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The Bankruptcy StrategistFeaturesBankruptcyLitigation

The Shutdown of the Restaurant Industry: The Widespread Impact

By Gerald D. Davis and Amy L. Drushal
June 01, 2020

Many communities have been experiencing a growing restaurant scene over the last few years. In fact, recent years have been considered the "golden age" for restaurants. For now, that restaurant scene is virtually non-existent, and it looks nothing like it did six months ago because of the COVID-19 novel coronavirus. Restaurants have lost nearly three times more jobs than any other industry since the beginning of the COVID-19 pandemic. While some restaurants are trying to keep their employees employed and their doors open with take-out only concepts, many have closed their doors, for now.

Restaurants are already fragile businesses, not known for lucrative revenue, but instead known for surviving on tight margins. When the industry reopens to the "new normal," will restaurants be serving at full capacity? What extra expenses will restaurants have to endure to reopen? Will people want to dine in? Will restaurants survive with increased expenses and government-imposed capacity limits? And, if they don't, what other businesses that support restaurants could fail with them?

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Financial Relief During the Pandemic

The restaurant industry contributes an estimated 4% of the United States' GDP — or roughly one trillion dollars. As an industry, it is the nation's largest private employer and the third largest employer overall. Since the end of March 2020, 3% of restaurants have permanently closed as a result of COVID-19, according to the National Restaurant Association, the main trade association for the industry. For the other 97%, governments at the local, state and federal levels have put some protections in place over the last few months, which have likely prevented more restaurants from permanently closing.

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