COVID-19 and the restaurant industry in Jalisco, Mexico

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. Objetivo Este documento estudia el efecto de la desaceleración económica de COVID-19 en la industria de restaurantes en Jalisco, México, identificando variables específicas del negocio que mejoran/empeoran las probabilidades de cierre permanente de los restaurantes. Diseño Los datos de una encuesta aleatoria sobre 438 restaurantes realizada en octubre de 2020 en Jalisco, México, se analizan utilizando un modelo de regresión logística binaria en el que la variable dependiente representa la percepción del propietario del restaurante con respecto a la posibilidad de cerrar el negocio para siempre debido a COVID-19. Hallazgos Los despidos y las grandes caídas interanuales en las ventas aumentaron las posibilidades de cierre permanente en 12.7 y 5.5 veces, respectivamente. Al