Small Restaurants’ Struggle with Rent

Aug 4, 2022 | Ask "Z" Economist

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Executive Summary: 45% of independent restaurant operators reported that they couldn’t pay their full rent this month according to Alignable’s survey of small business owners.

This reflects their inability to pass on inflationary food, labor, and operating costs to their customers sufficiently to break even, let alone generate a profit. Would it make a difference if there were fewer restaurants? Would the remaining restaurants be able to pass along their higher costs with less competition?

For that to happen we must assume that consumers can pay higher menu prices if there were no opportunities to dine out for less at marginal stores. Maybe some consumers can afford higher prices, but many cannot.

In any case, restaurant unit counts actually increased +7.6% from 4Q16 to 4Q21 – even through the covid closures. If inflation is not brought under control by increasing the supply of energy & food, restaurants may only be left for the rich, and far fewer will be needed.   

Restaurant Rent Graph

Unit Count Graph

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