COVID-19 and the restaurant industry in Jalisco, MexicoCOVID-19 y la industria restaurantera en Jalisco, México COVID-19 e a indústria de restaurantes em Jalisco, México

Abstract

Purpose This paper aims to study the effect of the COVID-19 economic slowdown on the restaurant industry in Jalisco, Mexico, identifying business-specific variables that improve/worsen restaurants’ odds of permanent closure. Design/methodology/approach The data of a randomized survey on 438 restaurants conducted in October 2020 in Jalisco, Mexico, are analyzed using a binary logistic regression model in which the dependent variable depicts the perception of the restaurant owner regarding the possibility of closing the business for good because of COVID-19. Findings Layoffs and large year-on-year drops in sales increased the odds of permanent closure by 12.7 and 5.5 times, respectively. At the same time, being a small business had a protective effect against closure. For instance, a restaurant with 6 to 10 employees and 11 to 20 seats, respectively, had 87.9% and 45.1% lower odds of permanent closure than a different-sized restaurant. There is also an element of legacy in restaurant resilience. Every year the business has been open, it has 2.5% lower odds of permanent closure. Practical implications These results call for government financial support to the restaurant industry in extreme financial distress and help to understand the business-specific characteristics of resilient restaurants when liquidity vanishes, such as in the COVID-19 economic crisis. Originality/value This study fills a gap in the literature regarding the effect of COVID-19 on the restaurant industry in Mexico, which is scarcely studied. Moreover, it analyzes data collected in the recovery period after the first wave of COVID-19, providing a unique scenario to study critical variables for the resilience of restaurants.