A number of questions have bubbled to the surface over the past week as the events of the Coronavirus have unfolded. And by the time this is published, the questions will likely continue to mount.
The main concern is the longevity and vitality of independent restaurants. As a firm that supports research and growth strategies for foodservice suppliers, the entire supply chain will be affected negatively for an uncertain period.
The 1918 Flu Outbreak Hit the Services Industries Hardest
The only comparison we have to what is occurring at this point in time is the Spanish flu outbreak of 1918. This virus killed more soldiers in World War One than combat. The economic impact, in a sentence, hit the entertainment and service industries the hardest.
This comparison to 1918 is obviously challenging considering mining and manufacturing accounted for a higher share of our incipient economy. What it does tell us is service industries – catering, gambling, resorts, foodservice – shuttered doors and never returned. Will we see a similar change today? MGM properties in Las Vegas have reported losses of $400 million based on the cancellation of the NCAA basketball tournament.
Are These in Trouble?
- There are nearly 12 million workers in foodservice in the United States.
- 60 percent of US full service (sit down) restaurants are independents.
- Non-commercial segments – K-12, colleges, recreation, hotels – account for half of the $720 billion foodservice industry.
- Consumer spending accounts for 70 percent of the nation’s gross domestic product.
Full service “mom and pop” restaurants account for 60% of all sit-down restaurants in the United States. Surely these restaurants will not survive when states such as Ohio ordered all foodservice establishments closed on March 15th at 9pm. Delivery and takeout are permitted, however, which might get lost in the headlines.
Delivery-Only Kitchens, Healthcare Foodservice Will Benefit
Given this situation, ghost kitchens, cloud kitchens and third-party central kitchens are poised to benefit the most. Delivery-only channels allow for limited labor, just-in-time preparation and meets the requirements of only a few employees working at a specific time.
I would be remiss not to mention that 50% of the foodservice industry is made up of non-commercial feeding. Food manufacturers, brokers and even foodservice distributors cater to specific segments – such as colleges, K-12 schools, corporate and blue collar feeding and recreation. These will surely suffer and we will see manufacturers shutter their doors as well.
But, as with commercial segments, the beneficiaries in non-commercial will be healthcare and – wait for it – corrections. There is little doubt that the latter will see its inmates sent home.
Plan For an Extended Hiatus, Then Work Backward
We are all holding our collective breath at this moment, but as we have suggested, consider planning for a six-month hiatus and work backward from there. As with insurance planning, accounting for the worse-case scenario is very important.
Want to gain more strategic insights around protecting your business during the coronavirus pandemic? Contact a Foodservice IP consultant today.