New Restaurants are Starting to Open in the Pandemic

A lot of discussions have been held and predictions shared when it comes to restaurant closures and COVID-19. And, generally, talk of expansion and openings is framed against a post-pandemic backdrop—a world where big chains get bigger and well-capitalized brands flood the real estate left behind. But what about present growth? One potential byproduct of pandemic conditions is that it stirs the entrepreneurial spirit. Franchisors are banking on this. People want to take control of their destiny in a time defined by what they can’t do. Perhaps someone was let-go from their job and wants to get in business for themselves. Or maybe those same lowered barriers for entry can pave the way for an individual with a restaurant dream who needed a push. Yelp on Thursday released its Q3 Economic Average report. While certain signs reflected continued economic uncertainty, others uncovered promising signs of adaptability. “Restaurants and food businesses, an industry hit hard by the pandemic, have seen a significant number of brand-new business openings amid the increased challenges,” Yelp said. “These openings and re-openings have been sustained by focusing on health and safety, as well as new approaches to serve their customers, including moving their services and patrons outdoors.” Essentially, there’s a rising number of entrepreneurs opening up restaurants at this juncture in the crisis, at a higher rate than one might expect given the setbacks. Yelp’s data indicated the number of restaurants and food-based business openings are increasingly more in line with 2018 and 2019 volumes (Yelp determines openings by counting new businesses listed on its platform).

The types of restaurants dotting the COVID landscape have changed, however. There aren’t many elaborate fine-dining interiors popping up, Yelp noted. Rather pandemic-optimized venues appear to be the eatery of the future—concepts with some combination of features like large patios, spaced-out tables, order-ahead menus, and efficient-service cuisine. Compared to this time last year, Yelp observed an increase in new openings nationally for open-air food services, such as farmers’ markets (211 openings) and food trucks (1,734). Additionally, pop-up restaurants (100) and seafood markets (84) experienced a jump in openings, year-over-year, “catering to consumers’ interests in novel ways to dine and shop for food outside of traditional restaurant experiences,” Yelp said. The company’s research indicated openings climbed for food businesses that specialize in sweet treats often enjoyed at home or sent to friends and family for socially distant celebrations. Think cupcakes (494 openings), custom cakes (512), and desserts (1,615). Going back to April, restaurants endured a large drop in new openings, as you might expect. But by May the rebound was set in motion, with a 29 percent average monthly increase in new restaurant openings from May to July. This leveled to flat in August and September, with roughly 6,600 new restaurants opening each month. There were only 100 fewer new restaurant openings in September compared to September 2019. New openings in Q3 as a whole were down just 10 percent, year-over-year. Keep in mind, however, this is running counter to heightened closures. In September, Yelp’s Economic Impact Report showed 32,109 closures as of August 31, with 19,590 of those listed as permanent, or 61 percent. The National Restaurant Association has predicted 100,00 could shutter in 2020. This chart below from Yelp illustrates the company’s sentiment—that opening rates have returned to pre-COVID days.  – Source: QSR.