This article is part of a Fortune Special Report: Business in the Coronavirus Economy—a look at the impact of the pandemic on more than 50 industries.
The coronavirus recession has left no industry untouched, but the restaurant business is arguably the hardest hit so far. The food and beverage sector accounted for 60% of the jobs lost in March, the first wave of the tsunami that has since prompted 16.8 million Americans to apply for unemployment. The impact on those workers foreshadows a supersize blow to the economy at large. The restaurant industry—which includes five chains large enough to appear in the Fortune 500—contributes an estimated 4% of the U.S. GDP, or roughly $1 trillion.
To get a sense of the ways in which the industry has been impacted—and how it might ultimately pick up the pieces, Fortune spoke to three restaurateurs, each leading a very different type of establishment.
Chairman and CEO, Chipotle
$5.6 billion in annual revenue
The Impact of the virus on Chipotle and its employees “breaks my heart,” says Brian Niccol. The crisis comes at a particularly frustrating time for the new CEO, who was guiding the chain past its earlier food safety issues by redesigning restaurants and rolling out new menu items like carne asada—changes that helped provide a 15% bump in revenue last year.
“We’ve kind of hit the pause button on those things,” he says. Instead, Chipotle, like its chain-restaurant peers, is focused on adapting to the new reality: plunging consumer demand and a workforce increasingly concerned about its health and safety—not to mention longer-term job security. The brand has reduced hours at 10% of its stores and closed 3% of locations—mostly those in shuttered malls or shopping centers—furloughing those employees. The rest of the hourly workforce, still coming in, received a 10% pay bump through mid-May; Chipotle employees typically get three days of sick leave, and now those working during the crisis are eligible for up to two weeks of sick pay, depending on their work schedules.
Some long-term changes to the company may be positive, Niccol says. More diners are now turning to the chain, traditionally a lunch staple, for dinner, he notes. Digital orders—already up 90% last year to 18% of total sales—will, he expects, become a permanent consumer habit (although that revenue stream largely depends on the continued success of partners like Uber Eats). Niccol also predicts that restaurant industry employees, burned by rapid layoffs at other companies, may start paying closer attention to the financial health of their employers (Chipotle has prioritized a healthy balance sheet as it has recovered from its 2015 E. coli outbreak): “Employees are going to have a closer eye on, ‘What is the health of my company? How good of a cash position are they in in the event of a crisis?’”
Owner, Crafted Hospitality
Midsize restaurant group
5 Crafted Hospitality locations
4 ’wichcraft locations
Tom Colicchio has high standards—for his staff, for Top Chef contestants, and for the nation’s lawmakers. As one of the founders of the newly created Independent Restaurant Coalition (IRC), the Crafted Hospitality and ’Wichcraft owner has become a spokesman for the sector’s 11 million or so servers, chefs, kitchen staff, and hosts, and is calling for government support. “Without help, the restaurant industry is going to be decimated,” he says. Colicchio is lobbying for changes to Congress’s CARES Act that account for the particularities of running a restaurant. For instance, the legislation forgives loans for companies that keep employees on the payroll for at least eight weeks after disbursement; many restaurants need the money now but suspect that it will take far longer to return to business as usual. Colicchio opted to close the doors of his establishments on March 15, sending his nearly 500 employees to file for unemployment rather than try to transfer to a takeout model as some of his fine-dining peers have done. The risk outweighed the pros of staying open, he says: “I couldn’t live with myself if, for a couple thousand dollars a night, someone may end up on a respirator.”
The IRC is pushing for new tax rebates and other longer-term support, but for Colicchio, the immediate priority is keeping the industry—and its role as a community touchstone—alive. “Our neighborhoods without restaurants aren’t neighborhoods,” he says. “Our buildings with ground floors empty—that just feels like the city is dead.”
It was only January when Manhattan’s Chinatown, home to Moonlynn Tsai’s Malaysian coffeehouse and restaurant, first felt the sting of the coronavirus. Diners, concerned about the new disease in China, began avoiding the area—despite an utter lack of evidence that the virus was present in the neighborhood.
Three months later, Kopitiam—named for the Hokkien word for coffeehouse—remains open, but it’s making less than 5% of its usual sales. The beloved eatery, first opened in 2015, is deeply entrenched in the community. Its staffers are a mix of local high-schoolers and elderly residents, and Tsai and her business partner, chef Kyo Pang, are trying their hardest to continue serving their neighbors. The pair furloughed their staff on March 17, days after New York City ordered restaurants to close, but paid all employees through April 1. They’ve tried to keep some revenue coming in with takeout orders, as well as gift cards and special offers like an at-home kit to build the restaurant’s famous kaya jam toast. But the challenges continue. Tsai said suppliers have gone from delivery every day to three times a week. In just a month, Kopitiam burned through all its savings from the past two years.
Looking ahead, Tsai fears for her fellow Chinatown establishments. If her restaurant—fawned over by food critics and with a savvy digital presence—can’t weather the storm, what will happen to others?
As for Kopitiam, she’s not ready to think beyond the next days. “I’ve learned to numb myself. If I start sitting still, all the emotions are going to come,” Tsai says. “We were hoping by now we could expand, but everything we had for that has been wiped out. If this happens again—how do we make sure we’ll be okay?”
A version of this article appears in the May 2020 issue of Fortune with the headline “86 the restaurant industry?”
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