It's been a tough go for restaurants, to say the least. At the start of the pandemic, they were forced to close their doors to in-person diners, which hit a lot of establishments hard -- particularly those that derive much of their revenue from alcohol sales.
Even after in-person dining was greenlighted, many restaurants were forced to operate under capacity limits until things improved on the coronavirus front. In fact, it's only recently that eateries have been able to go full steam ahead, packing in diners once more.
Because restaurants were so hard-hit, they were entitled to their own specific relief fund worth $25 billion. That's on top of aid, such as loans from the Paycheck Protection Program, they were privy to earlier in the pandemic.
But even so, a large number of restaurants are still struggling today. In fact, 39% were unable to cover the cost of their June rent, reports Alignable. And while that marks an improvement from May, when 49% of restaurants couldn't pay rent, it still means the sector is far from a full recovery.
Restaurants still face challenges
You'd think that with capacity limits finally being lifted and more people being vaccinated, restaurants would be raking in the dough right about now -- especially after people have been cooped up at home for a year. But restaurants are now facing a new challenge at this stage of the pandemic: labor shortages.
A lack of workers has forced many restaurants to reduce their hours and limit capacity, not for health reasons but because they can't manage larger crowds. And while some are enticing workers with perks like sign-on bonuses, other restaurants are still struggling to meet their staffing needs.
Part of the problem stems from the fact that boosted unemployment benefits are still in place in 24 states. That enhancement puts an extra $300 a week in jobless workers' pockets -- on top of their state benefits -- and in some cases, that $300 boost alone is more than or similar to what food-service employees make by working full-time.
In fact, Alignable reports that 71% of restaurant owners feel the labor crisis will improve once that $300 weekly boost runs out, but that's not set to happen until the beginning of September. As such, some dining establishments may continue to have trouble paying their rent, which is bad news for the landlords they owe that money to.
Compounding the problem is the fact that food costs have also risen. The cost of pepperoni, for example, has soared 60% since April. And an ongoing shortage is driving up the price of chicken, a restaurant staple.
Of course, these circumstances are putting commercial landlords in a real bind. On the one hand, many can't afford to allow restaurants to keep deferring rent payments. On the other, if they force the issue, those restaurants could run out of money and shut down completely, leaving landlords with vacancies to deal with.
Shuttered restaurants are actually bad news for real estate investors across the board, as they could bring down the value of the properties that surround them -- both residential and commercial.
Some of the issues restaurants are facing could resolve themselves later in the year as boosted unemployment comes to an end and supply chains start to catch up with demand. But until that happens, restaurant landlords may need to sit tight -- and brace for several more months of overdue rent.