WHY THE RESTAURANT INDUSTRY WILL NEVER BE THE SAME

The restaurant industry changed for good on March 15.

That day, after a weekend of seeing photos of customers lined up outside bars in Chicago and Boston and crowding them in Nashville, state and local officials began cracking down. They began closing bars and restricting restaurants to takeout service, all to stem the spread of the coronavirus pandemic.

The shock had already been evident in prior days, as event closures and growing fear of the virus sent restaurant sales plunging across the board, from low-priced fast-food chains to high-end experiential restaurants. And now restaurants face a spring with few customers.

Few industries can withstand this sort of shock and not come out damaged. But restaurants are especially unprepared. Much of the industry is made up of small businesses, including independents and franchisees, who operate on thin margins to begin with.

But a lot of it is run by private-equity firms that deliberately thin the margins, having spent years binging on cheap debt and selling off whatever asset they could.

The industry was on a weak footing to begin with, and now it’s been hit by a giant barge. It will never be the same after this. And it will be smaller. How much smaller will depend on how long our national quarantine lasts.

“I think it’s easy to say that what is happening with the virus is probably the single worst thing that has ever happened to the restaurant industry,” said Craig Ganz, an attorney in the Phoenix office of Ballard Spahr who specializes in bankruptcy.