Another One Bites the Dust: The Sizzler’s Demise and the Future of Restaurants

The Sizzler restaurant chain has a special place in my family’s lore. My older brother Chris is today a successful musician and small business owner. Back in the mid-’80s, he was a young, struggling musician willing to take any gig that paid. One such gig was at a Sizzler on Chicago’s North Side.

Apparently, the manager of that location thought a classical guitarist would, well, class up the joint. So they paid my brother to play Rodrigo while the patrons dined on over-tenderized steaks and bottomless diet sodas. We razzed our brother mercilessly about this “prestige” gig of his. To this day, he doesn’t find it funny.

So it was with a minor note of sadness that I read that the Sizzler is the latest COVID victim. According to Business Insider, the Sizzler chain is filing for Chapter 11 bankruptcy, citing the pandemic’s impact. The company’s plan is to operate through bankruptcy with hopes of eventual recovery. The bankruptcy impacts the company’s corporate-owned locations, not its franchises. We’ll see how all that turns out.

A Long Road Ahead

The real story here isn’t the Sizzler. I mean, when I read this, my immediate reaction was, “I thought they went out of business years ago.” The bigger issue is, when the smoke clears from this mess, what will be left of the restaurant industry? And, more critically, how will it be permanently changed?

So far, indications suggest things will get worse before they get better. A lot worse.

For example, Market Watch is reporting today that the New York’s Comptroller is forecasting up to half of NYC’s restaurants and bars will go belly up within the next six months due to the virus’s impact. That’s a roughly billion-dollar industry taking it squarely on the chin.

On a national level, the data has been all over the map, but mostly alarming. For example, in June, the Independent Restaurant Coalition issues a report estimating that 85% of independent restaurants may go under by the end of this year.

Chain restaurants are, of course, being severely impacted as well. We’ve already mentioned the Sizzler. Dunkin Donuts will likely survive the pandemic, but 800 of its locations will not.

Another survey, released in July by Aaron Allen & Associates, suggests about a third of all U.S, restaurants could fold by year’s end.

A Long Winter?

Of course, the big question hanging over restaurants and bars, particularly those operating in colder climates, is what impact will the winter have on their trajectory? The combination of a bad COVID and flu season could force new restrictions on indoor dining. And it’s easy to imagine this being a coup de grace for many establishments that have just barely managed to hang on to this point.

As we’ve noted previously, it’s always difficult to nail down which restaurants will be true COVID victims. After all, the restaurant business is tough in the best of times. Some operations were viable in a good economy, yet done under by the pandemic. Others were the walking dead. You know those establishments we walk or drive past every day (and never patronize) and wonder when they will finally throw in the towel. Well, COVID has forced their hands, but how long would they have otherwise survived? This natural messiness in the data aside, the bloodletting is real and catastrophic.

Adapting to the New Normal

So how are restaurants adapting to improve their odds of survival? And how optimistic are they? Localogy’s Modern Commerce Monitor™ offers some insights.

The MCM Wave V-III study, completed in June, includes restaurants as one of the verticals broken out in the sample. In August, Localogy issued a special MCM brief on the restaurant industry based on the Wave V-III data.

One notable finding was that, while conditions have generally improved between April and June, restaurants have retailed a fairly sober outlook on recovery. Certainly when compared with small businesses overall.

As the chart below notes, 61% of restaurant respondents believe the recovery will take nine months or more, or won’t happen at all. The good news is that the number not expecting to service declined from April to June. This may reflect the optimism of the survivor. Among the full MCM Wave V-III sample overall, 44% say recovery will take at least nine months.

 

Localogy’s data shows that the restaurants that survived the initial crisis are turning to technology and new processes to carry them through. For example, 45% of restaurants expect to adopt more online technology to address COVID concerns. And 60% plan to offer online ordering.

The MCM Restaurants brief offers much more insight into how restaurants have adapted. Localogy members can request a copy here.

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