The coronavirus pandemic has taken a devastating toll on restaurants. Since the outbreak began, an estimated 110,000 dining establishments have already closed their doors, and given that many are still operating with capacity limits and other restrictions, their near-term outlook is pretty bleak.
One thing that has been keeping restaurants afloat, however, is outdoor dining. For restaurants located in parts of the country where temperatures stay mild throughout the year, outdoor dining is easy to facilitate during winter. But for those located in areas that experience the brunt of winter, outdoor dining has been more of a challenge in recent months.
Thankfully, a lot of restaurants have adapted by investing in heaters -- those powerful enough to keep patrons warm outdoors even when temperatures plunge. But now, some restaurants are finding it difficult to secure a large enough supply of propane to fuel those heaters. And unfortunately, that could be enough to do them in.
Restaurants can't afford to lose customers
Normally, standard-size propane tanks can be found easily at grocery stores, gas stations, or home improvement stores. But now, some restaurants are finding their go-to sources for propane are all out due to uptick in demand. And that's a problem, because those that don't manage to secure enough propane could land in a situation where they have to cancel dining reservations at a time when they can't afford to do so.
Though many businesses -- notably, retailers -- have been hurt by the pandemic, restaurants have been exceptionally hard hit. In fact, while the U.S. economy managed to add 49,000 jobs in January, the restaurant industry lost 19,400. And that represents the third straight month of job losses at dining establishments.
While there's aid available for restaurants right now in the form of second-draw Paycheck Protection Program (PPP) loans, that relief is also limited. PPP loans for restaurants max out at 3.5 times monthly payroll costs (for most small businesses, they're capped at 2.5 times monthly payroll costs). But restaurants aren't a payroll-heavy business, so many dining establishments may not be eligible for enough PPP funds to get through the next few months. As such, they need to do whatever they can to bring in customers, even if it means searching far and wide for the propane needed to keep their outdoor heaters working.
A hit to communities and real estate investors
A scramble for propane could be just the thing that ultimately forces some restaurants to shutter in the next few weeks. And that's bad news on multiple fronts. Losing restaurants is bad for communities -- it can cause property values to drop. It's also bad for commercial landlords, who rely on restaurant tenants to pay rent. In fact, if too many dining establishments close down, landlords could have a real vacancy crisis on their hands and risk losing their properties, whose costs may be impossible to cover in the absence of steady rent.
In a few months' time, the need for propane should wane as temperatures rise across the country and space heaters are no longer a prerequisite to outdoor dining. But restaurants need to stay on top of the issue until then -- their long-term health depends on it.