Canada markets closed

Shake Shack CEO: We need mom and pop restaurants to come back after the coronavirus pandemic

Brian Sozzi
Editor-at-Large

Shake Shack (SHAK) CEO Randy Garutti is rooting for the locals.

Garutti was working in a New Jersey bagel shop at the age of 12. By 17, he served diners at a country club. During college, he waited tables at Chili’s. And he eventually worked at the popular hot dog cart in New York City’s Madison Square Park, which ultimately went on to become Shake Shack’s flagship location.

So, it’s safe to say Garutti not only knows the restaurant industry backwards and forwards, but understands the very difficult spot most mom and pop food outfits are in right now during the height of the coronavirus.

“We need the independent restaurant. We need the neighborhood place. We need Shake Shack and we need the chains way larger than us,” Garutti explained on Yahoo Finance’s The First Trade.

The Shake Shack in front of the New York-New York hotel and casino in Las Vegas. (AP Photo/John Locher, File)

To say it has gotten brutal out there for the country’s small restaurants is an understatement.

The local bagel shop may not have had the money these past few years to invest in mobile ordering like the big chains Starbucks (SBUX) and Dunkin’ Brands (DNKN). That means they aren’t partaking in the food delivery boom most large chains are experiencing as people stay quarantined. So the chances are high that the bagel shop is closed until further notice.

Meanwhile, the pizza place down the block probably has a section for people to come on in and dine that’s now closed as governments restrict human interaction. The pizza place is delivering pizzas using a third-party delivery firm, but still had to cut back on workers because dining-in is shuttered.

It’s unclear when the bagel shop or pizza place will be back to operating at full strength — that’s if they make it through the mounds of food supplier and rent bills.

Even big restaurants such as Shake Shack have been hit hard by the coronavirus. Shake Shack said last week same-store sales fell 29% in March. It has stopped the opening of new restaurants this year and tapped $50 million from its credit revolver (it is the first time Shake Shack has had debt on its books).

Make no mistake, America needs the small mom and pop restaurant to exist. They are the lifeblood of communities. They could be where the next big restaurant chain is born. Without their existence, communities and the economy take a hit.

While the recent government stimulus plan will help some restaurants stay afloat, restaurant experts have told Yahoo Finance about 30% of U.S. restaurants won’t reopen. Restauranteur and owner of Blue Dragon in Massachusetts Ming Tsai tells Yahoo Finance that number is closer to 50%.

Disturbing.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.