California, Restaurant Closures Increase

As of Dec. 1, nearly 17% of U.S. restaurants were closed permanently or long-term, according to a study conducted by the National Restaurant Association. In another recent survey conducted by the California Restaurant Association, 30% of restaurants say they will either close their restaurant permanently, or they will downsize by closing some locations. What is the actual situation in California from March to August 2020?

Since the first fears of the pandemic emerged in the U.S. in early March, businesses across the nation have endured six months of uncertainty. Even in the wake of increased closures we’re seeing businesses effectively transition to new operating models while keeping their employees and consumers safe.

Yelp’s closure data also shows that demand for home, local and automotive services has remained robust with a far lower rate of closures compared to restaurants and retail.

The Restaurant Industry: the Most Impacted by Closures

The restaurant industry continues to be among the most impacted with an increasing number of closures – totalling 32,109 closures as of August 31, with 19,590 of these business closures indicated to be permanent (61%). Breakfast and brunch restaurants, burger joints, sandwich shops, dessert places and Mexican restaurants are among the types of restaurants with the highest rate of business closures. Foods that work well for delivery and takeout have been able to keep their closure rates lower than others, including pizza places, delis, food trucks, bakeries and coffee shops.

Hawaii, California, and Nevada have the highest rate

Even as the pandemic spreads nationally, geographically Yelp data shows business closure rates vary across the country. Bigger states and metros with higher rents and more stringent local operations for small businesses throughout the last six months have felt a greater toll.

For the states with widespread business closures, the economic struggle appears to be closely coupled with unemployment rates. Hawaii, California, and Nevada have the highest rate of total closures and permanent closures – they’re also the three states with the highest unemployment rates, and among the biggest states for tourism.

Meanwhile, bars and nightlife, an industry 6X smaller than restaurants, has endured an especially high closure rate, with an increasing percentage of closures being permanent. As of the end of August there were 6,451 total business closures, of which 3,499 were permanently closed (54%).

How about California at city level?

The states with the most closures are home to the hardest-hit metros: Las Vegas in Nevada, Honolulu in Hawaii, and several of the largest California urban areas all are among the metro areas with the highest total closure and permanent closure rates (San Diego, San Francisco, San Jose, Los Angeles and others).

Undoubtedly, California, particularly Los Angeles, suffered the most restaurant closures. The majority of these closures were small restaurants: burger restaurants, sandwich shops, pizzerias and small Asian restaurants. However, some very famous restaurants have also closed, including a number of longstanding businesses ranging from the 92-year-old Alfred’s Steakhouse to the 85-year-old Harrington’s Bar and Grill in San Francisco.

Undoubtedly, California, particularly Los Angeles, suffered the most restaurant closures.

Yelp

Key Points

• The restaurant industry is the most impacted by closures
• Hawaii, California, and Nevada have the highest rate of total closures and permanent closures
• Business closures closely coupled with unemployment rates
• Las Vegas (NV), Honolulu (HI), and several of the largest California urban areas (particularly Los Angeles) all are among the metro areas with the highest total closure and permanent closure rates.