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Hot Tip for CNN: People Eat Food When They Are not in Restaurants

Summary:
I happened to catch a few minutes of a CNN story featured an interview with a famous chef (sorry, didn’t catch his name) he was discussing the crisis hitting the restaurant industry. After explaining how restaurants will find it almost impossible to survive operating at 25 percent of capacity, he then described the chains of suppliers — the truckers, the wholesalers, the food processors and the farmers — who will also go under because of the collapse of the restaurant industry. There is a small problem with this logic. The people who are foregoing meals at restaurants will still be eating, they just will be eating at home instead. This means we will need truckers, wholesalers, food processors and farmers to produce and transport the food that people eat at home. This could be different

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I happened to catch a few minutes of a CNN story featured an interview with a famous chef (sorry, didn’t catch his name) he was discussing the crisis hitting the restaurant industry. After explaining how restaurants will find it almost impossible to survive operating at 25 percent of capacity, he then described the chains of suppliers — the truckers, the wholesalers, the food processors and the farmers — who will also go under because of the collapse of the restaurant industry.

There is a small problem with this logic. The people who are foregoing meals at restaurants will still be eating, they just will be eating at home instead. This means we will need truckers, wholesalers, food processors and farmers to produce and transport the food that people eat at home. This could be different companies and it is entirely possible that the number of people employed in the supply chain will be less, but it will be very far from zero.

It is also worth noting that many restaurants will likely be able to survive with 25 percent capacity. Many have substantial take out business. They also will charge much higher prices to cover higher costs. They can get away with charging higher prices since they can afford to lose 75 percent of their customer base and still have their restaurants filled to their new lower level of capacity.

None of this is to say the situation facing restaurants and many other businesses across the country is not horrible, it is, but we should try to think about the prospects seriously and not just pronounce this as the end of the world. It isn’t.

The post Hot Tip for CNN: People Eat Food When They Are not in Restaurants appeared first on Center for Economic and Policy Research.

Dean Baker
I am a senior economist at the Center for Economic and Policy Research (@ceprdc). I also run the blog Beat the Press (@beat_the_press)

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