New York City recently started allowing outdoor restaurant dining.
Photo: lucas jackson/ReutersRestaurants that survived the coronavirus hit in March and April are reeling from a second punch that could put more eateries out of business.
Many restaurants that were just starting to recover some sales are bracing for another, potentially existential round of restrictions as a resurgence in coronavirus cases in the U.S. prompts a pullback in reopening plans.
Numerous states, cities and counties have halted or rolled back reopening plans for bars and restaurants amid a surge in Covid-19 cases and suspicions by public-health officials that gathering in crowded eateries and nightspots may be contributing to the virus’ spread. The turnabout comes as many restaurant owners spent thousands of dollars to equip dining rooms and staff for a new normal and were starting to recover some sales lost during the spring.
“This is the rainy day a lot of businesses don’t prepare for,” said Diego Galicia, a co-owner of Mixtli, a restaurant in a renovated train car in San Antonio.
Restaurant sales that had been improving since hitting lows in April are now sputtering in the first states to log rising case counts such as Arizona, North Carolina and Nevada, according to market-research firm NPD Group Inc.
Restaurant reservations peaked on Father’s Day, then slammed back to earth in markets such as Miami, Houston, and Scottsdale, Ariz., OpenTable data showed. McDonald’s Corp. said Wednesday it was halting the return of dine-in service in the U.S. for three weeks.
Restaurant owners say they understand the need to pull back and the public-health reasons behind it. Those who were banking on a gradual reopening for the rest of this year are now recalculating sales expectations, after investing in new equipment and training staff to host diners again. Many owners are turning again to to-go menus they threw together during the pandemic, but that only replaces so much business.
James Beard-award winning chef Nina Compton reopened one of her two restaurants in New Orleans at half capacity.
Photo: Denny CulbertMr. Galicia, who started offering carryout during the pandemic, said he resumed partial dine-in service at Mixtli last month and booked two weeks’ worth of reservations. He stopped dine-in service again on June 19 as Texas cases rose anew. Mr. Galicia said he had paid to test his staff for the coronavirus and invested in a hospital-grade air purifier.
Many states still allow outdoor dining, but eateries with patios typically made at most a fifth of their sales there before the pandemic, said Trevor Boomstra at consulting firm AlixPartners LLP.
“Restaurants can’t live and survive by patio alone,” said Mr. Boomstra, a director in the firm’s restaurants practice.
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In New Jersey, where government officials canceled plans to resume dine-in service before the holiday weekend, Tim McLoone is putting tables in parking lots and on balconies outside his Jersey Shore restaurants. The restaurateur said that he is generating around 70% of pre-pandemic revenue at seven seaside locations because of good weather, but that four other restaurants remain closed.
“If we get rain we go to zero. It’s not a sustainable business model,” Mr. McLoone said.
Surveys show that consumers in virus hot spots are cooling on the idea of dining out, particularly older adults most at risk of falling seriously ill from the disease.
Wyatt Batchelor, a partner at restaurant franchise MBN Brands LLC, said sales are dropping at his company’s California Burger King and its Texas Jimmy John’s Gourmet Sandwiches locations. He said he has stopped dine-in service in some of his Southern California Burger King locations.
People eating outside a Manhattan wine bar in late June.
Photo: andrew kelly/Reuters“This obviously puts pressure on us,” said Mr. Batchelor, who owns nearly 70 chain restaurants.
James Beard-award winning chef Nina Compton reopened Bywater American Bistro in New Orleans this past week at half capacity and is operating inside dining service—for now. “Financially we need to reopen,” she said.
Restaurant owners who received loans from the federal Paycheck Protection Program say they are trying to stretch the money. A $120 billion rescue fund for restaurants has some bipartisan support in Congress. The $800 billion restaurant industry employed 15 million U.S. workers last year, according to the National Restaurant Association trade group.
Restaurateurs say some suppliers and bankers have relaxed terms on contracts and loans, but they have had less luck with landlords. Rent payments by sit-down restaurant chains are trailing pre-virus levels, according to real-estate data company Datex Property Solutions.
And a new wave of restaurant closures is growing. Review site Yelp Inc. found last month that 53% of the restaurants noted as closed on its site marked their closures as permanent. Chain operators such as Darden Restaurants Inc. has permanently closed some locations since the pandemic hit.
Blackbird, a Chicago restaurant that sparked the careers of numerous high-profile chefs, said on its website this past week that it was closing for good.
“Our hearts are broken,” the restaurant wrote.
Write to Heather Haddon at heather.haddon@wsj.com
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