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Nearly half of Pennsylvania restaurants expect to fail without more help, survey says

A new report by the National Restaurant Association paints a gloomy picture: More closings, more layoffs.

Coowner Ray Tafuri outside the shuttered Midtown III, at 28 S. 18th St., on Aug. 21, 2020.
Coowner Ray Tafuri outside the shuttered Midtown III, at 28 S. 18th St., on Aug. 21, 2020.Read moreMICHAEL KLEIN / Staff

Nearly half of Pennsylvania restaurateurs surveyed recently by the National Restaurant Association believe that they could be out of business by next summer without additional help from Congress, as the American restaurant industry is in what one executive called “an economic free fall.”

This would also spike the rolls of jobless restaurant workers — 49% of operators nationwide expect to need fewer workers during the next three months.

Sean Kennedy, the association’s executive vice president for public affairs, wrote on Monday, Dec. 7 to congressional leaders to share the survey’s grim findings and to lobby for extended relief packages. The association is pushing for the passage of the Restaurants Act, which would establish a $120 billion fund to help restaurants. It also gave lawmakers a plan to create a second draw from the Paycheck Protection Program that would be tailored toward restaurants’ needs, which include perishable inventory. The first round of PPP, which ended in August, lent $525 billion to small businesses to cover rent and payroll.

» READ MORE: Some of the restaurants in the Philadelphia area that have closed

The restaurant association’s survey, conducted nationwide among 6,000 operators from Nov. 17 to Nov. 30, 2020, said 45% of Pennsylvania restaurant operators believed it is “unlikely” they would still be in business in six months. This is a more pessimistic outlook than their counterparts nationally (37% predicted closing) and in New Jersey (36%).

These permanent closings would include a growing number of restaurants that have shut down temporarily until conditions improve, idling thousands of food workers and impacting businesses that serve the dining industry. More than one in three said they would close in the short term.

Restaurateurs in Philadelphia feel particularly pressured because the city eliminated indoor dining entirely through Jan. 1, 2021.

The numbers in the restaurant association’s report are staggering:

  1. As of today, 17% of U.S. restaurants — more than 110,000 establishments — are closed permanently or long-term. The number of shuttered restaurants by state were not made available immediately.

  2. Most of the permanently closed restaurants were long-established businesses — open, on average, for 16 years, with 16% in business for at least 30 years.

  3. Only 48% of these former restaurant owners say it is likely they will remain in the industry in any form in the months or years ahead. “Our nation is losing a generation of industry talent, knowledge, and entrepreneurial spirit,” the report said.

The revenue numbers help to explain the story: 87% of full-service restaurants nationally reported an average 36% drop in sales revenue — in an industry whose average profit margin is 5% to 10%. Further, 83% of these full-service operators said they expected sales to worsen over the winter as outdoor dining declines. Only 6% of restaurateurs believed that sales would rise by March.

Although many restaurants added employees after the initial lockdowns, overall staffing levels remain well below normal. Eight in 10 operators nationally say they have fewer workers than they would in the absence of COVID-19, and 45% of restaurants are more than 20% below normal staffing. More layoffs are predicted, said the association, which represents one million restaurant and foodservice outlets and a workforce of 15.6 million employees.

“We’re out of time and out of funds,” wrote the Independent Restaurant Coalition, a grass-roots group also lobbying Congress.