Restaurant closures mount as pandemic crushes business

The Yomiuri Shimbun
Blanked-out signs are seen at the entrance of a family restaurant that closed on early July in Chiyoda Ward, Tokyo.

The closure of restaurants hit by the novel coronavirus crisis is accelerating. According to Tokyo Shoko Research, Ltd., the number of locations of 11 major restaurant chain companies fell by 7.4% over a yearlong period.

If the fourth declaration of a state of emergency in Tokyo leads to more people refraining from eating out, the number of restaurant closures could increase further, and the employment situation could worsen.

Izakaya first, but not only

Tokyo Shoko Research tallied the number of locations as of either the end of December 2020 or the end of February 2021, depending on when each company’s fiscal year ended.

The total figure was 8,437 locations, meaning that 678 locations had closed, compared with the 9,115 locations counted a year earlier. The pace of decline had been slow until last summer, but in the last three months of the yearlong period the number of locations fell by 316. The pace of closures had accelerated.

Izakaya pubs, many of which are located in front of train stations or in busy shopping areas, were among the first to close after the state of emergency was declared last spring. On the other hand, restaurants that also have locations in the suburbs suffered a slower deterioration in business than izakaya, which seems to have made their tempo of closures a little slower.

Customers not returning

An official of Joyfull Co., which operates family restaurants mainly in Kyushu, said: “Customers will not return in the numbers seen before the coronavirus disaster. We have no choice but to close restaurants based on profitability.” The company decided in June last year to restructure its operations by closing about 200 locations across the country, and it has gradually closed those. The number of locations has fallen by 21% in one year.

Atom Corp., which operates Steak Miya and other restaurants across Japan, saw its location count fall by 22% as it closed unprofitable locations and sold subsidiaries.

Seven & i Holdings Co., a subsidiary of which operates Denny’s, saw its shop count fall by 9.5%. Of the 11 major companies, only Saizeriya Co., which has a strategy of aggressively opening new restaurants to boost sales, increased the number of its locations, by seven.

Fears of more job loss

There is a growing sense of crisis in the restaurant industry. Shigeru Ishii, managing director of the Japan Foodservice Association, said: “There are many restaurants that have been operating on the edge of profitability, and there is no end to the number of restaurants that have no choice but to fold. The repeated declarations [of states of emergency] may lead to situations in which a business cannot be continued.”

Akiyoshi Niki at Tokyo Shoko Research said: “The chance to get spectators in the Tokyo area and elsewhere to visit [restaurants] during the Tokyo Olympic Games has disappeared. The restaurant industry provides jobs to people, including part-time workers. If a number of restaurants close, employment opportunities for a wide range of people could be lost.”

Sales fall more than ¥900 bil

Total sales of 94 listed food service companies in Japan in fiscal 2020 (April 2020 to March 2021) fell by ¥909.1 billion from the previous year, according to a survey by Teikoku Databank Ltd. Around 90% of all companies saw a fall in sales due to restrictions on business following the government’s declaration of a state of emergency.

Restaurants that serve alcoholic drinks were hit hard. On the other hand, companies that have strengthened their takeout business have seen an increase in sales.

Sales totaled ¥3.98 trillion, down 18.6% from ¥4.89 trillion the previous year, with 84 companies reporting declines in sales, including venerable restaurant Seiyoken, which logged a 77.6% fall. British-style pub operator Hub Co., and Chimney, an izakaya pub chain, also saw sales fall sharply, by more than 60%. Sales fell by more than 50% at 19 companies.

On the other hand, 10 companies saw an increase in sales. The coronavirus crisis led to an increase in sales for companies that have strengthened their home delivery, takeout and drive-through offerings. KFC Holdings Japan, Ltd. posted a 12.6 % rise in sales, while Mos Food Services, Inc. and McDonald’s Holdings Company, Ltd. also posted increases.

An official of Teikoku Databank said: “The situation is expected to improve this fiscal year with the acceleration of vaccinations. However, the number of infected people is on the rise, and trends in business hours and restrictions on serving alcohol will be key.”