As Americans are told to stay home and shelter in place, the economy continues to contract. The reports that the unemployment rate hit 14.7% in April was not a surprise to economists and most business owners, let alone the 20 million individuals who have lost their jobs.

Before we were even aware of COVID-19, Americans had already been told by market analysts to expect 30% of big box retailers to close their doors. Experts said that consumers were shopping online and the closing of malls or strip mall-based retail stores was just inevitable.

With the advent of COVID-19, one can only imagine what these malls will look like once businesses are allowed to reopen without limitations. We are seeing many retailers that have been in business for years struggling and while some may be closing their doors for good, others, like high-end department store Neiman Marcus and clothing retailer J Crew, are seeking bankruptcy protection.  Whether or not they will emerge post-coronavirus with a successful comeback remains to be seen.

The restaurant industry has also been impacted significantly by COVID-19.   Although deemed “essential businesses,” it is almost impossible for restaurants to survive on drive-thru and take-out orders alone. Challenges exist in managing inventory and spoilage due to uncertainties in volume, and scheduling the appropriate number of your labor team. Those who are surviving are burning what little cash they have on hand to keep their employees working and continue serving customers.  And many restaurants have discovered that they simply cannot adapt to take-out and curbside service alone.

Case in point, it was just announced that Souplantation will be closing all of its buffet-style restaurants permanently after 42 years of serving customers.

While we have been fortunate to maintain business operations across many of our own franchise operations (Del Taco, Subway, and Dunkin’), the fact is that store sales are down 18 – 30% at all of our locations, and yet labor costs have increased due to recent mandated increases in minimum wage. Fixed costs are constant, and even with rent breaks and delays on loan payments, many operators don’t have the cash to get through a month’s worth of sales that bad.

It is true that a certain percentage of the industry was in trouble even before all of this happened.  Running a franchise in any state is hard. Finding the right employees is always a struggle. Retail and restaurants particularly, have a high failure rate. Coronavirus is exacerbating that challenge, and we will likely see a good number of our favorite restaurants, whether they are independently owned and operated, or national franchise chains, will not survive.

We made a difficult decision to close our Denny’s restaurant in Mecca a few weeks after the dining room services were restricted, and it is uncertain whether the economy will recover enough to support reopening this business.

It is never easy to let employees go, and even harder when you have to close a business entirely. Not only are the impacted employees and their families affected, but also any remaining employees, as these layoffs are certain to impact the morale of a company team that you spent years building.

Economic recovery will not begin until we can reopen our businesses at full throttle.  And while that may not yet be practical, we need to begin lifting some restrictions in order for businesses to resume operations.

We thank the president and the Senate and Congress for the financial support already given to businesses, but we also think it is in national interest to come up with tax credits or direct cash stimulus for businesses, something that may be more sustaining than the recent Paycheck Protection Program, which had many limitations for some business operating models.  Tax credits or cash stimulus programs that will enable us to keep our employees working and our doors open, and even more, give hope to business owners that they can get through this.

America is a great country; We believe this with all our hearts.  Let us get Americans back to work and our economy growing again!







Image Sources

  • Dennys: Shutterstock