Permanent Business Closures Spike Because Of Pandemic

Nearly 98,000 U.S. businesses have closed permanently in the six months from March 1 to Aug. 31, according to a running count kept by Yelp that relies on self-reporting by business owners, followed by a vetting by Yelp staff. That is 23% more than said so in mid-July.

An additional 65,000 businesses have closed temporarily, Yelp said.

Businesses set up as solo proprietors, especially in professional services, have withstood the coronavirus pandemic better than most, according to Yelp. On the other hand, restaurants and retail stores continue to suffer from high total closures nationwide.

As of Aug. 31, more than 32,000 restaurants reported themselves to Yelp as closed, with nearly 19,600 indicating that the closures were permanent. The kinds of restaurants with the highest closure totals were breakfast places, hamburger joints, sandwich shops and places specializing in desserts. 

By contrast, pizza places, delis, food trucks and bakeries reported lower numbers of closures, permanent or otherwise. Those places are typically more suited for delivery and takeout.

Bars and nightclubs reported more than 6,450 closures by the end of August, of which almost 3,500 shuttered for good. Retailers reported more than 30,300 closures, 17,500 of which were permanent. Clothing stores have been particularly susceptible to closure.

California, Hawaii and Nevada had the highest total closures among the states, and they are the three states with the highest unemployment rates, partly because of the collapse of long-distance leisure travel in 2020.

Much of the pressure on small businesses to close comes from being unable to pay rent, especially as it has accrued since March. The New York Times interviewed a Boston restaurateur whose restaurants have stacked up back rents in the six figures, which his landlord has refused to reduce or otherwise negotiate.

"It doesn't work [financially] to reopen without a new lease," restaurant owner Garrett Harker told the NYT. In such a situation, permanent closure seems likely. 

Commercial landlords not budging on rent has been a constant during the pandemic. According to a poll by Alignable, only 8% of more than 22,000 small-business owners surveyed were able to negotiate a reduction in rent since the beginning of the pandemic. Some 78% have not been able to, 4% didn't ask at all and 10% were in an "other category," which included those who were evicted or who had their rents raised.

About a quarter (22%) of respondents said that while they might not have been able to obtain a lower rent, they did receive an extension in the time they had to pay. Alignable is an online small-business network.