Coronavirus challenges for restaurants: Will they ever recover?

Many businesses are already laying off large swaths of their workforce

As coronavirus-related recession fears percolate across the country, one industry that stands to be dealt a great deal of damage from the current crisis is restaurants.

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Many states, including New York, New Jersey and Connecticut, have banned dining at restaurants, limiting customers to takeout or delivery in an effort to stem the virus’s spread via human-to-human contact.

Chef and restaurant owner David Burke, who has eatery locations across New York and New Jersey, characterized the situation to FOX Business’ Maria Bartiromo on Tuesday as “troublesome” for the industry.

“A lot of people have been laid off in my companies, as well as other restaurants,” Burke said. “Curbside pickup and takeout is really a fraction of our business and again we don’t have the sales of alcohol, etc. So it keeps a couple of people employed, but 90 percent are still laid off.”

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On Wednesday, Union Square Hospitality Group – one of New York City’s prominent restaurant companies – announced it would lay off around 2,000 employees due to the coronavirus situation. That is 80 percent of its workforce.

“In the 35-year history of Union Square Hospitality Group, this is, without a doubt, the most challenging period any of us has ever encountered as leaders,” Union Square Hospitality Group CEO Danny Meyer said in a statement. “We’ve successfully led through and weathered 9/11 and the financial crisis of 2008, but at no other point has there been such a sustained and massive dual threat to both the physical safety and economic livelihoods of our people, or the hospitality industry as a whole.”

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Burke said allowing takeout provides a “little bit of hope” for the industry, but it’s not going to help anybody “stay in business.”

Both the federal and local governments are aware of the strain the unprecedented measures they have taken to stop the rapid spread of the coronavirus have taken on businesses. The White House is preparing relief measures for small businesses – and a relief package that could be valued at $1 trillion is said to be making its way through the administration. However, many believe that relief is unlikely to be enough for many.

Restaurants in some cities and states are already coming off the heels of a minimum wage increase at the outset of 2020, which, for an industry that runs on very slim margins, can take a toll on businesses’ bottom lines. It also makes the new strain much more likely to put some restaurants out of business altogether.

Burke predicts in New York City one-third of restaurants that have closed may not reopen.

And the sentiment is echoed throughout the sector. On Twitter, celebrity chef Hugh Acheson said a lot of places will go under.

According to the Bureau of Economic Analysis, restaurants contributed more than 2.3 percent to U.S. GDP in the third quarter of last year. They also accounted for more than 12 million jobs.

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