Food related business closures

[Twiggy]

It's been a wild ride these past few years. With lockdowns and social distancing, many businesses struggled. But I've also seen some incredible resilience.

Here's something that's caught my eye: I've come across 3 local businesses that actually launched during the pandemic, all focused on vegetable / vegan / wholesome food and delivery. They boomed as people stayed home, but recently I've noticed they've closed their doors all within the last 4 weeks. Is it “end of tax year“ and they've just said no/ or grants and subsidies “bounce back loans etc…

Is this a global trend? Are businesses that thrived during the stay-at-home era struggling to adapt as things go back to "normal"? Or are costs just too much to stay open? 

Would love to hear your thoughts! Did you see similar closures in your area? Was it specific to delivery businesses, or across industries? Let's discuss in the comments!

[tranguyen]

We're actually seeing a number of cafes & restaurants closing in Dublin in the last year or so, @Twiggy.

Many cited rising costs of ingredients as one of the reasons for closures (or for many, it necessitated price changes), with the other being the tax rates. In ireland, a temporary rates of 9% was introduced in 2020 in response to COVID but increased back to 13.5% in Sept last year. For this reasons, many businesses are calling for a reduction in VAT rates.

Here's a really good feature with some local business owners who have had to close their doors recently. 

I know for myself, I definitely have to reduce the number of times I'm eating out or buying coffees a week, just with the rising cost. That definitely doesn't help businesses, I'd gather.

Would love to know your thoughts @SunnySideKitche @dimo10 @Lovewell @GourmetOnWheels ❤️

[mksavage]

I actually think a large contributing factor to increased closures now, at least in the US, is the amount of financial/government support that was available to businesses, and specifically restaurants, during the pandemic. The financial support was so helpful and many of us wouldn't have survived without it. But, the truth of it is, while much of the financial relief was "forgivable," it was a one time boost. It didn't change the daily reality of the restaurant industry's incredibly thin margins. And now, with costs rising so dramatically and quickly, it's an incredible challenge to stay afloat once that pandemic "boost" ran out. In some ways, I think it just delayed the inevitable. I said at the time, "This will help restaurants now, but I bet we see a ton close in 2 years." 

I do also think that some items/offerings that were highly sought after during the pandemic aren't as necessary/popular now that life has returned to normal-ish. One example for us is -- during the pandemic we started making Thanksgiving sides (stuffing, potatoes, pies, gravy, etc.). In 2020, no one was doing large gatherings, everyone was staying home, and 4-portion sides were hugely popular. We've continued doing it ever since, and each year, as people begin gathering in groups again, it becomes less popular. It just doesn't fit any more. So, we've decided to cut it and invest our time/energy/staff elsewhere. I think we'll all have to continue to pivot as the world continues to change.

[Doran]

NOT FOOD RELATED BUT I agree with a lot of this.  I know my "retail" side started during the pandemic when facials were illegal to perform here for about 18 months.  That boomed up until last year and now is completely dead.  With more people back in the office I don't get the walk-by traffic.  Also, I think, with the cost of things skyrocketing people aren't as wanting to "shop local" and instead are looking for the very best deals.  I can't compete with Amazon prices.  

Many of my goods came from local makers with side hustles who have all closed down due to costs increasing, rent really skyrocketing, local government cracking down on lisc and permits that they all previously avoided and less demand all crashing together.  They all had to return to the office and don't have as much time plus are now having to actually pay the overhead and taxes of a business that wasn't there in previous years.  Grants and things are all gone for most of them.  

All the "cheese board" vendors that popped up are gone.  There were about a dozen or so in 2021 and NONE now in our area.  Same with the "picnic" popup companies.  They are all gone.

Most of my neighbors are all food related that opened around the time of the pandemic and they've done well staying open but I spoke with the guy across the way the other day and he turned off online ordering due to staffing issues, raise in prices from his processor for online and the hassle it was causing him.  He is lucky to have a steady lunch crowd that are willing to wait 30 mins in line.  We also spoke about how more and more people are paying in cash due to more places charging a credit card fee or offering a cash discount.  Neither of us do that but later that week I noticed many of the spots I eat lunch at each day did.

It is just really expensive this year to run a business.  My sales numbers are the same but expenses have almost doubled for me.  

[ryanwanner]

This has been a tough market for all small businesses for sure. While my coffee shop was forced to close because of landlord issues only, I'd be lying if I said that it was all good heading into the closure.

My personal take, controversial as it might be, is that society is becoming homogenized. Corporate chains are everywhere. In the US foodservice world, there are 4 big distributors for product. Each one of them source from pretty much the same production groups. Which means that the major difference between the corporate chains isn't coming from the kitchen: it's the decor in the dining room. The menus may have different names for plates, but they're all the same. As the general public continues to patronize these places, their palates become used to the mediocre product on the plate. Quite a few mom and pop places have tried to compete at the price level, but because we're not able to purchase at volume, our cost of goods is usually a lot higher. That means that comparative price point strategies won't work. So even if we serve the same quality as the chains, we have to charge more. If we up the quality of the menu, we will have to charge even more, and we run the risk of our customers not "understanding" our offerings because they're different from what they get at the local Applebees.

True story: on my cafe menu I had a frisée salad topped with mandarin oranges and red onion with a housemade warm coffee bacon vinaigrette on my menu: my most common complaint about that salad is that "it didn't look like an iceberg salad so I don't want it." They wouldn't even try it.

I also don't believe that the corporate world is having problems with their food costs. I am part of an annual festival in my area, and I run the pancake breakfast. Been doing it for 10 years now. One year I sat down and figured out the plating costs. Since the festival foundation operates on a very strict budget, I didn't plan for scratch items: just off the shelf pancake batter mix, liquid eggs, sausage patties, OJ, and the paper products. My costs were $2.50 a serving. It was a meal comparable to anything you can get at Denny's, IHOP, or the like, and they're charging $13-14 a plate.

As a coffee roaster, I do what I can to educate consumers on the entire path coffee takes to get from seed to cup and how many of the corporations do everything they can to do things as cheaply as possible. Part of that is that I try my hardest to source ethically and make sure the farmers are getting more than their fair share of the pie. That means my costs are higher. When set up at farmers markets, I have a limited time to talk up my processes, and usually I'm interrupted by the typical question of "how much does a bag cost?" When I say anywhere between $17-21, their hand snaps back like they just touched a live electrical wire. They'd just go to the local membership store and spend $10 on a two pound bag of something. That roaster is likely tied to the big conglomerates, and I guarantee you they're not looking out for the farmer. In fact, one of the conglomerates recently forced a Net 365 payment on the farmers: the farmers don't get paid for one full year after delivering the coffee to the conglomerate. Coffee is usually a once a year crop: you do the math.

I'm not indifferent to the stresses inflation has put on the average American (another corporate driven issue, not the governments: fight me on that statement). When a combo meal at McDonalds now costs $10-20 and a sit down meal at a chain will cost you $20-40 per head, it hurts. So where does that put the small restaurants? To stay alive we need to charge more than that. People stop coming because they can't afford it, they get the standard fare from the chain, their palates get used to mediocrity, small businesses suffer more. Vicious, vicious cycle.

And I haven't even started going into the extreme pressures the labor dollar places on businesses. But I've depressed myself enough with this post.

[VanKalkerFarms]

We opened our first Bakery in Nov of 2019 so we got like 5 months of "Pre-covid" times.  I have nothing really to compare to but we are doing better and better every year as word of mouth and where our location is spreads.

We crazily went ahead with location 2 in November of 2020 was our launch so that was very different.

I feel while a niche area like vegan or gluten free etc can be great, but you are eliminating 75-95% of all available customers right off the get go.  Now you really have to get the word out to those potential customers in a more targeted way.

Personally Labor is by far my biggest issue as it just keep creeping up into the mid to upper teens and even then getting 1 out of 10 applicants to even show up for an interview is rare.

[phillipsrw]

@Twiggy I think it's generally difficult times out there. It's a combination of all you mentioned plus a few others thrown in for good measure depending upon your sector. There has been s significant softening for the preference to purchase from online market place platforms, perhaps as there is a premium attached to their products to compensate for the fees, so people are shopping around. There has been a shift from the online sales to in-store, perhaps people enjoy the shopping experience more or its a more cost effective way to pass the time. Whatever, it's pretty tough trading our there for a lot of folks!

[Twiggy]

I mean Cazoo went into administration today - Cazoo are a UK based online second hand car site that started in 2018 and boomed during the pandemic It was worth $7bn in 2021 on NY stock exchange - current worth $30m.  Peoples buying habits have changed - product that wasn’t available e.g car parts to make new cars components etc hence surge in second hand.  

[RuckusDonuts]

Could be just simple statistics:

Small business failure rate within 1 year of opening: 20%

Small business failure rate within 2 years of opening: 33%

Small business failure rate within 3 years of opening: 40%

But yes, a variety of factors could be in play. The aforementioned pandemic scenario could have created false statistics. Food costs have skyrocketed, so organic models may be feeling much smaller margins & higher COG/prices. Niche market items have just that - niche customers - and the higher the niche (organic/vegan/etc) the more educated & demanding they'll be. We've focused on developing wholesale to the point it was 10% of our overall revenue in 2023, plus we're doing more events/popups, adding new items to keep developing new revenue streams from new & existing customers.