Rent delinquencies for independent restaurants remain stubbornly high, with 40% of owners stating they were unable to pay the rent in February. This is up from 38% of delinquencies in January, according to a new survey from Alignable and based on input from nearly 4,000 small business owners.
Restaurants’ rent delinquencies are higher than average, with 32% of all small businesses unable to pay their rent in full and on time in February. That said, industry numbers remain lower than December’s delinquencies, in which 52% of independent restaurant owners couldn’t afford to pay rent – marking the highest level in 2022. For additional context, November’s delinquency number was at 42%, while October was at 49%.
While February may be an improvement from a dismal December, many small restaurants continue to struggle with rent prices. According to the National Restaurant Association’s newly released State of the Industry report, 65% of all restaurant operators said their occupancy costs were higher in 2022 versus 2019, while occupancy outlays were up 8.3%. That means for a typical restaurant with $900,000 in annual sales, occupancy costs averaged $68,229 in 2022 versus $63,000 in 2019.
One silver lining from the Alignable report – minority-owned businesses’ delinquency rate improved by 16 percentage points over January, from 58% to 42%. Perhaps because of this improvement, a recent survey from Goldman Sachs found that Black-owned small businesses have a positive outlook about 2023. The report found that 81% of Black small business owners are optimistic about the financial trajectory of their business this year, marking a 13-percentage point increase above the optimism level for the overall small business community, which is 68%. Further, 78% of Black-owned small business owners expect their business to increase profits in 2023, 18 points higher than the national average (60%).
Alignable’s February data shows that rainy day funds also remain tight, as 31% of small business owners have just one month or less of cash reserves on hand. Alignable’s survey respondents cite stock market volatility, rising interest rates and ongoing fears of a recession as factors driving their concerns. Fifty-five percent of small business owners believe a recession has already started or will come this year.
That said, economists from the National Restaurant Association noted in the State of the Industry Report that they expect the national economy to “weather the storm of rising interest rates and not suffer a significant downturn in 2023.”
Contact Alicia Kelso at [email protected]