are as good or even better than full-time person-to-person.  Refresher process specific course work will become available on line or through social media, and those who enroll in school will be able to access skill updates for life.  The connection between schools and students will never end and job placement will become the key element of an education with some level of guarantee that those who complete a course or degree are “kitchen ready”.
• The safety protocols that larger chains have adopted and seem able to deliver will be just as well programmed in those independent operations.  As a result, the neighborhood restaurant will have a fighting chance of regaining their support in communities across America.
• The government will eventually see the importance of restaurants to our way of life and will re-invigorate the breadth of work and power of the SBA to do so much more.  They will be able to provide training and consultation for small restaurants, help them negotiate better terms for long and short-term bank loans, and connect hundreds of thousands of independent operations to a national marketing campaign that helps the industry attract employees, and convince the public that these businesses are streamlined to keep them healthy and safe.
• Finally, the Department of Commerce, the U.S. Department of Agriculture, the Food and Drug Administration, and professional commodity groups, food related organizations, and chefs will form a taskforce to look deeply into the changes needed for a stronger, more resilient food distribution system.

I truly believe this and am confident that with leadership in Washington that is more in-tune with the issues facing restaurants – things will change.  It will take time, but as has been the case through national and international disasters over many decades – the restaurant industry will rise up and thrive again.

PLAN BETTER – TRAIN HARDER

Harvest America Ventures, LLC

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