ASORE calls for attention to plight of restaurant industry

By The Star Staff

Restaurant sales fell sharply between January 2020 and April 2020 to $50 million from $157 million, a drop of 68.15% and half of the restaurant owners are reducing hours or exploring bankruptcy, a new study commissioned by the Restaurants Association (ASORE by its Spanish initials) shows.

The study conducted by Economic Intelligence (Inteligencia Económica) reveals the views of restaurant owners and operators and the impact of the COVID 19 pandemic on their operations. The findings of PROJECTIONS 2021 were presented Tuesday in a special event as the most exhaustive industry survey to date. The report was made available at a critical moment, ASORE said, in which the island is experiencing spikes in coronavirus infections and hospitalizations for COVID-19 that have forced the return of a more limiting curfew and greater restrictions on commercial activity, including restaurants.

The sample is representative of the industry as it takes into account businesses of all sizes, from single stores with fewer than three employees, to more mature companies with multiple locations and hundreds of employees. It includes everything from coffee shops and quick service restaurants, known as QSRs, to bakeries and fine dining. It has a confidence level of 95% and the margin of error for the survey was plus or minus 3.2%.

Compared to the first three months of 2020, only 24% of the restaurant owners said their sales have gone up in the first three months of 2021; 13% said they are the same and the rest argued that sales have declined. Ten percent of those interviewed said their sales declined by 50% when compared to the first three months of 2020.

However, to deal with the situation, a large percentage of 42% said they are delivering meals and 53% are reducing other expenditures. Only 29.6% are reducing their workforce and 35.2% are reducing working hours of their employees. Of those surveyed, 6.8% reduced prices and 28.4% are making other investments to increase sales.

The industry closed 2020 with average monthly sales 4% below the months of 2019.

According to the study, 55.1% of small businesses find the situation “Bad” as opposed to 38.9% of large businesses, and 47% of small businesses reported losses of more than 50%. The options of reducing hours and employees were the most frequent alternatives used by businesses to maintain operations.

Online sales, even in the midst of the pandemic, do not represent a significant segment of the business, the study found.

Regarding the options to stay afloat, restaurant owners said 9.1% are considering bankruptcy and 18.2% are thinking about consolidating operations.

The sector itself has been one of the most affected by the pandemic, reporting a record number of bankruptcies, closures and layoffs. The situation is worrying, ASORE said, since restaurants are an important engine of economic development, employing more than 60,000 people.

“Faced with this extraordinary situation, it was imperative that we learn more about the current state of the restaurant industry, which has suffered so much from the pandemic,” ASORE President José Vázquez said in a written statement. “It was also an opportune moment to measure the future outlook for owners. Much has been said about the impact on the sector. With this report, it is clear where we are and what the expectations are for the future.”

The executive also stressed that the industry is in an increasingly precarious situation, even with the aid announced by the federal government.

Vázquez said restaurants in Puerto Rico have not yet received rescue funds from the Coronavirus Aid, Relief, and Economic Security Act, commonly known as the CARES Act, legislation that contains an allocation of between $400 million and $500 million for the most affected commercial sectors. A $28.6 million package was also announced from the U.S.

Small Business Administration’s Restaurant Revitalization Fund. But this allocation worries ASORE as it does not cover the needs of restaurants in all jurisdictions of the United States and its territories.

“All sectors have received some type of relief mechanism except restaurants,” Vázquez said. “The local government has prioritized other industries to disburse the aid. At ASORE we are committed to landing the effort at the local level and we invite the government to also extend a helping hand to the restaurants.”

Gustavo Vélez, an economist and founder of Inteligencia Económica, noted that “[r]estaurants are an important pillar of economic activity in Puerto Rico.”

“Given the difficult situation facing the industry, ASORE identified a need to measure in the short term the impact of the business closure due to COVID-19 and how it would affect the industry,” the economist said. “The objective of this report was to analyze the sector since it does not have a recurrence of data on its level.”

Both Vázquez and Vélez agreed on the value of the report, since the restaurant industry is one that was facing obstacles long before the pandemic, due to economic contraction, high energy costs, inconsistent and highly bureaucratic permitting, and other factors.

To carry out PROJECTIONS 2021, Economic Intelligence surveyed 88 participants, including owners, operators, managers and employees in the sector, a set that includes 762 establishments.

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