The Real Cost of COVID-19

People frequently ask me what the real cost of this virus will be when it’s all said and done. Sadly, as Natasha Bedingfield said in her famous song “the rest is still unwritten.” As vague and sad as that statement was for me to say, we won’t know the answer for years, and that is the truth. As I write this, we are under a “shelter in place” order in California. New York and other states are under similar guidelines. As a result, large gatherings (over 10 people) are banned, church services are cancelled, most retail is closed, and restaurants are either closed up, or doing take out only. Commerce has come to a standstill, and while we have a stimulus plan being rolled out by the federal government (coming soon to a bank account near you), it will do no good.

Let’s analyze the impact of Corona using current events. Cheesecake Factory has declared they cannot pay rent due April 1. Cheesecake is a very large operator of restaurants; this should not be the case after just a 10-day shutdown (as of writing).

Cheesecake Factory Inc. is doing what a lot of tenants would like to do come April 1: withholding their rent.

The restaurant chain said that the “unprecedented times” we are living in has prompted it to take a closer look at its economic situation.

Cheesecake Factory says it’s not paying rent in April, has furloughed thousands of employees

The company has also furloughed 41,000 employees. These staff members will receive a daily free meal and retain benefits and insurance until June 1.

Point being, if Cheesecake is in trouble, how about the local independent shop? How does it survive? They cannot get a bulk deal on food and their staff is likely composed largely of family members working long hours… I don’t think this ends well for a majority of small restaurants. If stores do not close, the layoffs have started and it’s going to be brutal. As Samuel L. Jackson said in Jurassic Park “Hold onto your butts.”

Retail must be viewed the same way. I feel this virus and subsequent state ordered shutdowns will bring most to their knees. Case in point, Macy’s has laid off almost all employees (130,000) and the governing board will not be paid anytime soon.

Macy’s says it will stop paying tens of thousands of employees who were thrown out of work when the chain closed its stores in response to collapsing sales during the pandemic.

The majority of its 130,000, including stock people and sales clerks, will still collect health benefits but the company said that it is transitioning to an “absolute minimum workforce” needed to maintain basic operations. Macy’s has lost the bulk of its sales due to the temporarily closing of its stores starting March 18.

Amid Coronavirus Closures, Macy’s Furloughs Majority of Its 130,000 Workers

I feel most will use this as a chance to “get out of leases” where stores aren’t hitting their numbers. Online commerce will be even more important, and I think the days of free shipping may be coming to an end, as in-store sales will no longer subsidize it. See above on layoffs. This will be very brutal, and like the food service business, retail doesn’t pay well either. Folks, this event is the “retail apocalypse,” just not the way we pictured it happening.

Movie theatres, how the heck do they recover? If you work in this field, then look for new work quick. Not only are your local multiplexes closed, when operating, they serve overpriced food and booze, it tastes horrible. Movie production has also ceased worldwide, and as a result, movies won’t be coming out for a while. Again, I am envisioning mass layoffs here.

How does our education system recover? Is it just business as usual next school year? Nope. I think this virus exposed flaws in the current system in a couple ways. First the lack of on-line or distance learning. The district can’t assume everyone has a laptop, let alone Wi-Fi access at home. So, is the answer we buy all kids laptops? But if we do, how do we know Wi-Fi is available? Additionally, most schools offer a hot breakfast and lunch program, along with a take home bag for dinner for eligible students. How does this continue in the future? What if a cook somehow passes this virus on to food, and affects child…is the district liable?

How about volunteer groups? I will say this, you will see a steep drop off in membership. I guarantee it. Most members tend to skew older and those folks will be even more cautious going forward. This will be very prevalent in social justice groups, because who wants to be around a group of unknown folks with various levels of hygiene?

In closing, I would like you to consider the following.

First, the 2 trillion dollar “bail-out” is typical for an out of control Congress trying to assure re-election. This bill, which we had to pass to know what’s in it, was a cornucopia of pork barrel projects totally unrelated to mitigating the effects of the virus either medically or economically. Talk about putting lipstick on the proverbial pig, this thing was horrible. I would argue the “cure” is worse than the disease. Sadly, this is a recurring theme of omnibus fixes coming out of Washington. Oh, and two more “waves” of legislation are in the pipeline now, both with multi-trillion-dollar price tags in addition to what has been passed thus far.

Sadly, this virus, while it may calm when the weather gets warmer, will likely be back again in the fall, possibly in a new strain, just like any other flu. If it returns, how do we react then?

While we’re passing time in self-exile and hoping for warmer weather; hopefully, the Troll gets a few new photos of Hope Hicks celebrating summer apparel. To him, she’s like Campbell’s soup, it warms the soul.

I do firmly believe that social distancing is not a fad, it won’t be going away. We are all going to be germaphobes to the umpteenth degree. Bars will need to space out their stools and tables. Folks go there to “hang out,’ but don’t want to hang with strangers anymore. The concept of speaking to a barfly is not going to be a thing for a while. This goes for the restaurant side as well; tables will need to be spaced out… I do not see this ending well. Casinos will undergo big changes as well. The days of a 24/7 operation with minimal cleaning are over. Have you been to a blackjack table? Talk about shoulder to shoulder, more like bumping ugly’s with the person next to you; that will change. Bottom-line, I would say best case scenario is you see a return to 70% of your revenue compared to pre corona virus.

Movie theatres are literally screwed. They just spent a pant-load to re-do seating and configurations, subtracting quite a few seats. Total folks per screen are lower and they were forced to pay increased prices and then this happens. Ouch! I foresee in the future that seating may be even more limited. What if they have to go to small “clusters” of seats like 1, 2, 4, and maybe larger parties of 6-8? They may try something “value added” like table service or at the minimum food upgrades. The idea of paying $12 for a frozen pizza or $15 for a watered-down Bud Light are long over. Theaters have to upgrade and get a lot better but now it’s probably too late. I think the theatre business is dying on the vine and their demise just sped up. Streamers have put a dent in the old business paradigm and perhaps worse, the creators could take it straight to the people. Folks don’t have to watch movies at a theatre anymore. The traditional Hollywood revenue model is totally broken now. How do they pay 300 million dollars per episode for their “tent pole” franchises going forward? If you missed it, in the wake of the COVID-19 virus, Disney took out a $6 billion dollar loan. Guess owning 40% of all Hollywood movies has a downside.

A ton of retail will not make it. Look for deep discounts soon, especially in the clothing area. Maybe the Chief can buy some actual clothes. Last Monday, at our regular editorial board meeting (held at an undisclosed salsa bar) he was a sight no one’s eyes should be forced to endure. Trying to claim that a loincloth is just a leather kilt and he wore it in honor of St. Patrick’s Day was not very convincing. Sorry Chief but “sculpted” is not my word to describe you shirtless. Next time at least wear a shirt at the dinner table.

Anyway, back to the present topic. I think we will see a very different scene at restaurants, bars, theatres, and malls very soon. If you were looking for some ideas for the market, I would look at the “dinner kit” companies, and companies that are into the teleconferencing type stuff.

We will get out of this, but it’s going to be a rough several months, and look for this to rear its ugly head next fall.

Johnnie Does

PS the food reviews will continue no matter what. We just won’t do the ambiance. The people need me. I’m performing an essential service during these trying times. BTW the “Sac Bee” called me today looking for me to subscribe… of course I signed up and asked for 30 papers to be delivered daily. Hell, at $.50 a paper; on average that’s cheaper than a roll of toilet paper, if you can even find one! Hell, finding that stuff is like playing the adult version of Where’s Waldo?

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