Exactly 100 years ago, the U.S. dining industry faced its first extinction-level event with the ratification of the Eighteenth Amendment banning the production and sale of alcohol.
While it only lasted about a decade, Prohibition cast a long shadow over the restaurant landscape. The war on alcohol forced hundreds of fine-dining establishments to shut down, by eliminating their most dependable source of profit. The number of restaurants in the U.S. still tripled in the 1920s, in part due to the rise of “lunch car” diners that specialized in food that kids could enjoy with their sober parents, like hot dogs, hamburgers, and milkshakes. As the economist Tyler Cowen explained in his book An Economist Goes to Lunch, the ban of alcohol sales put children at the center of our culinary culture. For decades, he contended, Prohibition infantilized the American palate, making every meal fit for a kid.
Over the past few decades, U.S. restaurants have become world class. Dining out in America has become a kind of art form, leading the writer Eugene Wei to declare, in 2015, that “food has replaced music at the heart of the cultural conversation.” Food critics have noted a restaurant renaissance in Portland, Oregon, New Orleans, San Francisco, Chicago, Washington, D.C., Los Angeles, and New York City. Honoring this achievement, Americans before the crisis spent more money dining out than in grocery stores—something that had never happened before 2015.
But COVID-19 could bring this golden age to an abrupt close. OpenTable reservations have collapsed all the way to zero. Restaurant spending has fallen by about 60 percent across the country, with the sharpest declines in fine-dining, lunch, and late-night food. The situation is especially bad for independent restaurants. “There’s no question that mom-and-pops have disproportionately suffered during this time,” said Jack Li, the managing director for Datassential, a food-and-beverage-research firm.
In the last month, chains have taken $3 out of every $4 spent eating out. That figure is significantly higher than average, according to Datassential. Chains don’t just have more cash flow; they also have more cash savings. The typical local burrito joint barely has enough money to cover a few weeks of employee pay and utilities. Chipotle, meanwhile, has public stock and more than $900 million on hand. The companies that survive the recovery will be those that can hold their breath, with or without government assistance, and there is no doubt that chains have a significant advantage in lung capacity.