Coronavirus

Ghost Kitchens Can Help Feed New Yorkers While the City Is a Ghost Town

Regulations are making it harder for restaurants in NYC to adapt to COVID-19.

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During the restaurant boom of the 2010s, blue states and cities loaded unfunded mandates onto eateries. (In New York City, the government website lists approximately 32 different state and city permits, registrations, and mandates.) Then COVID-19 shut down an estimated 40 percent of restaurants nationwide. The industry suddenly faced sales losses of $80 billion, and two-thirds of its employees across the country were thrown out of work. The regulatory load only increases the likelihood that a restaurant will stay closed and cooks or waiters will lose their jobs permanently.

Some employees might not get their jobs back even if the restaurant reopens. Rising costs could push more places to remake themselves as ghost kitchens—places that cook solely for delivery with no in-house seating.

Restaurants are high-risk and low-margin. About 20 percent fail in their first year, 60 percent by year five. Profit margins range from 1 to 10 percent. The typical restaurant can't survive more than a few weeks without profit. Even before COVID-19, full-service restaurants were losing market share to lower-service formats, which increasingly replaced servers with touchscreen and app-based ordering. As of last year, the market research consultant NPD reports, carry-out, drive-through, and delivery sales accounted for 48 percent of restaurant revenues.

New York City, with its long working hours and commutes, has long been a robust take-out and delivery market. In such high-cost cities, ghost kitchens were already on the rise. This business model eliminates the need for expensive street frontage and lets the cooks offer multiple cuisines from a single kitchen. While a typical restaurant spends 30 percent of revenue on labor, a ghost kitchen spends only 10 percent.

COVID-19 is likely to accelerate the trend—especially coming on the heels of higher regulatory compliance costs. Thirty-three jurisdictions (states, counties, and cities) will require at least a $15 minimum wage by the end of 2020 (with some lower minimums for tipped employees). Seven states have mini-Worker Adjustment and Retraining Notification Act (WARN) Acts (requiring at least 60 days' notice to employees before a place of business is shut down) more stringent than the federal requirement. Predictive scheduling laws require employers in seven jurisdictions to give up to two weeks' notice of schedule changes. Eight states (plus the District of Columbia) have paid family leave. Thirty-three jurisdictions have paid sick leave. And new laws in 10 jurisdictions require additional COVID-19 leave.

Seven jurisdictions are subject to at least five of those mandates. San Francisco and New York City are subject to all six. (San Francisco is slightly better off: California Gov. Gavin Newsom has partially and temporarily waived the state's mini-WARN Act.) In New York City, paid safe and sick leave extends to care for any individual whose close association with the employee is the equivalent of family; paid family leave extends to leave for unregistered domestic partners. With these open-ended, fact-intensive definitions, it will be too expensive for employers to contest even doubtful claims for leave. The Wall Street Journal reports that some lawyers were advising New York City restaurants to fire all their employees before they became liable under the new leave requirements.

Even apart from mandates, reopening restaurants will face pressure on their slender profit margins. The National Restaurant Association's COVID-19 reopening guidelines will require revamped operations, including radically reduced seating capacity (50 or even 25 percent), sanitizing schedules (which will limit the number of turns per table), employee health monitoring, and investments in contactless technology. Many restaurateurs anticipate plexiglass sneeze guards for coffee bars and employee protective gear.

Between those necessary changes and the inevitable pandemic-era decline in dining out, COVID-19 was already guaranteed to cripple the industry. Restaurants and the people who work there shouldn't have to deal with high regulatory compliance costs too. If officials don't ease the burden, a lot of these businesses will die—or will persist only as ghosts.

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  1. It’s New York; who cares?

    1. You should care – you’d have to be be a cold-hearted humorless bastard of the worst sort not to laugh at people getting their just desserts.

      1. “Older people, vulnerable people, are going to die from this virus,” the governor (Cuomo) said today when asked about whether more should have been done to protect nursing homes residents. “That is going to happen. Despite whatever you do.”

        1. What a refreshing take after saying that the economy needs a stake through it’s heart to save even one life. I suppose now that he’s had this epiphany, he’s going to make himself personally, financially and criminally liable for any harm that his overreaction to inevitable virus deaths may have caused.

          1. Next thing we know, he will claim closing abortion clinics will save one life – – – – – – –

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    2. “The problem is, they haven’t opened their borders enough to illegal immigrants foreign-born food-truck entrepreneurs.”

      Leave it to Reason, in the face of rising totalitarianism, to admire the ingenuity of private citizens to line up for bread voluntarily.

      1. Crap. Goddamned edit button!

        1. Don’t worry… I have it on good authority that Snake Pliskin will take care of those NYC borders….

          1. I heard he died of COVID-19.

            1. He was clubbed 50 times over the head during gladiatorial combat by Slag. Death certificate says died of COVID-19.

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  2. necessary changes . . . inevitable pandemic-era decline

    Sneeze guards are a necessity permanently? Dining out is inevitably going to decline permanently?

    You are such a pussified piece of shit. My balls have shrunk just from reading this estrogen-soaked excuse for a website. I am so embarrassed.

    1. It’s only a “necessity” because you’re conceding the point without protest. It’s only “inevitable” because you’re a coward.

      This rhetoric is so reminiscent of the mewling we were subjected to after 9/11, another event that disproportionately affected New York City, and for much the same reasons.

      1. For all their famous tough-guy act, it would appear that in reality, New Yorkers are total wusses.

        1. Since we can’t post pictures, I’ll just leave this here: https://twitter.com/ringer/status/1262190751623995393

  3. “Ghost kitchens”? Sounds too much like “ghost guns”. The name will have to be changed.

  4. … lets the cooks offer multiple cuisines from a single kitchen
    Cultural appropriation!

    1. Until COVID came along, cooks could only offer one cuisine from any given kitchen. Fusion cuisines were right out!

  5. Ghost Kitchens Can Help Feed New Yorkers

    DeBlasio called in the Ghostbusters to deal with it, but the women showed up.

  6. Drats! All they serve is Ghost Toasties.

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