PYMNTS research reveals most small hospitality firms don’t have cash reserves to fall back on.
Research from the latest edition of PYMNTS’ Main Street Health study, “Main Street Health Q1 2023: Using Finance to Ease Recession Fears,” created in collaboration with Enigma, which draws from a survey of more than 500 Main Street small to mid-sized businesses (SMBs), finds that the majority of hospitality firms have no financial safety net. Specifically, 55% of food, entertainment and accommodation SMBs reported that they do not have any readily available source of financing to withstand a cash shortfall.
The 2022 Restaurant Digital Divide: Restaurant Customers React to Rising Costs, Declining Service,” which surveyed 2,378 U.S. restaurant patrons, noted that half have seen restaurants reduce their hours or shutter their dining rooms, 34% have observed longer order processing times and 27% have experienced lower quality service.
As such, restaurants cannot risk running out of cash, but they also do not have the luxury of cutting back their spending by much, or else they risk losing their customers and ending up even more strapped for cash than before.
Certainly, small independents are in a bind if even the largest restaurant companies in the world are struggling. For instance, quick-service restaurant (QSR) giant Subway is looking to sell off the company following a decade of challenges. Plus, earlier this month, it was reported that McDonald’s was closing its U.S. offices, gearing up for remote layoffs.
Additionally, Restaurant Business noted that Burger King franchisee Meridian Restaurants Unlimited, which owns 116 locations, is closing 27 stores amid its bankruptcy filing, with more such closings “possible, if not likely.”
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