And it’s really not because of COVID. The pandemic did indeed put a lot of pressure on restaurants, financially and otherwise, but more than anything, it revealed the fundamental weaknesses of the middle tier of the industry, weaknesses that are both economic and moral.
But to begin with, fast food will still be fast food. McDonald’s, Taco Bell and the low-end, big-money operations will continue much as before. Prices might go up a dime or a quarter, but the impact on consumers and the bottom line will be minimal.
At the other end of the spectrum, haute cuisine won’t feel much of a pinch either. If a couple spent $750 on a two-star Michelin dinner, money was obviously not that big an issue – so if the cost is $850 now, it won’t change much.
But the middle ground -- the local sit-down Italian restaurant, the long-running Mexican place with the good margaritas, the upscale bar with small plates – these are the ones in trouble.
First, their cost of doing business is going to go up. It starts with labor, as it’s no secret that restaurants relied heavily on immigrants, many illegal, to get the grunt work done, and that labor pool has dried up. Many of those workers either found other work or left the country, and so far at least, they have not come back.
Even the next tier of workers – line cooks, servers, etc. – aren’t returning because for decades, restaurant employees have been overworked and underpaid. The hours are long, and even spreading tips out among the entire staff doesn’t make the business attractive to prospective employees.
So in steps the law of supply and demand to require that restaurants pay workers more, which of course means that the cost to consumers must go up to cover the extra pay. (Restaurants have always had very low profit margins, so it’s not as if there’s fat to cut.) It’s only right that workers be compensated fairly, so in most ways, this is a positive, but it doesn’t make it any easier to run a restaurant.
The next issue is the price of food. The explosion of weather disasters, fires and droughts means that food is going to get more expensive, and high-quality food, the kind that even middle-tier restaurants must have access to, will be harder to get as well as pricier to pay for. That expense too will be added to the cost of meals.
And finally, the debt accumulated during the pandemic must be paid off. Even restaurants that survived, restaurants that are full now, have back rent due, and maybe unpaid fees and taxes. And it’s not like a few months of pre-pandemic business will get that debt off the books – it’s going to take time, and yes, another dollar or two on the cost of that spaghetti carbonara.
For some, spending an extra $20 to $30 each time they go out to dinner might not be a big deal, but for others, it’s going to force a change in habits. For example, let’s say a couple spent $100 on cocktails and dinner before the pandemic; now, that same meal will cost $125. That means that the cost of five meals in restaurants before COVID is the same as four today, and that spending the same amount of money means a 20% reduction in trips to restaurants.
It’s possible, of course, that the demand for restaurant meals is inelastic, in economic terms, meaning that price doesn’t have that much to do with the popularity of the product. History, though, and common sense suggest that is simply wishful thinking, and that the middle tier of restaurants is in for a severe round of contraction in the next year or so.
What that means for those of us who love to eat out is that we need to spend our money wisely. We need to make sure to visit our favorites rather than always flocking to the place serving the newest craze, because if we don’t help our favorites survive, the hard truth is that they simply won’t.
It’s good that workers will be treated better and paid more, but that may be the only positive in the brave new world of restaurants. Diners will see bigger tabs, and will likely have fewer options to choose from, and some long-running community institutions will have to give up the ghost.
But even though it will be easy to blame COVID, the real problems run deeper – and aren’t going to go away no matter how effective vaccines become.
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