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COVID 19 is about to kill restaurants by the thousands. This pandemic is the ultimate pressure test and restaurants are failing hard. Think about it: when we come out of this, your favourite food spots might not be there any more. Why are they so f****d? Let me explain.Margins in the restaurant industry are notoriously small. Like tiny, actually. For reference, margins for banking, accounting, and legal services come in around 18–25%, healthcare 12-15%, and software 15–25%. Restaurants? 3–9%. Ya, like single digit. These razor thin profit margins have left restaurants with zero reserves. So when a crisis hits (like right now), they are pretty much screwed. Restaurant owners’ only options are to swallow their pride, beg, and hope for help — or throw in the proverbial dish towel. Did you realize how many restaurants don’t even have one months rent in the bank? It’s bananas!So, why are the margins so bad anyway? Well, it starts with the fact that the industry as a whole shot itself in the foot when it started competing on price. See, it wasn’t always this way — margins used to be double, if not triple, what they are now. But for the past couple decades, while menu prices should have been rising to keep up with things like inflation and rapidly increasing rent, price wars instead drove them down ($1 value meal anyone?). ...Reports show that, due to COVID 19, 1 in 10 restaurants is already gone for good. And this is just the beginning. When restaurants do re-open (those that survive), they will be in rough shape. This is when we need to step up to ensure that those who put food on our tables can keep food on theirs. ...
