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It's all economics. Restaurants only exist because there's a market for them. The customer gets the product they pay for. If the market goes away (as it has),

It's all economics. Restaurants only exist because there's a market for them. The customer gets the product they pay for. If the market goes away (as it has), the businesses will go away. If people are willing to pay more, then some sort of business will return to fulfill that market. And…this is capitalism. You seem to think capitalism should be something different. At its base, capitalism is I provide a product or service that you want, and it's cheaper (from your perspective) to buy it from me than build it / raise it/ create it / whatever yourself. We've been conned into believing capitalism is entirely something else, it's stocks and bonds, and going public and creating third order derivatives to shift risk onto some unsuspecting entity seeking higher returns. 20% return sounds awesome, right? It's about $1000 a year. The entire capitalization of a given restaurant (of the size/style I invest in) is about US$350,000. That's enough to rent, build out, and equip the space, pay for all the various fees, hire the initial crew and initial marketing. If they're successful they start paying back the investment in about a year. IF they're not successful 1) I lose the money (that's the risk) and 2) they typically fail fast, within 60-90 days of opening. I had one restaurant that opened to great fanfare mid–2012. In October it was flooded due to hurricane Sandy. It never reopened. Another six months it would have been on better footing, but that first year you're upside down in debt and the insurance companies know that if they drag their feet long enough the business will be forced into bankruptcy by creditors who will settle for a meager distribution from insurance. I mostly know about restaurants and software companies and…while software companies have more flexibility right now, I don't know of any small company that just hoards a ton of cash as a routine business practice. Your investors will demand that it get distributed as part of regular dividends or a special dividend. If you're public a “shareholder activist" will buy the minimum amount of shares necessary to make a shareholder action to divest the cash or replace management. The entirety of small business in the US is you raise some money some how, you open the business, you pay off your debts and investors, and enjoy the profits (if any) or you close. If you (again, as a small business, and not someone with access to capital markets) were to bank 60-90-120 days of operating cash and your creditors or investors learned that, you'll be turfed out of your company, or lose access to credit and investment, or a combination of both. And to your point: you're right, the customers could (and likely will) let the businesses fail. And then they'll blog and whine about how "My City has Changed!" and why are all restaurants now variations on Taco Bell. Honestly, I don't see any of the restaurants I'm invested in reopening. I'll be out roughly US$50k. About 180 employees will be out of jobs. And it's not because no one donated to their gofundmes, I just don't think it's a viable business in a Covid-19 world. I think there will be some sort of restaurant experience post Covid, but it'll be split between low end fast food take out/delivery and high end ($100/pp or more plus drinks). Barring widespread testing and/or a vaccine, the local diner, restaurant, hipster mayonnaise fetish joint, is dead.

ykdxq2ke47ebuqi 6y ago
I mean, you seem to be taking the position that all should have prepared for the extremely unlikely scenario that the entire economy of a region would shut down for weeks if not months at a time, and if businesses failed to prepare for that then they deserve to close. And that's fine and all, but that's 100% contrary to the standard way small businesses in the US have operated. Any business hoarding cash for such an unlikely scenario would be relieved of that hoard of cash through one absolutely legal method or another, it's the American way. |reply tagged to my own post by mistake.
- dangus 6y ago
  No, I’m not taking the position that any business deserves to close due to an extreme scenario. My position is that it’s absolutely normal for the business owner to shoulder that risk - 1/5 of small businesses fail in the first five years, right? So the whole idea of donating money to save a business is a illogical when they are expected to fail. I’m very simply taking the position that donating to for-profit businesses is almost never a noble cause, even if it is a “mom and pop,” and that I’m confused why people are doing this when they should be more worried about their own finances, worried about their own job security, etc. With all respect to you, I think your responses are just taking us down a lot of tangents to my original point (I’ve admittedly followed you down that rabbit hole). I can’t find in your responses where you directly address why someone should donate to a for-profit business, especially when these donation funds are often managed by the owner. The root question is this: why should an individual donate to any particular small business at this time? How would donations have any chance of rescuing a business compared to a fully operational business? Why would anyone donate to the business ownership class over something like a local food bank or even just directly giving money to their unemployed friends and family? And despite your explanations of how the restaurant industry works, I still don’t think the story adds up. I don’t think the city is knocking down doors for tax money. Businesses don’t pay taxes on losses. I don’t think commercial landlords expect to get paid right now and I don’t think they’re evicting just yet when there’s no business to replace the evicted. They have incentive to negotiate. I don’t think restaurants have to pay suppliers for supplies they aren’t getting. And they certainly don’t have any obligation to pay their 100% hourly tip-supported staff.

ykdxq2ke47ebuqi 6y ago

I mean, you seem to be taking the position that all should have prepared for the extremely unlikely scenario that the entire economy of a region would shut down for weeks if not months at a time, and if businesses failed to prepare for that then they deserve to close. And that's fine and all, but that's 100% contrary to the standard way small businesses in the US have operated. Any business hoarding cash for such an unlikely scenario would be relieved of that hoard of cash through one absolutely legal method or another, it's the American way. |reply tagged to my own post by mistake.

dangus 6y ago
No, I’m not taking the position that any business deserves to close due to an extreme scenario. My position is that it’s absolutely normal for the business owner to shoulder that risk - 1/5 of small businesses fail in the first five years, right? So the whole idea of donating money to save a business is a illogical when they are expected to fail. I’m very simply taking the position that donating to for-profit businesses is almost never a noble cause, even if it is a “mom and pop,” and that I’m confused why people are doing this when they should be more worried about their own finances, worried about their own job security, etc. With all respect to you, I think your responses are just taking us down a lot of tangents to my original point (I’ve admittedly followed you down that rabbit hole). I can’t find in your responses where you directly address why someone should donate to a for-profit business, especially when these donation funds are often managed by the owner. The root question is this: why should an individual donate to any particular small business at this time? How would donations have any chance of rescuing a business compared to a fully operational business? Why would anyone donate to the business ownership class over something like a local food bank or even just directly giving money to their unemployed friends and family? And despite your explanations of how the restaurant industry works, I still don’t think the story adds up. I don’t think the city is knocking down doors for tax money. Businesses don’t pay taxes on losses. I don’t think commercial landlords expect to get paid right now and I don’t think they’re evicting just yet when there’s no business to replace the evicted. They have incentive to negotiate. I don’t think restaurants have to pay suppliers for supplies they aren’t getting. And they certainly don’t have any obligation to pay their 100% hourly tip-supported staff.