The American restaurant industry is on the menu.
Seemingly every day there is a headline announcing a bankruptcy, layoff, or store closing that affects one of the country’s most beloved brands.
Last month, Red Lobster filed for Chapter 11 after closing nearly 100 stores. Cracker Barrel, with restaurants in 45 states, has seen its stock value decline over the past year. The once-thriving Boston Market chain, which had 1,200 locations in the 1990s, is now reportedly down to two dozen.
So what’s behind this quick and informal reckoning?
It’s proof that the inflation virus is still infecting the post-pandemic American economy.
Supply chains crippled by the COVID pandemic lockdown have not recovered. Food costs – especially proteins like chicken, beef and seafood – have risen 30 to 40 percent over the past 36 months. Worst of all for the restaurant industry: customers have not returned from the closures.
Business closures and social distancing orders forced people to change the way they eat. Sixty million Americans (a large portion of the population aged 60 and older) were forced to use their smartphones to order a “free” dinner for the first time in 2020.
But now, these consumers feel comfortable ordering Chinese food from their living room couch.
So what’s behind this quick and informal reckoning? It’s proof that the inflation virus is still weighing on the post-pandemic U.S. economy.
Seemingly every day there is a headline announcing a bankruptcy, layoff, or store closing that affects one of the country’s most beloved brands. Last month, Red Lobster filed for Chapter 11 after closing nearly 100 stores.
And although Americans rarely worked from home before the pandemic, an estimated 22 million employed adults (about 14 percent of the workforce) have not returned to the office, according to the Pew Research Center.
That means fewer people going out to lunch or meeting colleagues for dinner after work.
This has been devastating for companies that invested in physical locations. Restaurants in urban areas have been especially hard hit because their expensive locations no longer receive the footfall they need to pay the rent.
To survive, many have had to transform into commercial kitchens specializing only in takeout.
Some companies will have to go bankrupt, completely reorganize and move to less expensive areas.
However, there is nothing to be done when consumers simply refuse to spend.
In general, wages have not kept pace with inflation and Americans are looking for cheaper alternatives.
Even high-end casual burger chain BurgerFi is now struggling to survive and considering bankruptcy options amid a sharp decline in sales.
In this economy, an ‘upscale McDonald’s’ is a luxury that many cannot afford.
Inflation is devastating for people with average incomes (earning $68,000 a year), with already tight budgets and rising transportation, housing and energy costs.
Unfortunately, there is no telling when – if ever – these prices will come back down to Earth.
The once-thriving Boston Market chain, which had 1,200 locations in the 1990s, is now reportedly down to two dozen.
Cracker Barrel, with restaurants in 45 states, has seen its stock value decline over the past year.
Red Lobster has suffered a triple blow that has destroyed its business. Volatile seafood prices and expensive real estate were probably bad enough. But California’s dire new regulations may have proven too much for the chain, which has multiple locations on the West Coast.
In fact, the restaurant industry’s struggles are most pronounced in deep California, where Democratic Gov. Gavin Newsom has turned the not-quite Golden State into the closest American facsimile to Venezuela.
Newsom signed a law in September raising the minimum wage for fast-food workers from $16 an hour to $20, making decades-old businesses unprofitable overnight.
A California trade group estimated that the Maduro-style edict led to the layoffs of nearly 10,000 workers even before the law took effect on April 1.
A West Coast Burger King franchisee with 140 restaurants announced it would replace workers with digital order-taking kiosks. A major Pizza Hut operator has eliminated delivery services and laid off thousands of drivers.
Now, just 90 days into the new regime, businesses are dropping like flies.
Earlier this month, beloved Mexican chain Rubio’s Coastal Grill announced it would close 48 restaurants in the state due to the “increasing cost of doing business.”
Blaze Pizza will close its California locations and move its headquarters from Pasadena to Atlanta to reduce its state corporate tax rate by more than a third.
Newsom’s far-left administration is completely out of touch with the reality of inflation and the governor has the blood of these failed businesses on his hands.
Earlier this month, beloved Mexican chain Rubio’s Coastal Grill announced it would close 48 restaurants in the state due to the “increasing cost of doing business.”
Even high-end casual burger chain BurgerFi is now struggling to survive and considering bankruptcy options amid a sharp decline in sales.
All of this is terrible news for the American economy.
While major chains Red Lobster and Burger Fi make headlines, mom-and-pop restaurants across the country are facing the same struggles.
A staggering 62 percent of jobs in this country are created by companies with between five and 500 employees. But during the pandemic, President Biden only focused on propping up S&P 500 companies with huge stimulus packages.
Let’s take a look at the Inflation Reduction Act and the Chips and Science Act, which have been estimated to cost up to $1 trillion and $80 billion respectively. Neither bill included a penny for small businesses.
As much as President Biden is desperate to convince the American people that “biddenomics is working.”
It’s not.
Perched on his shaky podium, Biden makes the case that he is rebuilding the economy from the bottom up.
This evidence suggests otherwise.