More than 110,000 eating and drinking establishments closed in 2020

Rachel King
·6 min read

Restaurants have been hit harder than any other industry during the pandemic, and have had very little to no relief in the last two stimulus packages passed through Congress.

It should come as no surprise then that many restaurants were forced to shutter in 2020, but the numbers are still shocking. More than 110,000 eating and drinking establishments in the United States closed for business—temporarily or permanently—last year, with nearly 2.5 million jobs erased from pre-pandemic levels, according to the National Restaurant Association. And restaurant and foodservice industry sales fell by $240 billion in 2020 from an expected level of $899 billion.

“Every restaurant segment has been impacted by the pandemic, but the sales and employment losses have been felt disproportionately by full service restaurants, which had much more challenging pivots to off-premises service,” says Hudson Riehle, senior vice president of the research and knowledge group for the National Restaurant Association. “The Paycheck Protection Program (PPP) is helping thousands of restaurants keep their employees on staff and their doors open, but our industry is uniquely affected and has unique challenges that PPP isn’t always going to meet.  Ultimately, recovery for restaurants will take industry-specific support through dedicated grants, tax relief, and other stimulus support at the federal, state, and local levels.”

The group released its 2021 State of the Restaurant Industry Report on Tuesday, shining a light on the decimation of the restaurant industry since the outbreak of COVID-19. The report examines shifts and trends for labor, menus, and service (on- and off-premises), based on a survey of 6,000 restaurant operators and consumer preferences from a survey of 1,000 adults as of December 1, 2020.

The restaurant and foodservice industry had been projected to provide 15.6 million jobs in 2020, representing 10% of all payroll jobs in the economy. Since the pandemic started, 62% of fine dining operators and 54% of both family dining and casual dining operators said staffing levels are more than 20% below normal.

When the pandemic took hold in the United States, spurring shutdowns and closures across the country, takeout and delivery became the primary—if only—lifelines for bars, cafés, and restaurants that were able to stay open. And while there several app-based delivery networks—such as Seamless, DoorDash, Postmates, and UberEats—that can facilitate food delivery, the report’s findings suggest consumers are aware of and concerned about supporting their local eateries more by avoiding the middleman fees and ordering directly from the restaurants via phone, email, or website. Approximately 64% of delivery customers said they prefer to order directly from the restaurant, while 18% preferred to order through a third-party service. And 72% of adults said it’s important their delivery orders come from a location that they can visit in person—as opposed to a virtual (or “ghost”) kitchen space.

Of restaurants that closed permanently in 2020, the majority were established businesses and fixtures in their communities; these eateries had been in business, on average, for 16 years, and 16% had been open for at least 30 years. Within this subgroup, these restaurants employed an average of 32 people; and 17% employed at least 50 people before they closed.

Roughly 72% of restaurant owners who closed for good admitted it’s unlikely they’ll open another restaurant concept in the future. Only 48% of owners said they plan to stay in the restaurant industry in some form in the months or years ahead.

With all this in mind, restaurants and bars have had to get creative to stay afloat, beyond just adding or expanding whatever takeout options they had before. Some restaurants have leaned heavily on expanding their outdoor dining footprints, while others turned their dining rooms into makeshift artisanal grocery stores.

But many restaurants have altered their menus dramatically, based on the report’s findings, increasingly providing options that cater to the country’s mood, or need, for comfort food. Approximately 38% of on-premises diners and 33% of takeout/delivery customers said their restaurant choices are influenced by whether the menus include the comfort foods they crave. In response, restaurants are meeting these demands with one in five family and casual dining operators added comfort items, and seven in 10 full-service operators added alcohol to-go since March 2020.

And while it may still seem like a novelty for many Americans, to-go cocktails, beer, and wine could become a permanent mainstay if state regulators come around. While not overwhelmingly adopted, the State of the Restaurant Industry Report found that most restauranteurs that tapped into the alcohol to-go trend are benefitting from it. Thirty-five percent of all customers—and specifically 53% of millennials—say they’re more likely to order from a restaurant if it offers alcoholic beverages with a to go order. “According to our research, off-premises alcohol sales represented, on average, 10% of sales for restaurants offering the option,” Riehle explains. “This has often allowed restaurants to bring back a bartender or additional employee. For many states, the change to allow alcohol to-go was temporary during the pandemic, but consumers and operators both overwhelmingly support making the changes permanent.”

In contrast to the entertainment industry, which is having a moment of reckoning as many moviegoers might prefer to stay home and avoid the high costs of movie theater tickets even after the pandemic, restaurant goers are eager to return in large numbers—once it is safe to do so.

“The loss of $240 billion in sales was a substantial and set industry growth back more than five years. Fully regaining that footing will take time,” Riehle says. “The good news is that the State of the Restaurant Industry Report shows a clear consumer desire to enjoy restaurants on-premises. As the vaccine becomes more available and more social occasions return to restaurants, consumers will still continue to utilize off-premises options.”

In late April 2020, 83% of adults said they were not eating on-premises at restaurants as often as they’d like, a jump from 45% reported in January 2020. A crucial reason is socialization. Broken down by age group, baby boomers were found to want to return to restaurants most, beating out millennial and Generation Z adults, who say they are not eating on-premises at restaurants as often as they’d like. And eight in 10 adults said their favorite restaurant foods deliver flavor and taste sensations that they can’t duplicate when cooking at home.

“The year ahead will be one of rebuilding,” Riehle predicts. “Looking ahead, we anticipate that restaurants will continue to double down on things that streamline operations, diversify their offerings, and entice customers—think technology, seamless off-premises protocol and tools, meal kits, and more—all things we saw proliferate out of absolute necessity in 2020.”

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