Will COVID-19 Kill Independent Coffee?
the Coronavirus pandemic has had a profound effect on small businesses across the country, but perhaps no other sub-category has suffered more than Restaurants. As a subset of these, local cafes are also suffering.
Independent cafes often have their advantage over well-known chains, not only for their superior product, but also for their ambiance. Freelancers often settle down in a cafe to tune in to a project, while colleagues and friends often gather in cafes to relax or catch up while sipping on homemade lattes and scones.
But the allure of the independent cafe is fading as dining inside continues to be a precarious, if not impossible, prospect. While larger restaurants may have the ability to move tables and seat customers six feet or more at a limited capacity, cafes may not be able to make similar arrangements.
Often, cafes are filled with comfy, cozy furnishings that lend themselves to conversation – sofas shared by strangers and small tables for chatting but also encouraging turnover. Many independent cafes have a minimum square footage, especially those located in cities with high rents, and limiting indoor capacity means hardly allowing more than a handful of patrons to enjoy their drinks at home. time.
Of course, independent cafes could benefit from takeout orders. But with so many people work abroad, the idea of stopping for a coffee in the morning no longer has the same appeal. So that begs the question: will independent cafes survive the pandemic? Or will they fade into oblivion, leaving caffeine lovers to support bigger chains?
The disappearance of small cafes
The combination of operating restrictions and limited resources has left independent cafes in a very precarious situation at this point in the game. While larger chains, like Starbucks (NASDAQ: SBUX), may have the ability to withstand a temporary drop in income, small stores do not have the same means or access to capital. And while small business financing in the form of Paycheque Protection Program (P3) Loans may have helped some local cafes stay afloat earlier in the pandemic, the well-known limitation of PPP is that it mostly benefited companies that were heavily payroll-laden.
Cafe workers don’t really make a lot of money, and many rely more on tips than employer-paid wages for a living. And for independent cafe owners, their biggest expenses tend to come in the form of rent, supplies, and overhead. While PPP loans can cover some of these costs, they fall short of businesses spending less on payroll.
So it’s no surprise that the number of independent coffee shops in the United States is already shrinking for the first time in nine years. And while this can give companies like Starbucks an edge, it can have a profound impact on neighborhoods and the momentum they aim to maintain.
The bottom line
Of course, the loss of independent cafes could impact not only caffeine lovers, but also real estate investors. At the basic level, commercial owners who rent to small cafes could end up with vacancies as these establishments are forced to close permanently. And mall operators could face crackdown on existing tenants if they attempt to replace independent cafes with chains.
At a time when so many retail stores and other small businesses are closing their doors, losing independent cafes is a blow that investors simply don’t need. But even the most innovative cafe owners may ultimately struggle to survive the blow of the pandemic.