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  • Restaurant businesses and food businesses are very tenuous.

  • They don't have a lot of cash reserves and they go from week to week,

  • and that's the fact of the matter.

  • I've been in the business my whole life.

  • Restaurants in the U.S.

  • are reeling from social distancing measures aimed to slow the spread

  • of the coronavirus pandemic.

  • The industry employs more than 15 million people in the United

  • States, and many of them have either already lost their jobs or are

  • worried about losing their jobs.

  • Restaurants, large and small, are doing the best they can to navigate

  • the economic shock brought on by the pandemic containment

  • initiatives. So the COVID shutdowns are probably the biggest

  • existential crisis that this industry has ever faced.

  • The National Restaurant Association estimates that between March,

  • April and May of 2020, sales will decline by $225 billion.

  • But beyond just lost sales, many smaller and independently owned

  • restaurants are focused simply on survival, and owners are worried

  • about being forced to close their doors permanently.

  • In March 2020, as coronavirus cases surged in the U.S.

  • state governors began shutting down many markers of American life,

  • including bars and restaurants.

  • All bars in the state and all restaurants will close at 9:00.

  • Any bar or restaurant closes at 8 o'clock tonight.

  • These stay-at-home initiatives closed restaurant dining rooms

  • essentially overnight.

  • A worst case scenario for many owners.

  • Seventy five percent of all small businesses have already reported

  • some sort of hit or interruption from the COVID-19 pandemic.

  • For smaller and independent restaurants, this is simply a tidal wave.

  • We've never seen anything like this where you're seeing a nationwide

  • shutdown, targeting one particular industry that's been going on for

  • weeks now. For smaller restaurants and the independents, they measure

  • their cash flow in days, maybe weeks.

  • This is not something that's sustainable for them any time soon.

  • Jen Withrow was working for a year and a half at Common Market in

  • Charlotte, North Carolina, a specialty market that included a deli

  • and a full bar. When she got an email from her bosses, Governor Roy

  • Cooper had ordered the store to close, it could only offer takeout

  • and delivery options and Jen had been laid off along with five of her

  • eight co-workers. Well, we're considered a grocer, so we are

  • considered essential as a business.

  • I didn't think that my job was going to be at stake.

  • Jen's story isn't the only one.

  • According to the National Restaurant Association, more than 3 million

  • industry employees have already lost their jobs.

  • Peter Sherman is the owner of Bar Bacon, a restaurant and bar with

  • two locations in New York City.

  • Each location has 40 employees, including cooks, bartenders and

  • waitstaff. Peter laid off all 80 of them on March 16th, the same day

  • Gov. Andrew Cuomo closed the city's bars and restaurants.

  • It was easily the lowest point of my professional career.

  • I mean, I just spent seven years with people, people that I have been

  • with me for that long, too, and have trusted me, that I brought up.

  • And then in their toughest moments, in all of our toughest moments,

  • being the guy that was exactly as bad as everybody else before me.

  • And I couldn't shake that for anything.

  • And some restaurants are getting hit from another angle.

  • The government ordered shutdowns are part of a larger effort to

  • enforce social distancing and limit large gatherings of people in

  • order to tamp down on the coronavirus spread and that sudden

  • disappearance of large gatherings of people?

  • It's a huge blow to restaurant owners who do a large catering

  • business. Fred Kaskowitz owns two restaurants in the New York City

  • suburbs and Connecticut Woods End Deli and Fred's 06825 each with

  • deli offerings and prepared foods.

  • Catering makes up 25 percent of his business, especially during the

  • time of year when those shutdown orders came.

  • Passover seders and Easter brunches were just around the corner.

  • So for like Passover and Easter, we did a big business.

  • We we had six seders that canceled, that we were actually going to

  • be working a good sized pieces of business, 50 people or more.

  • So they all canceled.

  • Easter, the phone is not ringing at all.

  • Basically, we've gone to a dead stop in regards to catering.

  • And catering is more profitable part of our business and we need that

  • to survive. In March 2020, national restaurant chain The Cheesecake

  • Factory said it wouldn't be able to pay April rent for its nearly 300

  • locations. Independently-owned restaurants are feeling the same pain,

  • but are uncertain about what the future may bring.

  • I contacted my landlord via e-mail and let them know that I'm not

  • paying rent and they've been forthright in understanding why.

  • But they're not in a position yet, as none of us really in a

  • position, to understand what that conversation really looks.

  • Despite the empty tables, restaurants were deemed essential businesses

  • and allowed to stay open for takeout and delivery in order to serve

  • communities. But restaurants have had a somewhat fraught relationship

  • with delivery in recent years.

  • Mobile delivery has exploded in popularity.

  • Consumers spent $10.2 billion on meals through third-party delivery

  • apps like DoorDash, GrubHub or Uber Eats in 2018.

  • And 38 million people used one of those mobile delivery apps in 2019.

  • At the same time, the number of people dining inside restaurants was

  • on a decade-long downward trajectory.

  • Casual dining as a whole has been in trouble long before coronavirus

  • began to spread around the country.

  • Traffic has been kind of a sore spot starting in 2006.

  • And the surge in delivery orders wasn't exactly boosting restaurants

  • bottom lines. Third, party delivery apps charge restaurants pricey

  • commission fees to use the service up to 25 or 30 percent in some

  • cases. Those cut into restaurants already thin profit margins.

  • So you look at most full service restaurants and for them, delivery is

  • never been something that makes a lot of money, a lot of revenue for

  • them. The food is a pretty low profit cost right there.

  • And when you add to it the cost for working with the third-party

  • delivery company, they really could do it only to keep their brand

  • out there and to continue serving the community.

  • During the coronavirus pandemic, some restaurants have shifted focus

  • to take out and delivery in the interest of feeding communities and

  • to bring in at least some cash.

  • Fred Kaskowitz had to lay off two of his 13 employees, so he's making

  • delivery runs himself.

  • Yes. So where were you offering the curbside pickup and delivery.

  • I'm out every day in my car, we're making ourselves

  • available to older people who don't want to go out of the house.

  • Madelyn Alfano, who owns a chain of Italian restaurants in Los

  • Angeles, switched gears to delivery as well.

  • What we've done with our servers in our bussers, and our cashiers is

  • we've afforded them the opportunity to to sign up to drive, to be

  • delivery drivers, so that we were trying to help all of our employees

  • maintain their earning capacity.

  • And for what it's worth, during the coronavirus outbreak, some third

  • -party apps like GrubHub and Postmates are waiving some of those

  • commission fees. But regardless, how long can restaurants afford to

  • just do takeout and delivery.

  • For Peter Schurmann from Bar Bacon?

  • It wasn't sustainable at all.

  • He temporarily closed his two New York City restaurants instead of

  • keeping them open for delivery.

  • Having them say, okay, we have to close everything down and you can

  • just be open for delivery was almost laughable, you know,

  • particularly someone that's a full-service restaurant with 100 seats.

  • You know, I can't just all of a sudden convert to grab and go, much

  • less compete in that market.

  • Even when we sort of rebound from this calamity right now, the jobs

  • are going to be there unless unless there is a major influx of

  • capital and not loans, because loans which need the influx of capital

  • to small businesses, especially restaurants.

  • Money is coming.

  • At the end of March 2020.

  • President Trump signed a $2 trillion stimulus package meant to help

  • soften the blow of the economic fallout from the coronavirus

  • outbreak. The massive bill includes a $349 billion lifeline for small

  • businesses in the shape of loans guaranteed by the Small Business

  • Administration. You can take out a loan for up to eight weeks of

  • payroll as well as overhead.

  • You hire the people back.

  • As long as you hire the people back, the loan is forgiven.

  • But it's unclear if this relief is enough to keep those independent

  • restaurants open. And for many owners who may be able to survive the

  • shutdown orders, there's still so much uncertainty remaining about

  • what happens once those orders are lifted.

  • It may not be as simple as simply unlocking their doors.

  • I'm sitting on almost $400,000 of debt right now just to open the door

  • up. And let's just say a miracle happens and I get $400,000.

  • That's per property, by the way.

  • All right. I can open the doors.

  • You are opening a restaurant.

  • Anyone that knows anything about restaurants, opening a restaurant is

  • one of the toughest things you could possibly do.

  • And you're doing it with the staff now that is shaken.

  • You're doing it with a, you know, customer appetite and clientele

  • appetite that you've no idea what you're walking into.

  • That may be the biggest source of anxiety for restaurant owners in the

  • midst of this crisis.

  • Will the customers ever come back?

  • The big challenge is, is there going to be enough demand when we're

  • able to turn the lights on?

  • Restaurants in particular are incredibly capital intensive businesses,

  • meaning it costs a lot of money just to keep them running.

  • And it's hard to budget for an environment where everyone is allowed

  • to leave their homes again because nobody knows how people will feel

  • about being in public with a still present threat from COVID-19.

  • That's an unknown quantity when when things when things are gonna come

  • back and how they're going to come back.

  • And everybody just speculates over that.

  • If you think it's going to be a straight shot.

  • To me, I don't see that because is still going to be a lot of

  • backlash from this whole thing.

  • But then when I really am concerned about is the go-forward cost of

  • after I open.

  • I need to expect a certain run rate of loss as the country gets back

  • into a rhythm and we all sort of figure out what that looks like.

  • I mean, just because everybody wants to go out doesn't mean it'll

  • happen, doesn't mean it will sustain itself, doesn't mean the entire

  • world didn't just change.

Restaurant businesses and food businesses are very tenuous.

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B1 INT US delivery restaurant coronavirus business catering bar

How Coronavirus Decimated The Restaurant Industry Overnight

  • 24 0
    day   posted on 2020/04/20
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