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Rent delinquency rates for small restaurant owners remain high, though have shown an improvement since October.

Rent delinquency rates for small restaurants improve in November

New data finds that 42% of independent restaurant owners could not afford to pay rent in November, a 7-point improvement over October.

New data from Alignable shows that 42% of independent restaurant owners could not afford to pay the rent in November. While this number is high, it marks an improvement over the 49% delinquency rate in October.

In September, 36% of restaurants couldn’t pay their rent, while in August and July, the number was 46% and 45%, respectively.

Across sectors, 41% of U.S. small business owners reported that they could not pay their rent in full and on time in November, which is a new record for 2022. Typically, the fourth quarter yields the opposite trend for such businesses, but factors such as higher rents and declining monthly revenues continue to take a toll. Alignable reports that rent is up 1% in November, for instance, and Moody’s Analytics predicts rent prices to continue at a growth rate of 5% to 7% through Q2 2023. Further, 73% of small business owners said consumers spent less in November versus October as inflationary pressures linger.

For restaurants, however, November’s rent delinquency numbers are a step in the right direction as consumers settle into the busy holiday season. This time of year can be a boon for many concepts, particularly those that offer catering and gift card sales. Joseph Alvarez, senior vice president of sales, catering and community relations at Boston Market, said November and December are “extremely profitable months” for the brand, for instance.

“A major portion of our sales is achieved during these two months alone,” Alvarez said, adding that nearly 50% of Boston Market’s catering business is generated during this time.

Additionally, November and December account for more than half of annual gift card sales for the average casual restaurant. Perhaps this is why a majority – 60% - of independent and small chain operators have a positive outlook for the 2022 holiday season.

Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association, also has plenty of optimism to close out 2022.

“Thinking toward the holiday season, indicators focused on things like travel and the allied experiences that come with it are still important drivers of restaurant sales and the indicators for travel are positive,” Riehle said. “If you look at it in a multifaceted way, the pent-up demand for socialization and travel is there and the operator community is much more innovative in tapping into different consumer patterns such as meeting off-premises demand, stepping up their catering and gift card marketing. It’s quite clear consumer attitudes toward restaurants remain positive.”

Contact Alicia Kelso at [email protected] 

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