Nearly one in 25 restaurants have closed across the United States since the beginning of the pandemic, and many of those that remain open are operating fewer hours each day, according to research from Datassential.
“We have to realize we have a very different industry today,” said Jack Li, executive chairman, Datassential, during a recent webinar. “There has just been so much that has actually changed.”
Between the net restaurant closure rate of 3.9 percent, and an average reduction in operating hours of 7.5 percent per week, the restaurant industry is being forced “to do more with less,” he said, citing data from Datassential’s Firefly research.
The country has about 790,000 restaurants operating today, compared with 822,000 in February 2020, before the widespread shutdown began in March 2020. Among the restaurants that remain open, hours have been reduced by about an average of about 6.4 hours per week.
The data show that closure rates have varied considerably by market, and even by neighborhood, as well as by cuisine type.
Overall, the restaurant closure rate was higher in markets that were under stricter pandemic restrictions, while areas that loosened restrictions quickly, such as Florida and Texas, had fewer net closings as a percent of total restaurants. Reductions in hours of operation have followed a similar pattern.
Buffet-style restaurants were among the hardest hit, but Mongolian, British, German, and Swiss/fondue restaurants also saw considerably more closings than openings during the last 2-1/2 years.
The research identified seven types of restaurants that actually saw more locations open than close as a percentage of the total, led by vegetarian restaurants (and others that cater to special diets).
“We saw so much growth in this type of restaurant for so long, that not even COVID could take down the vegetarian and special diet types of places,” said Li.
Other types of restaurants that have shown net unit growth include juice/smoothie outlets; wing restaurants; African restaurants; Caribbean restaurants; brew pubs, and wine bars.
Many urban business centers have suffered both high rates of closure and reduced operating hours, as workers have either adopted work-from-home routines in other markets or have relocated completely. Manhattan has been particularly hard hit with pockets of closures, as have Washington, D.C.; St. Louis, Missouri, and downtown Los Angeles.
Meanwhile, a handful of areas have shown net growth in new restaurant openings, including Delaware and parts of Miami and Atlanta. Delaware may have benefitted from an increase in tourism by car from the densely populated Northeast and Mid-Atlantic during the pandemic, while Atlanta and Miami have both seen pockets of new restaurant development, the Datassential presenters pointed out.
The overall reduction in operating hours during the pandemic is likely driven in part by the tight labor market, which is leading restaurants to operate with fewer staff, and in some cases close their doors early. In fact, the Datassential research showed that more than half of restaurants surveyed—58.6 percent—have reduced their hours of operation. That compares with 19.8 percent that have added hours, which includes the impact of Wendy’s opening earlier for breakfast.
About two thirds of restaurant operators surveyed by Datassential—65 percent—said they are hiring less qualified staff as a result of the tight labor market, although 36 percent said they expect labor conditions to ease going forward.
Inflation also remains a challenge, however, and 53 percent of operators said they expect rising prices to worsen going forward, compared with 15 percent who expect an improvement.
“If you are a supplier to this industry or an operator in this industry, you have to figure out how to do more with less, with fewer resources,” said Li.
In this environment, versatile products that can be used in multiple menu items become more important, he said. Operators and suppliers also need to focus on creativity to differentiate their menus and efficiency to drive margins with reduced resources.
“I think if you lean into these three things, you will be in a really good place,” said Li.
Related: Restaurants Report Becoming More Sustainable Since Pandemic; NPD: American Eating Habits Adapt to Higher Costs.