US election results could have big impact on the restaurant industry

Published on
November 10, 2020

The results of the recent U.S. election is expected to both positively and negatively impact restaurants, which are already struggling to remain open due to COVID-19 restrictions.

The National Restaurant Association has applauded the election of President-elect Joe Biden – who beat out current U.S. President Donald Trump, who was seeking a second term – but the organization stressed the urgency of Washington delivering financial help to the foodservice industry. 

“So far, 100,000 restaurants of all types have closed across the country, and another 40 percent are unlikely to make it through the winter without additional relief from the federal government,” NRA President and CEO Tom Bené said in a press release.

NRA is asking Congress to support proposals that include “immediate relief for restaurants and small businesses across the country,” it said. “Without this assistance, thousands of restaurants will close before a long-term solution can even be considered,” according to the organization.

International Foodservice Distributors Association (IFDA) President and CEO Mark S. Allen echoed Bené's concerns.

“Stimulus funding is needed now, after weeks of stalled talks and failed negotiations. Talks must restart in Congress and the White House to deliver badly-needed funding to those who need it,” Allen said in a press release.

Outside seating options, which helped restaurants and bars liimits placed on indoor dining this summer, will become a less-popular option among patrons now that it's getting colder as the country moves into winter, Allen said. In addition, several states have recently issued new restrictions on indoor dining.

“Restaurants and supporting businesses, including foodservice distributors, need funding to ensure they can make it through this crisis," Allen said.

With several U.S. Senate races still to be decided, with the balance of power in the Senate dependent on the outcome, it is difficult to determine the potential economic impact the election will have on U.S. restaurants, Technomic Managing Principal Joe Pawlak told SeafoodSource.

“If the prevailing winds and current prognosticators are correct, at least one of the Georgia seats will go to the Republicans in the runoff in January. If that is correct, it will be difficult for the new administration to get through legislation that would impact the restaurant industry most, such as a higher minimum wage, higher corporate and higher income group taxes, and stronger regulations,” Pawlak said.

Regardless of who wins the Senate, Pawlak said Technomic expects another stimulus package to be passed, which “would have a positive impact on struggling restaurants right now,” he said.

Election results already impacted the foodservice industry in Florida, where voters approved an increase in the current minimum wage of USD 8.46 (EUR 7.00) an hour to USD 10.00 (EUR 8.00) per hour starting September 2021. The minimum wage will gradually rise to USD 15.00 (EUR 13.00) per hour by 2026.

“Given the devastating impacts COVID-19 has already had on Florida’s economy, we are extremely worried about the job losses and business closures that will accompany this mandate,” Florida Restaurant and Lodging Association CEO Carol Dover said in a press release.

FRLA estimates the minimum-wage increase will cause the elimination of 158,000 jobs, on top of the 336,000 positions that have been eliminated by the pandemic.

Biden also supports raising the federal minimum wage to USD 15.00 per hour, which would impact restaurants across the country. Currently, each state sets its own legal minimum wage.

Restaurants and other foodservice operators continue to be one of the industries hit hardest by the coronavirus pandemic.

FIC Restaurants, the parent company of the Friendly’s restaurant chain, is the most recent operator to file for Chapter 11 bankruptcy protection as a result of the coronavirus crisis. And Austin, Texas-based restaurant Snap Kitchen, which offers healthy prepared meals, is permanently closing at least 20 of its 33 locations, Restaurant Business reported.

“Like so many others, our retail stores have suffered greatly in the wake of COVID-19 and its devastating impact on retail and the foodservice industry,” Snap Kitchen CEO Anthony Smith said. “Snap Kitchen was not immune to the effects of the pandemic and, in order to survive as a company, we’ve had to make the incredibly tough decision to shutter the majority of our stores and say goodbye to many of our dedicated employees.”

Meanwhile, broadliners US Foods and Sysco Foods reported a plunge in earnings in their most recent quarters.

Sysco’s fiscal first quarter 2021 sales plummeted 23 percent to USD 11.8 billion (EUR 9.9 billion), while gross profit dropped 24.6 percent.

US Foods’ net sales decreased 10.5 percent to USD 5.8 billion (EUR 4.9 billion), while gross profit declined 15.7 percent in the third quarter of 2020.

"In the third quarter, we demonstrated the resiliency of our business model by continuing to gain market share in an industry significantly impacted by COVID-19," US Foods Chairman and CEO Pietro Satriano said in a press release. "Our case volumes continue to recover and adjusted gross profit margin improved by 70 basis points over the prior quarter.”

Photo courtesy of Devi Bones/Shutterstock

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