"Large-scale Closures and Mass Layoffs" Self-Employed Panic... "Requesting In-Kind, Financial, and Funding Support"

Korea Foodservice Industry Research Institute "Large-scale Temporary Closures, Business Shutdowns, and Mass Layoffs in Foodservice Companies"
Fundamental Government Support Needed to Compensate Sales Losses, Delivery Fees, and Rent

Amid the impact of COVID-19, a merchant in Hwanghak-dong Kitchen Street, Seoul, where the wrinkles of small business owners and self-employed people are deepening, is unloading secondhand goods purchased from a closed restaurant from his car. Photo by Moon Honam munonam@

[Asia Economy Reporter Lee Seon-ae] "We barely survive after letting go of two employees. Many places are going bankrupt even now, but soon mass closures and large-scale layoffs of restaurant workers will inevitably become a reality. Government support is desperately needed." - Mr. A, owner of a restaurant in Pildong.

"Sales have been cut in half for three months now. We originally planned to hire serving staff, but we can't even do that and are in a position where we have to let go of the few employees we have." - Mr. B, owner of a restaurant in Suwon.

Concerns are rising over 'mass closures' of self-employed restaurant operators nationwide and 'restaurant worker layoffs' as a survival strategy amid the spread of the novel coronavirus infection (COVID-19). To prevent such a crisis, voices are calling for urgent government support.

According to the results of the "Survey on the Impact on Restaurants after the Occurrence of COVID-19," jointly conducted on the 18th by the Ministry of Agriculture, Food and Rural Affairs and the Korea Foodservice Industry Research Institute under the Korea Foodservice Industry Association, 95.2% of 600 restaurants nationwide reported a decrease in customers during the five weeks following the COVID-19 outbreak compared to before, with an average customer decrease rate of about 59.2%.

This is higher than the 2015 Middle East Respiratory Syndrome (MERS) outbreak survey results, where 84.3% of businesses experienced a sales decline, and the sales decrease rate exceeded 34.3%.

The trend of customer decrease rates in restaurants after the COVID-19 outbreak seemed to ease slightly, dropping by 3.0 percentage points from 29.1% in the first survey to 26.1% in the second survey. However, following the 31st confirmed case (February 18), the virus rapidly spread mainly in the Daegu and Gyeongbuk regions, and the third survey showed an average customer decrease rate of 32.7%, which then jumped to 59.2% in the fourth survey.

When examining the impact on restaurants by industry and region after the COVID-19 outbreak, Korean cuisine showed the highest customer decrease rate at 64.1%, while gimbap and other simple food establishments had the lowest at 41.6%. The Research Institute believes this is related to the composition of service types (structural costs) by industry.

Regionally, the Gyeongsang area showed the highest average customer decrease rate at 66.8%, while Incheon had the lowest at 44.7%. This is analyzed to be because, as of February 29, 2,724 out of 3,150 confirmed COVID-19 cases (86.5%) were concentrated in the Gyeongsang area, resulting in a greater impact compared to other regions.

After the COVID-19 outbreak, self-employed restaurant operators immediately took hygiene measures, but these were not fundamental solutions, and as the situation prolonged, the impact on restaurants has continued to worsen.

Researcher Seo Hyun-woo pointed out, "In the case of COVID-19, the number of confirmed cases is large compared to the 186 MERS cases, making the situation more difficult," and added, "Government support is essential to overcome these difficulties."

According to the survey, the most desired forms of government support by restaurants affected by COVID-19 were in-kind support (44.4%), financial support (43.6%), and loan support (42.1%), in that order.

Since the COVID-19 outbreak, the government has expanded support funds and lowered interest rates for restaurants, but small businesses without collateral cannot benefit from these measures, leading to criticism of their ineffectiveness.

Researcher Seo said, "At the early stage of the COVID-19 outbreak, restaurants responded with hygiene-related consumption stimulation measures, but these were temporary. As COVID-19 prolongs, restaurants will focus on cost-cutting measures, which could lead to large-scale closures and mass layoffs of employees," emphasizing, "Ultimately, fundamental solutions are needed, such as compensating for lost sales, delivery fees, and rent, rather than temporary deferment-type support focused on loans and guarantees that restaurant owners have to repay."

Signs of mass closures are already appearing. An analysis of Seoul's food hygiene business status data from the Seoul Open Data Plaza showed that about 1,600 establishments closed last month. Compared to the same period last year, 132 more places shut down. The burden of costs such as labor and rent, combined with the unexpected variable of COVID-19, has increased the number of closed restaurants.

Mr. D, who runs a restaurant in Ilsan, said, "The reality faced by self-employed people has already been pushed to the brink," and raised his voice, "It is questionable whether we can survive until COVID-19 ends, and closures will surge to an extent incomparable to the MERS outbreak."

There are rental notices posted in various places along Myeongdong Street in Seoul, where the number of self-employed business owners closing their doors is increasing.
Photo by Moon Honam munonam@

This content was produced with the assistance of AI translation services.