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Big Fish Get Bigger

November 23, 2020

COVID-19 unleashed a tsunami of destruction. Whole industries are transforming, and some are being wiped out altogether.

The industry that’s perhaps been damaged most by the pandemic is the restaurant business. It’s been gutted.

According to Yelp and the Wall Street Journal, almost 22,000 restaurants closed their doors forever from March 1-September 2 of this year. The most damaged were the independent or mom-and-pop establishments, as 75 percent of all the shuttered eateries had fewer than five locations.

Conversely, the national chains are thriving.

El Pollo Loco has nearly 500 locations and is adding more. CEO Bernard Acoca said the firm has experienced record growth in delivery and online orders and will emerge stronger as a result of the pandemic.

Chipotle more than tripled its online business sales in the second quarter. Domino’s, Papa John’s, and Wing Stop all reported double-digit same-store sales increases in the third quarter.

As small restaurants shut down, the national chain operators scoop up the business that’s left behind.

For independent operators, profit margins were razor thin before the pandemic. Now, with limited seating capacity and reduced traffic, the math just becomes impossible.

Not so for national chains. They have deep pockets. Many are publicly traded and have the financing and scale to weather economic turbulence. They can change their delivery service.  

Small mom-and-pop shops have none of these advantages. As a result, the restaurant landscape that arises from the pandemic will probably feel blander.

Also, we’ll probably experience more permanent job losses. As the service sector hemorrhages jobs across restaurants, retail, and travel – three of the biggest employment areas in the U.S. – millions of those jobs won’t come back.

Many industries are experiencing what the restaurant industry is going through. Large players feast while smaller players get wiped out. It’s sad.

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