As it spreads, COVID-19 roils markets
When we were producing the March issue of Franchise Times back in February, COVID-19, the disease caused by novel coronavirus, was largely contained to the Chinese market and the handful of Chinese exposed stocks. Oh, how things change.
Now, major metros and entire states are all but shut down—and many bars and restaurants are indeed shut down—major events are canceled and scores of consumers are teleworking.
The economic impact will be severe. In a survey by IGM, the Initiative on Global Markets, of the nation’s top economists, more than half agreed that even if the number of deaths is similar to a typical flu season, COVID-19 is likely to cause a major recession. Just 5 percent disagreed. China released economic numbers for January and February, and they were worse than expected. Retail sales were down more than 20 percent, factory output was down 13.5 percent and investments cratered—especially in commercial real estate. March will be even worse following the spread of the virus.
In response, the Federal Reserve already slashed rates to near zero and committed more than $1.5 trillion to buoy the stock market. But economists believe the impact on the U.S. economy will be even worse given the nature of our consumer-centric economy. If nobody is buying burgers, going to bars, sporting events, traveling, getting their nails done or doing much aside from watching Netflix, it’s going to be rough.
Restaurants may bear the worst of it. New York City barred restaurants from providing in-house dining, with the State of New York and several others following suite. Operators can only provide takeout and delivery.
In Seattle, the earliest major metro to see widespread effects from the pandemic, well-known restaurateur Tom Douglas saw traffic fall by 90 percent. He temporarily shut down 12 of his 13 restaurants and laid off 800 employees.
Many restaurants can’t survive a bad month, let alone a total shutdown, and when they’re hovering at about 5 to 10 percent in sales, delivery is not sustainable. Takeout-heavy locations and those with drive-thrus may fare better, but with widespread telework, they will suffer as well.
Buckle up folks. The effects of COVID-19’s spread are just coming into view, and they do not look good. And keep washing your hands.