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New restaurant openings down 10% in Q3 2020 year-over-year: Yelp

Yahoo Finance's Akiko Fujita and Justin Norman, Yelp Vice President of Data Science, discuss restaurant reopenings amid the coronavirus pandemic.

Video Transcript

AKIKO FUJITA: The latest data out from Yelp points to surprising resilience among restaurants and small businesses. New openings accelerated in the third quarter. In some states, the rate of openings was in line with pre-pandemic levels.

Let's bring in Justin Norman. He is the vice president of data science at Yelp. He joins us from San Francisco today. And Justin, some interesting numbers here, but I'm curious how sustainable do you think these rates that you saw are, especially given that you were looking at these openings when we still had good weather. We're going into the winter months. We've heard over and over how things could get a little more difficult for these businesses that have been able to operate with outdoor dining.

JUSTIN NORMAN: And that's true. And while I do want to be clear that our last economic impact report and the latest employment figures are showing continued economic uncertainty, our data is also finding that there are some areas of the local economy which are showing some promising signs of adaptability. And I think that's good news.

In particular, business owners who have proven their resilience throughout the course of the pandemic have been changing their operating models and adopting new technology solutions. And some of those will transfer over even if the weather does, in fact, change. Those are things like being able to offer remote services or delivery.

And in particular, we've begun to measure quantitatively the resilience of businesses throughout categories, whether or not they're actual restaurants or they're other types of businesses, as well as in a specific geolocation. So we're certainly taking a look at how that will sustain over time.

AKIKO FUJITA: And when you talk about these businesses adapting to the conditions on the ground, you've talked about these food services that have popped up at farmer's markets, at food trucks. You know, these aren't the traditional bricks and mortar setup that we're used to seeing. How did you see that vary from state to state?

JUSTIN NORMAN: Sure, so in particular, some of the largest numbers of openings we've had overall have been in what you've just said. So food services that include categories like farmer's markets or even breweries have had the largest numbers openings. Food trucks in particular have had over 1,700 openings when compared to Q3 of 2019.

But geographically, the states that have showed the most resilient third quarter for restaurant and food related businesses include places like North Dakota, Washington, DC, and Rhode Island with 39, 108, and 69 openings respectively. And the states overall with the largest total number of openings in Q3 tend to be the larger and heavily populated states. And that includes California, of course, with over 3,000 openings, and Texas with over 2,000.

AKIKO FUJITA: And when we talk about reopenings, of course, it's not just restaurants and some of these businesses. It's about gyms that are reopening, schools that are reopening as well. What did you find on that front in terms of the rate of reopenings and how that compares to where things stood several months ago?

JUSTIN NORMAN: Sure, well, we found that education businesses, fitness, beauty, leisure activities, and banking businesses had a majority of their reopenings in Q3. So that's a bit later than what we saw in businesses that are more heavily invested in retail, which had the majority of the openings in Q2.

So we're just starting to get a good picture of what some of the businesses that are in those categories are going to do. So as we go into Q4, and we go into the new year, we'll really see kind of the impact of where those go. Of course, those are impacted much more so by the local regulations from being able to have people inside of the business. But overall, we are still seeing some of those reopenings occur in those categories.

AKIKO FUJITA: And how much runway do some of these businesses have? You know, what we have seen a lot are these businesses that close in the initial days of the pandemic, reopened back in May or June, and then eventually decided they just couldn't make enough money with limited capacity. You pointed in your last report about 60% of these closures eventually became permanent. So how is that likely to get worse or better, especially with these case counts going up again?

JUSTIN NORMAN: So it's really difficult for us to be able to tell that. I think that that is, of course, going to be impacted by how the pandemic plays out, whether or not we continue to see these surge numbers to increase, as well as the individual circumstances of the businesses. So of course, it's very challenging for any local business that relied on a higher volume of traffic than they've been able to sustain during the pandemic. I don't want to diminish that at all.

But it is important also to recognize that there are new businesses opening in parallel with some of these other businesses that may have had challenges. And to be really specific about that, there were actually only 100 fewer new restaurant and food openings in September of this year compared to September of last year. And new restaurant openings in this quarter are actually only down 10% compared to Q3 of 2019.

So there are certainly going to be perhaps a redistribution of the types of categories and types of businesses that we see. But there, of course, is still challenges with the existing businesses. And local and state governments need to continue to provide aid as well.

AKIKO FUJITA: And speaking to some of those business owners that have chosen to open their business during this time, what's driving that decision? You know, this is a time where we've seen millions of Americans unemployed. We have seen the path of this virus change from week to week. What's prompting a lot of these business owners, at least that you spoke to, to take a chance on this during the most difficult time?

JUSTIN NORMAN: So, many of the things that you've mentioned, of course, are a part of the factors. You know, people really do rely, of course, on these businesses, not just for a source of income if you're a business owner but they also provide some pretty critical services, especially if you're talking about a marketplace or a drugstore or places like that.

So, in many cases, it's for the community that drives that. In other cases, it is because the operating model, as I've mentioned before, has been able to adjust to deliver some of those services maybe not exactly how they'd done before, but in a way that does serve consumers with what they need.

And then, finally, some of these businesses have been getting, quite frankly, a lot of great support from their local communities and local governments, and even the state and federal governments with regards to safety measures and with regards to additional capital. So these sorts of things can play, depending on where you are geographically apart, and deciding whether or not it's safe for you to open and whether or not it's a good decision for you in the community.

AKIKO FUJITA: Justin Norman, the vice president of data science at Yelp, it's good to talk to you. Appreciate your time today.