Winter is Coming: Will Restaurants Survive?

With outdoor dining providing a lifeline for on-premise-focused restaurants over the past seven months, restaurants in colder states are gearing up for a new set of challenges as winter approaches with no sign of an end to the COVID crisis in sight. 

New research from Gusto predicts that an impending winter slowdown has the potential to erase two million in job gains from September and August, or about $190 billion in economic activity, with the retail, leisure and hospitality industries impacted the most. More aggressive estimates show that job losses could be as high as 2.8 million.

The summer job gains in the foodservice industry were largely due to outdoor dining. According to a new audit by the New York State Comptroller Office, restaurant employment in New York City fell to about 91,000 jobs in April after reaching a record-high of 317,800 in 2019. However,  the industry recovered to about 174,000 by August with the help of outdoor dining thanks to the city's Open Restaurants and Open Streets program. The program allows many city blocks to close off to traffic to allow restaurants to expand outdoor dining. Mayor Bill de Blasio has since made that program permanent and year-round, and said the program has saved almost 100,000 jobs.

Unfortunately, a vast majority of New York's hospitality businesses still couldn't afford to pay full rent in August, suggesting that outdoor dining isn't a reliable safety net on its own. Gusto's report notes that other factors besides adjusting to outdoor dining — including the lifting of state and local shutdown orders — haven't contributed as much to the restaurant's economic recovery either. 

Now, according to Gusto’s research, mid-sized cities and smaller cities (with populations of 200,000 or less) will be affected the most by the colder weather. The report specifically predicts a looming crisis in the North, from New England to the Pacific Northwest, with some extension into the South. Markets where the average temperature drops to below 50 degrees by November, an area that represented about 45% of total private employment in March, are classified as "at risk." 

Cities such as Chicago, Colorado and Washington, D.C. have already created programs or grants to help restaurants maintain outdoor dining in cold weather, but these efforts may not be enough to stem closures.

Not only is the impending cold weather going to be a challenge, so too is consumer anxiety about eating out at all. The CDC released a September report that found dining out increases COVID-19 risk more than other activities.  

To maintain some outdoor dining capacity, restaurants across the country are scrambling to add heaters, tents and other features (including giant dining bubbles) while also adding safety features to their indoor dining rooms. DoorDash's cold weather grants are available to help small restaurants winterize their establishments with equipment like heaters, tents and lighting. Some restaurants are getting more creative with their solutions — one restaurant in Maine added heated igloo tents. 

These innovations may sustain some outdoor dining activity and keep employees working during the colder months, but it might not make a huge difference when it comes to the bottom line, especially since many of them are quite expensive. There is also the possibility that dine-in restrictions could return in the wake of rising COVID-19 cases, which are increasing as the U.S. risks a new infection peak.

The New York State Restaurant Association has warned that as many as two-thirds of the entire state's restaurants could permanently close by the end of the year without additional government aid. As the second-largest private-sector employer in the country, the restaurant industry's job losses have a significant impact on the general unemployment rate, which now stands at about eight percent, from about 14% in April. As the shift to colder weather starts in certain states, time will tell if that downward trend continues.