10,000 Texas Restaurants Have Already Been Killed By The Pandemic. A New North Texas Capacity Rollback Could Threaten Even More
With the number of coronavirus infections increasing in North Texas spurring Gov. Greg Abbott to roll back restaurant and bar capacity in the Dallas-Fort Worth area to 50% last week and no congressional relief in sight, the local restaurant industry is hanging by a thread.
Many owners and operators doubt their ability to remain open for another 90 days.
Restaurant owner and operator Franson Nwaeze, whose Chef Point Bar & Restaurant has two locations in Colleyville and Watauga, said the re-emergence of the virus has impacted both businesses and their employees.
"Business is quite slow," he said. "We've had to make major adjustments in our workforce, cut back on people's hours and do a few things to keep us afloat."
Nwaeze said some staffers had to move to part time, and there isn't enough restaurant work in DFW right now to sustain individuals looking for work, so he's hoping government stimulus through unemployment will help sustain them.
"We are doing what we can to lower expenses and changing the menu so we are not wasting," he added. "We will definitely try to stay open. We survived the first round and by God's grace will survive the second and the third."
But for many restaurants, that may not be the case. The National Restaurant Association in partnership with the Texas Restaurant Association sent a letter to Congress this month, warning that more than 10,000 Texas restaurants have already shuttered their doors and 30% of operators say it's unlikely they'll be open six months from now, TRA told Bisnow.
"I have talked to people recently, in the last 10 days, who have said we do not have three months in us. We cannot get to spring if something doesn't change," Greater Dallas Restaurant Association President and attorney David Denney said.
Early on in the pandemic, Denney predicted 10% to 15% of independent DFW restaurants would close, but with the pandemic continuing to rage and stalling traffic again in the midst of the holiday shopping season, he is estimating pandemic-related closures for independent restaurants could hit 15% to 20% in North Texas.
And since restaurants employ 11 million people nationwide and serve as anchors for most retail and mixed-use centers, Congress' failure to address the issue through a restaurant stimulus package could end up walloping the commercial real estate industry in 2021, Denney told Bisnow.
"What has a lot of people biting their nails is what does this mean for the downtown markets and commercial real estate and developments that are food and beverage heavy," Denney said. "We may be looking at a real estate crisis of 2021 that follows the hospitality crisis of 2020."
The rollback of capacity from 75% to 50%, which went into effect Dec. 3 and which affects bars, restaurants and other nonessential businesses in the 18-county DFW area, has worsened the situation.
"It increases uncertainty," Tenant Risk Assessment CEO Bradley Tisdahl said. "It's not great."
But while he sees the clock ticking, he believes some restaurants have some runway, and he said landlords are still working with them in good faith to get them to the summer. Discussions between landlords and tenants continue to this day with everything on the table from rent reductions to abatements, Tisdahl said. And many restaurants are already set up to deal with remote, delivery and takeout dining services, so the impact of another capacity drawdown may be somewhat muted, he added.
He believes the projected vaccine schedule may give restaurants and bars enough time to save themselves from a slew of bankruptcies and closures.
"The conversations that we have had with our clients on the real estate side indicate that we need a public health solution to improve demand for hospitality and the restaurant businesses by the summer of 2021," he said. "It seems like we are certainly on pace to get there to avoid some kind of catastrophic situation within the hospitality sector. That's not to say there won't be companies — restaurant operators and hospitality companies — that do go under between now and then."
Denney with the Greater Dallas Restaurant Association said it isn't the rollbacks impacting restaurant traffic, but rather studies and media reports that are pinning the coronavirus crisis on restaurants when the evidence cited is considered unfounded by the restaurant industry.
Denney points to the National Restaurant Association's criticism of a 2020 Centers for Disease Control and Prevention study in which some correlation was found between those who were infected with the coronavirus and the probability that they had recently visited a restaurant. In a report, NRA points out that the CDC study had no way of officially confirming whether the patients caught the illness from restaurants or somewhere else. In addition, the survey uses limited feedback from patients in a marginal number of states while leaving out other data, the NRA said in a statement.
The NRA also noted that even the CDC admits its own study was limited to a little over 300 patients from only 11 health care facilities and may not be an accurate reflection of patients from the entire U.S. health care system.
Nevertheless, these reports about bars and restaurants are doing a number on the ground level with or without 75% operating capacity limits, Denney said.
"It is very challenging, the holiday time is when people make up a bulk of their revenue; it's not the rollbacks, it's the general malaise that is affecting these industries," Denney said.