Reopening constraints and profitability
States are setting new requirements as conditions for businesses reopening. They are particularly strict and disruptive for social businesses like restaurants and health clubs. The central challenge facing business owners, operators, and investors is whether they can operate profitably in this environment. For example, in Colorado restaurants will be operating under the following guidelines:
· 50% occupancy or 50 diners, whichever is less.
· No more than eight people to aparty.
· Tables & people at least six feet apart.
· Staff must wear masks.
· Customers must wear masks, except while eating and drinking.
· Uncooperative customers should be asked to leave.
Many businesses will have to retool their business models and competitive strategies to profit under similar constraints. All will face major uncertainties in consumer attitudes and behaviors, particularly if, as expected, new outbreaks take place. Finally, the deep recession will likely depress consumer discretionary spending and make it more difficult to quantify how different factors affect consumer demand.
I'll share a preliminary framework analysis of the restaurant industry in my next post.