Yahoo Finance Amid Soaring Closures, Kevin O'Leary Questions The Impact Of Bidenomics On U.S. Restaurants
Amid escalating operational costs and changing consumer behaviors, the U.S. restaurant industry faces unprecedented closures, with financial strain evident across famed chains and local eateries.
Kevin O’Leary, star of ABC's ‘Shark Tank,' outlined the challenges impacting the restaurant sector in a Daily Mail report issued this week.
O'Leary attributes the increasing trend of closures to persistent inflation, the slow recovery of supply chains post-pandemic, and shifts in dining habits. Warning that the situation could worsen, O’Leary questioned the effectiveness of economic policies under the Biden administration — dubbed "Bidenomics" — in addressing the root causes of the industry’s downturn.
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"Last month, Red Lobster filed for Chapter 11 after closing nearly 100 stores. Cracker Barrel — with restaurants in 45 states — has seen its share value plummet over the last year. The once-booming chain Boston Market, which boasted 1,200 locations in the 1990s, is now reportedly down to two dozen," O'Leary wrote in the report for the DailyMail.
"It’s proof the inflation virus is still infecting America’s post-pandemic economy," he said. "Supply chains crippled by the COVID pandemic lockdown haven’t recovered. Food costs — especially for proteins like chicken, beef and seafood — are up 30 to 40 percent over the last 36 months. Worst of all for the restaurant industry — customers haven’t returned from the shutdowns."
While the worst of soaring costs due to inflation is behind us — inflation peaked at 9.1% in June of 2022 and has since fallen to 3.3% in May 2024 — business closures and social distancing mandates dramatically altered dining habits, a shift that has persisted post-pandemic, according to O'Leary.
During the height of COVID-19 restrictions, sixty million Americans, predominantly those aged 60 and above, ordered meals via their smartphones for the first time, the ‘Shark Tank' investor said, which marked a behavior shift toward convenience, with many now preferring to dine at home rather than venturing out.
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"These consumers are comfortable requesting Chinese from their living room couches," O’Leary points out.
The issue is compounded by inflation, which has squeezed the budgets of average Americans, making dining out less feasible. "In this economy, an ‘upscale McDonald’s’ is a luxury that many can’t afford," he said, pointing to the reality for average-income earners making $68,000 a year grappling with increased costs across essential needs like transportation, housing, and energy.
The economic strain is palpable with no immediate relief, signaling ongoing challenges for the U.S. economy. "Unfortunately, there’s no telling when — if ever — these prices will come back down to Earth," O’Leary said.
Amid that backdrop, major chains like Red Lobster and BurgerFi are making headlines, but mom-and-pop restaurants across the country are facing the same, if not greater, struggles.
O’Leary criticized the federal response, noting that while funds were directed toward large corporations via stimulus packages during the pandemic, small businesses, which create 62% of U.S. jobs, were largely overlooked.
"Take a look at the Inflation Reduction Act and the Chips and Science Act, which have been estimated to cost as much as $1 trillion and $80 billion respectively. Neither bill included a dime for small businesses," he said.
"As much as President Biden is desperate to convince the American people that ‘Bidenomics is working.’ It’s not. This evidence suggests otherwise."
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