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Jack Li, founder of menu research firm Datassential, said 11.5% of restaurants in the country are not open right now.

Datassential: 'Restaurants are closing down where we've just sucked people out of the economy'

Jack Li, founder of market research firm, said restaurants reliant on heavy office foot traffic could have longer recovery if telecommuting sticks

 Restaurants highly dependent on foot traffic from office and tourist populations have been the hardest hit by the coronavirus pandemic, according to Datassential. As the industry enters the recovery phase, these restaurants will be further challenged employers become more flexible about employees telecommuting.

Jack Li, founder of menu research firm Datassential, said 11.5% of restaurants in the country are not open right now. Of those, 3.3% are permanently closed while 8.2% are temporarily closed.

The regions or states with the most temporary closures are Hawaii (highest rate of closure), Washington D.C., New York and Nevada.

“Right now it's restaurants in urban areas that are most closed,” Li said during last week’s Restaurants Rise Live digital conference.  “If you look at the numbers in rural areas about 7% of restaurants have closed. The numbers double among restaurants in urban areas.”

He said some of those temporary closures may turn into permanent closures as the industry enters the recovery phase.

“It's very hard to know exactly which places will survive and thrive going forward and which ones are just not going to be able to make it,” Li said.

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Li gave a keynote speech during the four-day digital conference organized by Nation’s Restaurant News and Restaurant Hospitality. The free event, held last week, provided insights and business solutions for restaurant leaders navigating the COVID-19 environment.

Li said restaurant owners should look at where stores are located to understand how they might fare during the recovery phase of the pandemic.

Another factor that could impact how fast a restaurant bounces back: telecommuting.

It’s estimated that at least 50% of American workers are currently working from home during the COVID-19 crisis, according to various surveys and reports.

Li suggested that telecommuting has proven to be effective for some companies during the stay-at-home orders and that could lead to a dramatic shift in foot traffic for restaurants located in commercial areas.

That could lead to lower traffic volumes during lunch, normally a peak period for restaurants near high rises and office complexes. 

“And this is probably going to be one of those things that actually has a lasting impact [and] will really reshape some of the restaurant industry,” he said.

This will be especially harmful to restaurants where office workers outpace residents. And, it also explains the high rate of temporary closures in urban areas where restaurants rely on office or commuter traffic.

Other dayparts have been affected as well. McDonald's said breakfast sales are down because there's fewer people commuting in the morning. 

“Restaurants are closing down where we’ve just sucked people out of the economy,” Li said.

If that pattern continues, recovery could be challenging to brands located in urban zones.

“If you pull consumers out of an area because they're not going to offices to work, you make it very challenging for restaurants,” he said.  “That will have a very large impact on what recovery looks like.”

To learn more about how consumer behavior has changed during the pandemic, watch a replay of Li’s Restaurant Rise webinar, or read this article: "Consumers are excited to return to restaurants, but they want a safe and relaxing experience, Datassential says.”

For our most up-to-date coverage, visit the coronavirus homepage.

Contact Nancy Luna at [email protected] 

Follow her on Twitter: @fastfoodmaven 

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