COVID created difficulties for restaurants, but supply chain and labor issues worsened them
Since June 2021, there haven't been capacity restrictions on restaurants or bars in Michigan. For many restaurant owners, though, the struggle has continued amidst record COVID-19 case numbers, an ongoing labor shortage, and unpredictable supply chain delays of everything from chicken wings to cream cheese.
The peak of this current COVID surge was particularly difficult, as December normally leads to high profits for restaurants before the slower post-holiday months. This December, though, 60% of businesses said via an industry survey that their profits decreased by half.
The most recent batch of federal funding, the Restaurant Revitalization Fund, came as part of the Biden administration’s American Rescue Plan, but funds were quickly depleted. When the Small Business Association opened applications in May, over 360,000 businesses applied in the first three weeks. This accounted for requests of $75 billion in total, almost three times more than the $28.6 billion allocated.
Vicky Thinnes is the director of sales and marketing for Millenium Restaurant Group, a Kalamazoo company that runs eight Michigan restaurants, as well as a catering and event service. She expressed appreciation for the support restaurants were given early in the pandemic but said it has now almost completely subsided.
“It's tapered out at this point,” Thinnes said. “[...] From the early stages though, by all means, it was extremely helpful in getting us through some of those valleys that we were in when COVID initially hit.”
Though they lost one restaurant and an event center, Thinnes said the company regrets seeing many competing businesses close over the last two years and is thankful to have survived.
“We are actually lucky to still be standing and be here,” Thinnes said. “[...] Everyone's always talked about for the last two years being able to pivot and adjust. Honestly, every day of this pandemic, that's what our executive team has had to do, just acclimate to rising cases or new policies or implementing new procedures. It’s honestly been the craziest two years of my career and I've been in hospitality since going back to the early 90s.”
According to a survey from the National Restaurant Association, approximately 80,000 restaurants have closed, either temporarily or permanently, as a result of COVID.
Even those that are still operating have struggled. According to a National Restaurant Association field survey, 85% of operators said their profit margin is lower than before the COVID pandemic, and 65% said profit was lower in September than June.
In October 2021, the National Restaurant Association reported that 95% of restaurant operators said they experienced food and beverage supply shortages or delivery delays, compounding the problems of the pandemic itself.
Allen Attee, the president and CEO of Picasso Restaurant Group, which operates over 20 restaurants across Michigan, said he thinks this broad exit from the industry will have lasting impacts, even once COVID cases subside.
“A lot of people call it the great resignation in our business,” Attee said. “Many people have moved from the restaurant industry into other industries with no intention of coming back. [...] So, I think when you look to the future, you're certainly going to have to look at automated systems and new ways of doing business to reduce your labor really because it's so hard to find.”
Traditional restaurants aren't the only ones having difficulty, either. The entire hospitality industry has been hit hard. Those in food service management, hotels, and event planning have struggled as well, often with very few opportunities to rebound back to normal business levels.
Attee expressed this frustration, explaining that most of his locations are in educational, medical, or office buildings, meaning customers have yet to return en-masse and they have not seen a significant increase in sales levels.
“We're doing awfully, to be honest with you,” Attee said. “I think when you look at this pandemic in general, streetside venues certainly got hit hard, but that time was a little bit shorter and then those venues were able to pivot — whether it be delivery or GrubHub — and make adjustments to get back on track. My organization is dealing with a captive audience.”
Sandra Andrade, executive director of Main Street Ann Arbor, an association of restaurants in downtown Ann Arbor that often organizes large events, said the loss of their biggest events most significantly impacted revenue.
“We haven't had Taste of Ann Arbor in two years, then Art Fair we didn't have for a year, and then last year it was half (as long),” Andrade said. “So, definitely, we too have adapted our revenue and are being cautious of our spending. Membership did go down with the pandemic, just businesses not being able to pay or they're no longer downtown, [but] it's more the impact of the loss of our bigger events.”
Like Thinnes, Andrade also emphasized the importance of being able to adapt. Last year, their annual Restaurant Week took on a different format, offering more takeout, family-style meals, and virtual demonstrations. They also decided to collaborate with Destination Ann Arbor this year by planning a simultaneous Hotel Week, in hopes of boosting other hospitality sectors, as well.
“Because of the hit on the entire hospitality industry, we thought it'd be a great idea to make it hotel week as well,” Andrade said.