Full-Service Eateries Bear Brunt Of Economic Downturn

A report from Marcus & Millichap says full-service restaurants are facing the brunt of the economic downturn sparked by the coronavirus pandemic, while limited-service eateries are well positioned to survive.

The report says many of the nearly 400,000 full-service eateries doing business before the coronavirus pandemic will “struggle to survive.”

The coronavirus pandemic sparked a myriad of shutdown orders across the US this year, forcing swathes of businesses to close their in-person operations in an effort to reduce the virus’ spread.

Near 5,000 square feet is the average size of a full-service establishment, according to the report, but most inhabit a smaller footprint. Those businesses, it says, have a greater likelihood of struggling during a lengthened shutdown “due to their inability to operate under social distancing guidelines or lack of outdoor seating.”

“More than 100 million square feet of space is in jeopardy of needing to be re-tenanted,” according to the report. “Orders to re-close are also a looming challenge as a spike in cases threatens to overload health-care systems. Sunbelt states have been forced to reverse course on reopening to some degree as the number of infections surged.”

The report from Marcus & Millichap also predicted that not being able to operate while practicing social distancing will play a part in the closing of a significant portion of the country’s eateries. 

“Estimating how many restaurants will permanently close should come into clearer focus in the coming weeks as more stimulus is injected into the system and vaccine trials move into their final stages,” according to the report. 

Compared to full-service restaurants, limited-service restaurants appeared to receive a better prognosis in the report, which noted that many fast-food eateries were able to stay operating during April and May amid broad coronavirus-related shutdowns.

“Drive-thrus, curbside pickup and little competition from full-service concepts have buoyed the industry thus far,” according to the report. “However, many independent locations that had difficulty getting PPP loans or those without the backing of a corporate office that has more accessible lines of credit have permanently shuttered.”

The report also weighed in on retail sales and said online retailing is forecast to make up 18 percent of sales when the economy “fully” reopens.

“As the retail market adjusts to a post-pandemic environment, the impact will amount to an approximately three-year shift forward on the move toward online purchases,” according to the report.