More Than Half of Independent Restaurant Owners Couldn't Pay December Rent
New data from Alignable finds that 52% of independent restaurant owners couldn’t afford to pay December rent, up 10% from November’s numbers and marking the highest level in 2022. Small restaurant owners are struggling more than the average small business, with overall rent delinquencies for December at 40%.
This is a stark trend versus last December, when just 26% of small businesses couldn’t pay rent. It’s also an increase from previous months; in October, 49% of restaurant owners couldn’t pay rent, while in September, the number was 36% and in August and July, the numbers were 46% and 45%, respectively.
Typically, the fourth quarter tends to yield the opposite trend for small restaurants as more people are out and about shopping and celebrating, but a confluence of pressures – including higher rent and declining revenues – have taken a toll this year. Fifty-two percent of small business owners say their rent is higher than it was six months ago. Additionally, 64% of small businesses said consumer spending was lower than it was in November.
Optimism has taken a hit as well, with nearly 80% of small business owners worried about rising interest rates. The U.S. Federal Reserve recently raised interest rates another half point to help combat relentless inflation and those rates are now at their highest level in 15 years. More increases are expected this year, according to the Wall Street Journal, impacting small business owners’ ability to borrow, invest or grow.
Perhaps even more concerning is that 38% of small businesses say they only have one month of cash reserves currently on hand, marking the worst month in 2022 for cash flow and presenting a greater risk of closure.
Rent delinquency is most pronounced in New York, where 55% of small business owners couldn’t pay rent. Other states with high delinquency rates include Texas (45%), New Jersey (42%), Pennsylvania (42%) and Florida (41%).
Restaurants weren’t alone in their struggle in December. Small retail businesses also broke a delinquency record last month, with 46% saying they couldn’t afford rent. Overall, just 21% of small business owners say they have fully recovered from Covid-19 lockdowns, a 22-point decrease from December 2021. It is worth noting that this survey included just over 3,200 small business operators, a small sample of the independent category to be sure. That said, those who provided input for the survey expressed trepidation about raising menu prices even higher to cover inflation, as they don't want to scare away loyal customers.