What Happens After The Restaurants And Other Small Businesses Close?

Many restaurants will not survive the lockdown phase of the coronavirus pandemic. The Souplantation/Sweet Tomatoes chain has shut down for good. Some restaurants will try to reopen but not last very long. Other small businesses, such as gyms and yoga studios, will permanently close as well. And it’s not just small businesses. FoodFirst Global Restaurants, which operates 92 locations, has filed bankruptcy. In other sectors, well-known names filing bankruptcy include Gold’s Gym, Hertz, JCPenney, JCrew, Neiman Marcus, and Pier 1 Imports.

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Tables are set but no customers. (AP Photo/Steve Helber) ASSOCIATED PRESS

Some have theorized that the closure of so many businesses will limit the chances of economic recovery. That’s not true, however. The restaurant business illustrates the challenges of business failure, and the question of what will happen after the pandemic is over and people are ready to eat out. It will turn out that America will have plenty of restaurants from which to choose: some new, some old. We may experience a brief period of limited choices, but that won’t last long.

People will eventually want to eat out again. They will feel safe once we have a vaccine, a generally-effective treatment, or enough survivors for herd immunity. At that point, many people—but not all—will have money enough to dine out.

When people feel safe,  the current wave of restaurant closures may limit supply of dining out opportunities. Fortunately, many people are eager to open restaurants. Even the most casual observer of the industry has seen multitudes of restaurants come and go. Death and birth are continual phenomena of the restaurant industry.

Some new restaurants are started on a shoestring by a former cook or server; others are financed by wealthy people with ideas about the kind of restaurant they would like to frequent.

After capital, the biggest challenge of entering the restaurant business is finding a good location. Traffic going past the location is helpful. The right amount of space, configured in the right way, is critical. Plenty of retail space has been made available by the closure of brick-and-mortar stores, but that space would require substantial tenant improvements to get the walls in the right places, plus equipment for the kitchen as well as tables, chairs, plates and flatware.

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