Fast-food chains are vultures feasting on the carcasses of independent restaurants. But, the American government killed those mom-and-pop businesses in the first place.


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Chains are swallowing up independent restaurants across the US. iStock/Getty Images; Samantha Lee/Business Insider
  • The death of independent American restaurants during the pandemic chains like McDonald’s and Starbucks a natural villain. 

  • Analysts say that fast food chains will likely benefit from the $39 billion in sales linked to tens of thousands of restaurants closing across the US. 

  • But, the federal government is to blame for its failure to save these restaurants — not fast-food chains. 

  • This is an opinion column. The thoughts expressed are those of the author.

  • Visit Business Insider’s homepage for more stories.

In a recent video, Angela Marsden stands in front of her Los Angeles restaurant, Pineapple Hill Saloon & Grill.

“I’m losing everything,” Marsden says. “Everything I own is being taken away from me.” 

Marsden has been forced to shut down outdoor dining at her restaurant due to Los Angeles’ stay-at-home order. In the parking lot next to her restaurant, a film crew is setting up catering – in tents that look shockingly similar to Marsden’s own outdoor dining set up. 

It’s a stark comparison. For a second, it seems like Marsden will blame the movie company. Surely, these organizations can afford to shut down filming, at a time when many restaurants cannot. Instead, she turns her attention to Los Angeles Mayor Eric Garcetti and California Gov. Gavin Newsom. 

“They have not given us money, and they’ve shut us down,” Marsden said in the video. “We cannot survive. My staff cannot survive.”

An estimated 110,000 restaurants have closed since March, and thousands more are likely to follow. As colder weather rolls in and new safety measures are imposed due to the spread of COVID-19, the most at-risk eateries are independent restaurants, like Marsden’s. Meanwhile, sales at fast-food giants like McDonald’s and Starbucks have essentially stabilized. 

Read more: Fast-food giants like Dunkin’ and Chipotle are using the restaurant apocalypse as a chance to ‘swallow up’ independent restaurants that are struggling to survive the pandemic

In the face of what is essentially an apocalyptic event for the restaurant industry, it is natural to look at survivors with envy – and rage. The fact that the restaurants most likely to survive are massive chains like McDonald’s and Dunkin’ helps fuel this fire, as do the multi-million dollar paychecks handed out to the executives in charge of these giants. 

But, ultimately, Marsden is right. The blame for the death of independent restaurants doesn’t lie with film studios or fast-food chains. It rests squarely in the hands of the politicians and the governments.

It’s natural to hate fast food when your favorite restaurant has closed up shop

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McDonald’s sales have stabilized. REUTERS/Piroschka van de Wouw

“I can’t help but resent these brands and their hold over our lives when all I want – and what I really need – is to sit with my friends in our favorite dark bar while drinking Tecates, sharing a basket of matchstick fries, and joking around with a bartender we’ve come to know and love through years of being a regular,” Madeleine Davies wrote in Eater this week, on KFC’s latest viral marketing campaign. 

“If that were safe and possible, maybe then I could lighten up,” Davies continued. “Only none of us can do that because our favorite dark bars are disappearing; chains, with their sense-dulling monotony and corny viral marketing campaigns, could be all that remains.” 

Davies’ concerns about chains taking over America are reasonable. Analysts have said that the closures of independent restaurants will fuel the growth of chains in the coming years. For example, investment firm Cowen estimates that independent restaurant closures this year and next will mean there will be $39 billion up for grabs through 2022. According to Cowen analyst Andrew Charles, Chipotle, Domino’s, Starbucks and Wingstop are among the chains best positioned to cash in on hundreds of thousands of mom-and-pop shops dying out. 

But, the chains themselves are not to blame. 

A new report from The Counter this week found that fast-food franchisees amassed more than $1 billion in federal aid through the Paycheck Protection Program (PPP). The Counter raises some important questions about PPP loans, including if a second stimulus package will again be disproportionately funneled to organizations – like franchisees – with greater preexisting financial support. 

At the same time, it is not a bad thing that franchisees received government funds.

Many franchisees truly did need assistance during the pandemic, with restaurants closing and operators declaring bankruptcy. While most chains – especially in fast food – have seen sales recover, their survival was far less certain in the early days of the pandemic.

“Every franchisee is a small business, and they had to close up, and they’re sucking wind,” restaurant industry investor Roger Lipton told Business Insider in May. “They’re hemorrhaging.” 

With $130 billion in unclaimed PPP funds, it is hard to argue that franchisees took funds from more-deserving candidates. There are roughly 4.3 million people across the US who work in fast-food restaurants, according to market research firm IBIS World. These locations shutting down hurts workers just as independents restaurants closing robs employees of their jobs. 

Read more: Franchisees of iconic American chains are ‘hemorrhaging’ sales, as operators of IHOP, Pizza Hut, and more file for bankruptcy

Focusing on fast food ignores the real culprit 

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Many restaurants are struggling to regain sales. BRYAN R. SMITH/AFP via Getty Images

Essentially, PPP loans did what they were supposed to do for fast-food franchisees – organizations with solid financial support and an easily activated take-out business. But, as seen by widespread closures, they failed independent restaurants. You can be skeptical of fast-food chains’ lobbying efforts, but at the end of the day, the government is to blame for this failure. 

Restaurant owners, industry groups, and publications have called for a bailout since March. 

“Unless the restaurant industry receives a financial bailout, we may be looking at the permanent closure of about 85% of independent restaurants, resulting in approximately 16 million people across the country losing their jobs,” California chef Brooke Williamson wrote in an Los Angeles Times opinion piece in early December. 

State and city governments have said they lack the funds to bail out restaurants. So, the responsibility lies squarely in the hands of the federal government – which, after months of negotiations, still has failed to pass a second stimulus package. 

Even the villains of the anti-chain narrative say the government is failing independent restaurants. McDonald’s and Starbucks CEOs have urged Congress to take action in passing another stimulus package, specifically calling out the struggles of small businesses. 

“We need Congress to take action,” Starbucks CEO Kevin Johnson said at Starbucks’ investor day on Wednesday. 

“This is not a competition,” Johnson added. “We are grounded in humanity.”

Of course, there are reasons to criticize massive companies, from the gap in salaries between CEOs and restaurant workers to failure to address persistent sexual harassment problems. A future of American dominated by chains is a grim vision of the future, and one that becomes more likely every day the federal government fails to provide further aid. 

Fast-food chains may be vultures, feasting on the carcasses of beloved mom-and-pops. But, they didn’t truly kill those businesses in the first place. The true culprit in their demise is the failure of the federal government. 

Read the original article on Business Insider



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