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. 2021 May 15;96:102960. doi: 10.1016/j.ijhm.2021.102960

Rapid responding to the COVID-19 crisis: Assessing the resilience in the German restaurant and bar industry

Thomas Neise 1,, Philip Verfürth 1, Martin Franz 1
PMCID: PMC9757539  PMID: 36569044

Abstract

The COVID-19 pandemic has fundamentally impacted the restaurant and bar industry. Simultaneously, this industry is already undergoing structural change. Using the concept of organisational resilience, we analyse the impact of the COVID-19 crisis on owner’s assessment of resilience in the German restaurant and bar industry. Findings from an online survey with 623 owners and managers show that ex-ante business problems, and financing by loans or credit, reduce the likelihood of owners perceiving their business as resilient; while, delivery and takeaway service, ownership of property and higher age of owners, increase the likelihood of enterprise resilience. The paper contributes to understanding how restaurants and bars absorb and cope with the COVID-19 crisis. Furthermore, we make recommendation for future research on the recovery and adaptability of the business sector.

Keywords: COVID-19, Crisis, Resilience, Restaurants, Structural change, Germany

1. Introduction

The COVID-19 pandemic and the restrictions imposed in response, have had a massive impact on the hospitality sector worldwide (e.g. Karim et al., 2020; Brizek et al., 2021; Gössling et al. 2021). The bar and restaurant industry has been affected severely by the regulations and restrictions, such as the shutdown policy over weeks, issued in many countries. The shutdown policy, and the lower demand during the COVID-19 pandemic, put restaurants and bars ‘at risk of permanent closure, and many of their employees have lost their jobs’ (Nicola et al., 2020, p. 190).

We follow the definition of crisis by Brinks and Ibert (2020, p. 10), who state that a crisis ‘encompasses the elements of uncertainty, urgency and threat’. The question is how restaurants and bars deal with these uncertainties, the urgency, and the threats that exist for their enterprises. The immediate collapse in demand forced owners and managers to respond quickly and flexibly to this urgent threat to their business by cutting costs and/or finding ways to generate some sales (e.g. delivery services). Therefore, the question arises what conditions influence their ability to withstand and respond appropriately to the crisis triggered by COVID-19?

Numerous studies have examined the influence of crises, such as economic, financial, health and food crises, terrorism and natural disasters, on the hospitality sector (e.g. Steiner, 2007; Alonso-Almeida and Bremser, 2013; Haque and Haque, 2018; Cheng and Zhang, 2020). Most studies on crises in the hospitality sector refer predominantly to the tourism sector, and not to the restaurant and bar industry. There are only a few exceptions, who deal specifically with crises in the restaurant and bar industry (e.g. Green et al., 2004; Seo et al., 2014; Brizek et al., 2021). The first study on the effects of COVID-19 on restaurants in Germany was published by Wilkesmann and Wilkesmann (2020).

To explain how enterprises withstand, respond and adapt to disruptive changes and crises in the hospitality sector, the concept of resilience has become increasingly popular in recent years (e.g. Hall et al., 2017; Sydnor-Bousso et al., 2011; Tibay et al., 2018). However, the literature does not pay much attention to the perspective of the restaurant and bar industry, and as yet there are no studies that explicitly investigate the resilience of the restaurant and bar industry in terms of the COVID-19 crisis. The existing resilience studies focus on the survival of tourism-related enterprises, including travel agencies, hotels, and restaurants (Altin et al., 2020, Brouder and Eriksson, 2013, Lado-Sestayo et al., 2016; Türkcan and Erkuş-Öztürk, 2019). Studies have been done on the reasons for closures of restaurants and bars, but they do not have a resilience perspective. Examples for such studies are Parsa et al. (2005, 2010) on the reasons why restaurants in the USA fail, Muller and Woods (1991) on failure rates of restaurants in California. Andrews and Turner (2012) and Muir (2012) analyse the factors that have led to a declining number of pubs in England.

Against this background, our paper contributes to the emerging debate on crises within the hospitality sector. First, we complement the organisational resilience literature by analysing the situation within a crisis. So far, studies have focussed on how enterprises gain or remain resilient by a post-analysis. The COVID-19 crisis provides a good opportunity to understand how enterprises assess their situation during a crisis. Second, we present one of the first studies on how restaurants and bars deal with the COVID-19 crises. Up to now, the literature largely focuses on the hotel sector, or the hospitality sector as a whole. Third, our paper combines the focus on structural change and a crisis. Although the COVID-19-pandemic is a fundamental crisis in terms of its scale and impact on the restaurant and bar industry, it is not the first disruptive change to hit this sector. By choosing the German restaurant and bar industry, we can analyse how the magnitude of a crisis, e.g. the COVID-19 pandemic, is related to ex-ante conditions that affect the resilience of enterprises. The German restaurant and bar industry has already had to face ongoing structural change in recent years, which has posed major challenges for many enterprises (Franz, 2020b). Furthermore, the focus on Germany allows us to understand how state aid might help companies to overcome the COVID-19 crisis.

To achieve these goals, we present first insights on how the viability of the restaurant and bar industry is affected by the COVID-19 crisis. Our research question is: What factors determine the organisational resilience of bar and restaurant enterprises during a crisis?

To answer the research question, an online survey was conducted with 623 respondents from the German bar and restaurant industry between 19 April and 10 June 2020. The variable of interest is the dummy variable "enterprise resilience" (yes = 1), which means that the manager or owner positively assessed that his company could withstand the COVID-19 crisis.

By applying a binary logistic regression analysis, our study shows that ex-ante business problems and financing by loans or credits reduce the likelihood that owners perceive their enterprise as resilient, while delivery and takeaway service, ownership of property and owners age increase the likelihood of enterprise resilience.

The article is structured as follows: The introduction is followed by a literature review on organisational resilience and crisis to derive our hypotheses. Section 3 presents the German restaurant and bar industry and its structural and format changes, as well as the measures taken in the context of the COVID-19 pandemic. A section on our data and method follows, before the empirical results are presented and discussed. Finally, we draw a conclusion and give recommendations for future research.

2. Organisational resilience and crisis – literature review and hypothesis

According to Rose (2006), resilience can be analysed at three different levels: (1) at the micro level, the resilience of individual organisations, (2) at the meso level, the resilience of an industry, a market or a group of companies, and (3) at the macro level, the totality of individual organisations and markets. In this article, we focus on the resilience of an industry: the meso-level. However, in order to draw conclusions about the industry, we will look analytically at the resilience of individual organisations. Therefore, organisational resilience serves as a conceptual framework. Neise (2019, p. 14) points out that organisational resilience is discussed particularly in organisation and business studies (e.g. Busch, 2011; Linnenluecke and Griffiths, 2015; Weick and Sutcliffe, 2001). The literature on organisational resilience is looking at the capabilities of organisations to adapt to shocks or gradual changes in the environment of organisations (Weick and Sutcliffe, 2001).

Based on a literature review, Barasa et al. (2018, p. 496) contrast the original understanding of resilience with more current perspectives. In its original understanding, resilience is understood as a simple bounce back from shocks to the original situation (engineering resilience). This perspective ‘is grounded on a machine-like view of systems, with simple cause and effect relationships’ (Barasa et al., 2018, p. 496). Martin (2018, pp. 848–849) understands regional economic resilience as a development process including four factors (risk or vulnerability, resistance, reorientation or reorganisation and recoverability). In order to understand the ability of restaurants and bars to respond immediately to the COVID-19 crisis the term “resistance” is particularly relevant. Resistance means the scale and scope of a shock. Martin (2018, p. 849) emphasizes that the regional structures influence the vulnerability or resistance of a region to a crisis. The same has been also discussed in the literature on individual firms. For instance, Barasa et al. (2018) observe that recent research conceptualises organisational resilience as the ability to withstand shocks and transform in the face of challenges. Organisational resilience can therefore be defined as ‘a firm’s ability to effectively absorb, develop situation-specific responses to, and ultimately engage in transformative activities, to capitalise on disruptive surprises that potentially threaten the firm’s survival’ (Lengnick-Hall et al., 2011, p. 244). Again, Martin (2018, p. 852) states that the “(competitive) ‘fitness’ of individual firms” is critical as it “shapes their ability or otherwise to resist and recover from the disruption.”

In this sense, organisational resilience (i.e. the fitness of firms) consists of three main elements: (1) absorption, (2) coping and (3) adaptation. Absorption of shocks includes the ability of organisations to withstand stress without losing functionality (Berkes, 2007, p. 284). Coping means the ability to respond quickly in a shock situation to prevent the worst, while adaptation, in turn, is the ability to develop and implement strategic long-term responses to shocks (Berman et al., 2012, p. 91). In this study, we focus on the ability of enterprises in the restaurant and bar industry to withstand the shock of the COVID-19 pandemic (absorption), and the short-term responses of companies to the restrictions (coping; cf. Fig. 1). Due to our objective of examining organisational resilience of enterprises during a crisis, adaptation is not the focus of this article.

Fig. 1.

Fig. 1

Conceptual framework for analysing enterprise resilience.

2.1. Absorption of shocks

The absorption of shocks is related to the robustness of the firm, i.e. its ability to withstand stress. A key indicator of a company’s absorptive capacity is its pre-shock performance. If companies are already struggling with profitability issues before the disruptive event, such as high operating costs, excessive taxes, and bureaucracy, they are more likely not to withstand the shock, and thus close down (cf. Esteve-Pérez and Mañez-Castillejo, 2008, p. 235). Balcaen et al. (2012, pp. 953–954) distinguish between economically and financially distressed firms. Economically distressed firms have an inadequate business model and low or negative profitability, while financially distressed firms have temporary debt repayment problems. ‘Firms in financial distress may survive after restructuring their balance sheet, while recovery of economically distressed firms needs a restructuring of their operations and strategy as well’ (Balcaen et al., 2012, pp. 953–954).

When a crisis occurs, debt becomes a critical determinant, as interest must be paid regardless of whether or not the company makes sales or profits. So, low or no debt gives companies the opportunity to respond with more financial flexibility in the event of a crisis – including the ability to borrow more easily (Freear, 1980). The available literature on the restaurant and bar industry in Germany suggests that many companies were already in economic and financial distress before the COVID-19 crisis. Franz (2020b) notes that the structural and format change in the restaurant and bar industry in Germany is driven by a change in demand that is removing the basis of previously functioning business models, and by an investment backlog with low capitalisation and difficult access to capital providers. Thus, we derive the following hypothesis:

Hypothesis 1

The better the enterprise’s economic and financial performance before the COVID-19 crisis, the more resilient it is.

The second key indicators of the absorptive capacity of enterprises – related to the first – are the tangible and intangible resources or assets that an enterprise can access in times of crisis (Barasa et al., 2018, p. 497). To put it in the words of Conz and Magnani (2020, p. 404) ‘to be resilient, a firm needs to keep some resources in reserve and possess various assets and resources – material, social, financial, human, technological – to sustain the organisational performance during times of crisis’. Resource scarcity, in turn, impedes enterprises’ ability to overcome disruptions. Pal et al. (2014), who studied small and medium-sized Swedish textile companies during the economic crisis, found that a lack of tangible assets, such as raw materials and finished goods, as well as intangible assets, such as investment finance and external support, impaired the resilience of the companies. Parsa et al. (2015, p. 88) note that ‘restaurant size and location seem to influence restaurant failure rate, with larger restaurants having a greater success rate’. The higher rate of failure among smaller restaurants appears to be closely related to the smaller amount of assets available to respond to crises. More resources are also a clear advantage of system restaurants and bars. ‘The present research suggests that as restaurants get larger and more complex, more resources are likely to be used (financial and human), and there is a greater chance of survival. Relatively small and simple operations, requiring fewer resources and managerial expertise, appear to be more vulnerable to failure’ (Parsa et al., 2011, p. 374). Accordingly, we formulate the following hypothesis:

Hypothesis 2

The more tangible and intangible assets an enterprise has at its disposal, the more resilient it is.

2.2. Coping strategies during crisis

Coping means the organisational ability to respond to challenges related to an event when it occurs (Berman et al., 2012, p. 91). This ability has a decisive influence on the resilience of an enterprise during crises. Coping strategies are reactive and incremental actions intended to minimize the negative effects of disruptive events (Neise and Revilla Diez, 2019).

Tibay et al. (2018) found for the hospitality sector in Auckland, New Zealand, that companies implement measures to adapt to structural change in the industry and are very attentive to slow changes, but ‘with regard to being able to withstand and adapt from [sic] the aftermath of a significant disruption such as a natural disaster, there are few mitigation plans in place due to the low frequency of such events’ (Tibay et al., 2018, p. 1223).

Enterprises’ coping strategies are diverse, ranging from cost-cutting and improved marketing, to temporary closure (Biggs et al., 2012). The impact of responses on organisational resilience depends strongly on the timing of the observation. This is illustrated by the examples of staff layoffs and the use of state assistance during the crisis. While layoffs can help survival in the short term, they can impair organisational resilience in the long term, as Gittel et al. (2006) demonstrated in a study of airline responses to 9/11. Another coping strategy discussed in the literature is the use of government support and subsidies. A study by Haynes et al. (2011) shows that companies located in counties that received more disaster assistance are not more likely to survive. However, these companies were found to be more likely to have positive sales performance. With reference to the literature, we assume that the resilience of companies in the restaurant and bar industry manifests itself, in particular, in their short-term coping capacity. From this we derive the following hypothesis:

Hypothesis 3

The better a company’s short-term response to the crisis, the more resilient it is.

An important factor for the resilience of small enterprises, in particular, seems to be the age of both the companies and their managers. Various authors state that the probability of survival of a company increases with its age (e.g. Headd, 2003; Kaniovski and Peneder, 2008). This is explained by learning processes based on experience at the firm level (e.g. Falk, 2013). ‘Success rates generally increased with owner age, number of owners, and previous experience as the owner of another business’ (Headd, 2003, p. 56). Parsa et al. (2005, p. 319) show that for a restaurant to be successful ‘it is important for the owner-manager to have the requisite skills to run a restaurant’. These skills are partly based on the experience of the respective manager. When managers lack experience, they are less successful ‘in adapting to environmental turbulence, and usually show inadequate planning’ (Parsa et al., 2005, p. 307). This is particularly relevant in crisis situations. Similarly, Türkcan and Erkuş-Öztürk (2019, p. 3) argue that learning at the firm-level is crucial to avoid closures of older firms. Headd (2003, p. 56) has shown that the success rate of new enterprises increases with the age of the owner. Based on these findings, we come up with the following hypothesis:

Hypothesis 4

The more experienced the owner or manager, the better the enterprise can respond to the crisis and is thus more resilient.

When disasters strike, the demands on a company can change suddenly and extensively. At the same time, individuals and families also face major challenges in dealing with disasters. Normal routines may no longer work. Especially, family enterprises can be overwhelmed by this double burden (Danes et al., 2009, Haynes et al., 2019). (Haynes et al. 2019, p. 133) note that ‘in general, incorporated businesses are more likely to survive and succeed’. Parsa et al. (2005, 2011) have shown that owner- or family-run restaurants have a lower coping capacity than corporate-owned enterprises. The study by Parsa et al. (2005) shows that independent owners have a significantly higher 3-year failure rate than franchisees. Franz (2020a) finds for the restaurant and bar industry in Germany that, in addition to economies of scale, system restaurants and bars have distinct advantages in dealing with challenges due to their more extensive and differentiated organisational structures. From this we derive the following hypothesis:

Hypothesis 5

Owner-managed enterprises are more likely to be less resilient.

3. The German restaurant and bar industry

3.1. Characteristics and structural change in the German restaurant and bar industry

The hospitality industry in Germany comprises 223,000 companies. Of these, 44,000 companies belong to the hotel industry, the majority (165,000) to the restaurant and bars industry, and 14,000 companies provide other catering services (DEHOGA, 2020, p. 11). The restaurant and bar industry in Germany is usually divided into (1) restaurants, (2) pubs, (3) bars, discotheques, dance and entertainment venues, (4) cafés, (5) ice cream parlours, (6) snack bars, and (7) other beverage-related enterprises (DEHOGA, 2020, p. 11).

Restaurants and snack bars make up by far the largest share with a total of 138,000 enterprises (DEHOGA, 2020, p. 11). More than other industries, the hospitality sector in Germany is characterised by small and medium-sized companies, 99.6% of which have fewer than 100 employees (Lichtblau et al., 2017, p. 4). Many enterprises are small, family-run businesses that often have less reserves and assets. System restaurants and bars account for approximately 30% of the total restaurant and bar industry turnover in Germany (DEHOGA, 2019a, p. 3). Together, the one hundred largest system restaurant and bar companies in Germany have 19,609 establishments (DEHOGA, 2019a, p. 7).

In 2019, a total of 2.4 million people were employed in the hospitality sector, including 1.5 million in the restaurant and bar industry (DEHOGA, 2020, p. 5). The share of employee remuneration in turnover in the hospitality sector in Germany was around 33.7% in 2016 and was well above the overall economic average of 28.6%. Wages and salaries account for 69.1% of gross value added in the hotel and restaurant industry; while in the economy as a whole this share is 56.4% (Lichtblau et al., 2017, p. 3).

While there were 175,576 establishments of the restaurant and bar industry in 2009, the number was 165,206 in 2018, with a slight increase since 2014. This increase took place particularly in the snack bar segment, while the number of pubs and restaurants continues to decline (DEHOGA, 2012, p. 9, 2020, p. 11). However, structural and format change in the bar and restaurant industry in Germany is much older (e.g. Dröge and Krämer-Badoni, 1987 for the bar industry). Franz (2020b) identifies a number of reasons for structural change:

  • the change in consumer behaviour due to a change in leisure and communication behaviour (e.g. competition from television, internet, smartphones and sports) and due to changed working and living conditions,

  • the increasing demands of guests on the breadth, depth and quality of the offer, as well as on the space and room design,

  • the reduced bargaining power of restaurant and bar owners vis-à-vis brewers and wholesalers,

  • competition from clubhouses and bakeries as well as from large-scale system gastronomy,

  • the lack of innovative capacity of bar and restaurant operators,

  • the shortage of personnel and the lack of company succession,

  • an investment backlog with low capitalisation and difficult access to capital providers,

  • the lack of political and administrative support,

  • the increasing regulation and enforcement of rules and laws (tax audits, etc.) and the associated increased demands on restaurant and bar managers and owners.

Parallel to the increasing spatial concentration, an expansion of system gastronomy branches and franchises can be observed, analogous to the developments in retail (Pätzold, 2012). This development is increasingly displacing locally orientated companies. Franz (2020a) notes that larger restaurant and bar enterprises, especially chains, have several competitive advantages over the small, family-run enterprises: In addition to economies of scale, their more extensive and differentiated organisational structures give them clear advantages in dealing with the increasing administrative burden, and in personnel management.

3.2. Development and measures in the COVID-19 crisis

On 28 January 2020, the first infection with the new SARS-CoV-2 virus (‘corona’) was confirmed in Germany. From the end of February 2020, the number of confirmed infections in Germany increased sharply. After a meeting with the Prime Ministers of the federal states on 13 March 2020, Chancellor Angela Merkel appealed to citizens to cancel all unnecessary events and refrain from social contacts. Measures have been taken in many federal states to slow down the spread of the virus. For example, the ban on big events automatically led to a loss of turnover for bars and restaurants. In mid-March 2020, the Ministry of Health still warned against the rumour that further massive restrictions on life would soon be announced. In Bavaria, the Prime Minister rejected rumours of forced closures of restaurants and bars. For the owners and managers of bars and restaurants, further restrictions were therefore not to be expected. Only 3 days later, on 16 March 2020, the federal government and the heads of the federal states decided that bars, clubs, discotheques, pubs, and similar establishments should be closed to the public (for an overview see Dannenberg et al., 2020, p. 9). It was also decided that measures should be implemented in canteens, restaurants, eateries, and hotels to minimise the risk of spreading the coronavirus, for example, by regulating table spacing, the number of customers, hygiene measures and instructions. In addition, it was ruled that eating establishments could generally only open between 6 am and 6 pm. After 17 March, when the renowned Robert Koch Institute assessed the risk to public health as high, individual federal states introduced further restrictions between 17 and 22 March 2020: Regulations came into force in all federal states requiring all restaurants and bars to be closed for on-site consumption. Take-away and delivery services may, however, continue to be offered, subject to hygiene and distance regulations.

An initial study on the effects of COVID-19 on restaurants in Germany was published by Wilkesmann and Wilkesmann (2020). The study summarises the main results of two surveys in top gastronomy, which took place from 22 March to 10 April 2020, at the beginning of the closure of restaurants due to the COVID-19 pandemic. A total of 654 people were interviewed: chefs, waiters, guests, and restaurant owners (Wilkesmann and Wilkesmann, 2020, pp. 5–6). The key findings of the study were that 50% of the top restaurants could survive for a maximum of 6 weeks if the corona shutdown is maintained. On average, the maximum is 9½ weeks. The effect of government support measures was viewed with great scepticism by top gastronomy employees. According to the respondents, the survival of many restaurants could not be ensured in the long term (Wilkesmann and Wilkesmann, 2020, p. 7). The majority of the employees received short-time allowance. Service staff is particularly affected: 65% of this staff group got short-time allowance as opposed to 56% of chefs. At 12%, service employees were also unemployed more often than the cooks surveyed. Overall, the financial situation for employees in the catering trade is particularly precarious, because the short-time allowance not only reduces income, as it is often not topped up, but also eliminates additional income in the form of bonuses and tips (Wilkesmann and Wilkesmann, 2020, pp. 10–11).

On 9 May 2020, the first federal state (Mecklenburg-Western Pomerania) started to reopen its restaurants. In the following weeks, the other federal states followed step by step, with the closures for bars being maintained longer than for restaurants. The establishments that were allowed to open were, however, subject to extensive guidelines. For instance, maximum number of guests, spatial distance between tables, visitors and staff should wear face masks, buffets and self-service were prohibited.

Due to restrictions, turnover in the hospitality sector in Germany fell by 44.0% in March 2020 compared to the previous year (real 45.4%). In the hotel industry, there was a decline in sales of 50.0% (real 51.0%), in the restaurant and bar industry of 40.7% (real 42.4%). According to calculations of the Federal Statistical Office, all segments of the hospitality industry recorded the largest decline in turnover since statistical recording began in 1994. In March and April 2020, 1,025,512 employees in the hotel and restaurant industry were sent to short-time work, which is 95% of all employees. In April 2020, a total of 35,348 people were registered as unemployed, an increase of 208.2% compared to the same period last year (DEHOGA, 2020, p. 1).

4. Data and methodology

With the outbreak of the COVID-19 pandemic in Germany, the need arose to gain knowledge about the effects of this crisis, and the reactions of the affected companies, as quickly as possible. To ensure this, without face-to-face contacts, the method of a standardised online survey was chosen. The survey included questions about the decline in sales due to the temporary closure, the use of government assistance, the offer of delivery and takeaway services, structural problems of the enterprise, and characteristics of the enterprises surveyed. After designing the questionnaire, we conducted a pre-test to ensure that the questions were clearly formulated and that all essential response categories were included in the questionnaire. The pre-test helped to clarify the questions and add more response categories. Some of our questions and response categories are related to the business survey of the German Hotel and Restaurant Association (cf. DEHOGA, 2019b).

We contacted the enterprise owners or managers via various business associations, such as different regional entities of the German Hotel and Restaurant Association, regional Chambers of Industry and Commerce, as well as local and regional business development agencies. The companies received an invitation link to complete the survey electronically. We considered all responses in our analysis, where more than 60% of the questions had been answered. Consequently, we surveyed a total of 623 enterprises between 19 April and 10 June 2020. The survey was distributed throughout Germany. Of the enterprises that participated, 63,2% (n = 576) are located in urban areas. The questionnaires were mainly filled out by the owners (81.3%) and the managing directors (15.7%) of the enterprise (n = 566). Of the respondents, 32.3% were female and 67.3% male (n = 560). The average age of the respondents is 49.7 years (n = 562).

To detect the factors that determine whether enterprise owners or managers consider their enterprise to be resilient; meaning the ability to withstand the crisis, we applied a binary-logistic regression analysis. The binary logistic regression model (cf. Liao, 1994) determines the likelihood of being resilient by estimating a linear function of the enterprises’ factors as shown below:

LogP(E)1(P(E)=ß0+ß1X1+ß2X2++ßnXn

with P (E) describing the probability of each enterprise to be perceived as resilient. X1−n stands for the independent variables, and ß1−n represents the coefficients of each independent variable. The parameter ßo shows the constant term.

To control for autocorrelation, we calculated the binary logistic regression with robust standard errors. We also tested the analysis for multicollinearity to ensure that two or more explanatory variables are not highly linearly related. Multicollinearity can be rejected as the variance inflation factors (VIFs) for the explanatory variables have a mean value of 1,11.

The dependent variable of our analysis is the dummy variable ‘enterprise resilience’, where 1 means that the owner perceives the viability of his enterprise as not threatened, that is, the enterprise can withstand the shock.

We derived several independent variables from the online survey to determine whether the enterprises are assessed as resilient (see Table 1 and Table 2).

Table 1.

Independent variables that determine resilience assessment.

Independent variable Mean Std. Dev. Min Max Observations
Problems before COVID-19 pandemic
Decline in sales 2018–2019 (yes = 1) .07 .26 0 1 575
High operating costs/tax load (yes = 1) .52 .50 0 1 623
Regulatory requirements (yes = 1) .20 .40 0 1 623
Financing and liquidity (yes = 1) .07 .26 0 1 623
Response during COVID-19 pandemic
Short-time allowance (yes = 1) .78 .42 0 1 623
Corona relief programme (yes = 1) .85 .36 0 1 623
Delivery and take-away service (yes = 1) .41 .49 0 1 623
Characteristics of owner and enterprise
Managed by owner (yes = 1) .94 .24 0 1 593
Self-owned property (yes = 1) .50 .50 0 1 584
Investment via loans/credits (yes = 1) .47 .50 0 1 623
Age of respondent (years) 49.71 9.79 22 77 570
Operational years 29.97 50.51 1 830 594
Employees per enterprise 16.31 15.80 1 102 575

Calculation by authors.

Table 2.

Binary-logistic regression analysis results for achieving enterprise resilience.

Independent variable Odds ratio Robust standard errors
Problems before COVID-19 pandemic
Decline in sales 2018–2019 (yes = 1) .485 .204
Operational costs/tax load (yes = 1) .601** .119
Regulatory requirements (yes = 1) .610* .163
Financing and liquidity (yes = 1) .296** .146
During COVID-19 pandemic
Short-time allowance (yes = 1) .909 .228
Corona relief programme (yes = 1) .897 .275
Delivery and take-away service (yes = 1) 1.469* .290
Characteristics of owner and enterprise
Managed by owner (yes = 1) .367** .159
Self-owned property (yes = 1) 1.455* .307
Investment by loans/credits (yes = 1) .679* .139
Age of respondent (years) 1.028*** .011
Operational years .997 .002
Employees per enterprise .997 .007
Constant .936 .671
Observations 502
Prob > chi2 0.000
Pseudo R2 0.086

***Significant at 1% level (p < 0.01); **Significant at 5% level (p < 0.05); *Significant at 10% level (p < 0.1).

To analyse how business performance before the COVID-19 pandemic determines the resilience of the enterprise, we developed the explanatory dummy variable ‘decline in sales 2018–2019′ (yes = 1). The variable served as a proxy, to test whether weaker business performance prior to the COVID-19 pandemic determines the resilience rating. We also included two control variables that influence the ex-ante business performance of the enterprise. First, we developed the dummy variable ‘costs and taxes’. The variable implies that the enterprise had high operational costs and a high tax load before the COVID-19 pandemic. A study by DEHOGA (2019b, p. 11) showed that 47.9% of the restaurants and bars surveyed, perceive high operating costs as a particular burden (ranked 3rd of the main problem areas). Second, we generated the dummy variable ‘regulatory requirements’, which indicates that enterprises that suffered from regulations, such as a smoking ban or noise protection, had fewer customers. In the DEHOGA survey (2019b, p. 11) on the main problems of companies, regulatory requirements generally ranked sixth (33.4%).

To analyse whether assets influence enterprise resilience, we developed the explanatory dummy variable ‘self-owned commercial property’. The variable means that the owner owns the commercial property of the enterprise. We also included three control variables as proxies to take into account that the enterprise owns fewer assets. First, we used the dummy variable ‘investment via loans or credits’, to control whether the enterprise does not possess sufficient capital to finance its own investment. Second, the dummy variable ‘financing and liquidity’ provides information whether the enterprise had difficulties in guaranteeing sufficient financial capital before the COVID-19 pandemic. Third, the variable ‘employees per enterprise’ serves as a proxy for the size of the enterprise. We assume that the larger the enterprise, the more assets it has at its disposal (Parsa et al., 2005, Ismail et al., 2011).

We included the dummy variable ‘delivery and takeaway service’ as a proxy for enterprises to cope with the COVID-19 crises. The variable means that the enterprise offered takeaway menus or delivered its products to the customer. The variable should explain whether this coping strategy generated at least some sales during the lockdown, and increased the resilience of the company. In addition, we integrated the two control variables of political measures in our analysis, that test how the enterprises may compensate for the losses caused by the COVID-19 pandemic. First, the German government provided a rapid loan scheme for the enterprises affected. Accordingly, we included the dummy variable ‘corona relief programme’, where 1 means that the enterprise used the offer to stabilise its cash flow. Second, the dummy variable ‘short-time allowance’ means that the enterprises took advantage of the common crisis programme offered by the Federal Employment Agency. This programme supports companies if employees’ working hours are significantly reduced due to temporary and unavoidable economic reasons (e.g. poor economic conditions or catastrophes). The Federal Employment Agency disburses 60% of the net remuneration for up to 12 months. During the COVID-19 pandemic, the period was extended to up to 21 months.

Literature has shown that older enterprises and their owners support resilience (e.g., Headd, 2003; Kaniovski and Peneder, 2008; Parsa et al., 2005). Accordingly, we added the variables ‘age of respondent’ and ‘operational years’ to our analysis. The variable ‘age of respondent’ indicates the age of the owner or manager. Furthermore, the variable ‘operational years’ serves as a proxy to test whether companies with a more longstanding presence in the market are more resilient. Last, but not least, we tested our final hypothesis using the variable ‘managed by owner’. We expect that owner-managed enterprises have less coping capacity than corporate-owned enterprises (e.g. Parsa et al., 2005, 2011).

5. Results and discussion

5.1. Descriptive results

The vast majority of the enterprises in our sample of 623 enterprises are managed by the owners (94%). This indicates that our sample represents the typical population of the German bar and restaurant industry. Two-thirds of businesses are restaurants (68%), and one-third (32%) are bars, cafés, ice cream parlours and other beverage-related enterprises. Half of the owners (50%) own the property in which their business is located and finance their investment with credits or loans (47%). Of the owners, 18% have an additional income source, and 60% of all bars and restaurants rely on regular customers as their primary customer group. The average age of owners is 50 years; the surveyed enterprises have been in business for an average of 30 years and employ an average of 16 workers.

With respect to our dependent variable ‘enterprise resilience’, the descriptive analysis shows that 45% (n = 623) of the respondents perceive their enterprise as resilient. During the shutdown (i.e. April 2020), our surveyed enterprises experienced an average decline in turnover of 90%. To reduce the impact of the decline in turnover, the enterprises frequently made use of relief schemes provided by the German state. Of all enterprises surveyed, 85% utilised the corona relief programme, and more than three-quarters (78%) of the enterprises took advantage of the short-time allowance. Considerably fewer enterprises offered a delivery and takeaway service (41%) to compensate for the ban of on-site consumption during the full lockdown and thus have less decline in sales.

The enterprises faced several economic and financial problems before the COVID-19 crisis. More than half of the companies (52%) were confronted with high operating costs and a high tax load. Regulatory requirements caused problems for 20% of the enterprises. Only 7% had difficulties in gaining sufficient financing or liquidity, and 7% of the companies suffered a decline in sales from 2018 to 2019.

5.2. Discussion of analytic results

Regarding Hypothesis 1: The analysis shows no significant effect on how prior declines in sales determine the resilience rating of bar and restaurant owners. We can confirm that ex-ante high operational costs or tax load, negatively influence the likelihood of an enterprise being perceived as resilient. These results are in line with the results of the DEHOGA study (2019b, p. 11) which showed that 48% of the restaurants and bars perceived high operating costs as a burden. Businesses lacking sufficient financial reserves, cannot easily withstand the impact of the shutdown period if they were already struggling with high costs, before the COVID-19 crisis. Similarly, enterprises that have problems complying with regulatory requirements, are perceived as less likely to be resilient. Although we cannot verify our hypothesis, the significant negative results of the control variables indicate that business constraints before the COVID-19 crisis, have a negative impact on the likelihood that the owners or managers perceive their enterprise as resilient. It seems that high costs and taxes as well as strict regulations reduce the absorptive capacity of enterprises in a crisis (cf. Esteve-Pérez and Mañez-Castillejo, 2008, p. 235).

Concerning Hypothesis 2: The analysis reveals that enterprises with their own commercial property are more likely to be perceived as resilient. Moreover, enterprises with difficulties in accessing financial capital before the COVID-19 crisis, are significantly less likely to be seen as resilient (cf. Conz and Magnani, 2020). According to the survey, this is the most important reason why owners or managers do not evaluate their enterprise as resilient. This result is further confirmed for enterprises that rely on loans and debts. Our analysis shows that businesses with loans and debts are less likely to be considered as resilient. Both results demonstrate that a solid financial basis, preferably own financial capital, is necessary for firms to withstand the COVID-19 crisis. Thus, the COVID-19 restrictions reinforce effects that were already evident before, as Franz (2020b) mentions, an investment backlog with low capitalisation and difficult access to capital providers, as one of the factors driving structural change in the restaurant and bar industry. Hence, we can confirm that assets are crucial for enterprise resilience. However, with respect to the size of the enterprise, the analysis shows no significant impact. It seems that the size of the enterprise, as an indicator for assets, does not influence whether the enterprise is seen as resilient or not. This is surprising, as existing literature states that smaller companies are more likely to go out of business (e.g. Bates and Nucci, 1989; Cader and Leatherman, 2011; Parsa et al., 2011).

Regarding Hypothesis 3: In terms of the enterprise’s coping strategies amid the COVID-19 crisis, the analysis shows that delivery and takeaway-services increases the likelihood that an enterprise is assessed as resilient. This variable is the most significant positive indicator explaining enterprise resilience. The firms can partially compensate for the losses caused by the ban on in house consumption. The result demonstrates that short-term responses are beneficial for enterprise resilience. However, it should be noted that the delivery and takeaway services could only compensate for a small part of the drop in sales during the shutdown. We found no significant impact of the use of the government assistance (i.e. short-time allowance and corona relief programme) in explaining enterprise resilience. Although the loans provided by the corona relief programme, and the short-time allowance, can relieve the enterprises from paying salaries, it is too early to detect any effect of the government assistance on enterprise resilience. Owners or managers might have difficulties in assessing how the government assistance will affect the long-term viability of their enterprise, as it is still unclear how much financial compensation will be needed to overcome the ongoing crisis.

Concerning Hypothesis 4: The analysis confirms that the older the owner, the more likely the enterprise is to be seen as resilient. Older owners may have experienced more structural crises or economic downturns and may therefore be able to cope with the COVID-19 crisis more easily because of their experience. Our finding confirms the studies of Headd (2003) and Parsa et al. (2005). Regarding the variable ‘operational years’ we could not find any significant impact. This result could be explained by the wide range of operational years of the companies surveyed (up to 830 years).

Regarding Hypothesis 5: Our study confirms that enterprises managed by the owner are less likely to be seen as resilient. The result indicates that owner-managed bars and restaurants are overwhelmed by the crisis, and have less coping capacities than corporate-based restaurants and bars, to withstand it. This finding is consistent with the literature, which shows that system restaurants go out of business less often than individual restaurants (Parsa et al., 2005, 2011). Moreover, it confirms the findings of Franz (2020a) that corporate-based restaurants have an advantage in coping with challenges due to their more extensive and differentiated organisational structure.

6. Conclusion

6.1. Summary

The COVID-19 pandemic and the restrictions imposed in response have had a significant impact on the restaurant and bar industry worldwide. In Germany, the COVID-19 pandemic affects an industry that was already exposed to ongoing structural change in the preceding years. In this article, we drew upon the concept of organisational resilience to analyse the factors that determine the resilience of bar and restaurant enterprises in Germany during the COVID-19 crisis. Our results show that businesses that experienced poor economic and financial performance before the COVID-19 crisis, are perceived as less resilient. The empirical results also show the importance of sufficient assets in withstanding the COVID-19 crises. We found that next to the ownership of the property, a solid financial basis is an essential factor in determining whether an enterprise is more likely to be perceived as resilient. In terms of coping strategies, our results highlight that delivery and take-away-services increase the likelihood of an enterprise being rated as resilient. In addition, we found that the older the owner or manager, the more likely it is that the enterprise is perceived as resilient. This result suggests the importance of the experience of the enterprise’s decision-makers in dealing with a disruptive event such as the COVID-19 pandemic. Furthermore, we provide evidence that owner-managed enterprises are less likely to be resilient than corporate-based restaurants and bars. It can be assumed that this is because corporately owned restaurants and bars have more resources available in the form of, for example, financial resources, stronger organisational structures, better trained management, legal advice and so forth.

Overall, the paper makes three important contributions to the emerging debate on crises within the hospitality sector. First, we complement the organisational resilience literature by analysing the situation within a crisis. Previous studies have focused on how businesses become or remain resilient through a post-crisis-analysis. To do so, we focused on the capacity of enterprises in the German restaurant and bar industry to withstand the shock of the restrictions due to the COVID-19 pandemic (absorption), and the short-term responses of the companies to the restrictions (coping).

Second, we present one of the first studies on how restaurants and bars are dealing with the COVID-19 crises. In contrast to the study by Wilkesmann and Wilkesmann (2020), which focused only on the effects of the COVID-19 crisis in the top gastronomy, our study covers the whole spectrum of enterprises in the restaurant and bar industry. Thereby, we contribute to the understanding of how restaurants and bars withstand and respond to the COVID-19 crisis, which has important implications for the future outlook of the business sector.

Third, our study highlights the important role of ex-ante conditions in analysing organisational resilience. Our results show that enterprises which have been affected by the ongoing structural change in preceding years, are less likely to be seen as resilient during the COVID-19 crisis. Enterprises that have not already struggled with the structural and form change before the COVID-19 pandemic, are more likely to be seen as resilient than enterprises that have been affected by the ongoing structural change in past years. This indicates that the COVID-19 crisis could lead to a further weakening of locally orientated owner-managed enterprises, while the impact on system restaurants and bar branches and franchises will be smaller.

6.2. Limitations and future research

This article provides insights how the German restaurant and bar industry dealt with the first phase of the COVID-19 crisis. Nevertheless, this study has some limitations. It is important to mention that the resilience assessment by the owners or managers should be interpreted carefully. The assessment is based on the subjective opinion of the respondents. Moreover, the financial situation, as well as business performance, could not be evaluated externally.

As our study focused on the absorption and coping of restaurants and bars, we recommend that future research looks at the recovery and adaptation of the industry. Here we see three important areas of research: First, it is recommended to study how many, and which restaurants and bars survived the crisis. In this context, it is worth analysing which owners and business characteristics (e.g. previous experience of crisis, education and training of owners) positively influence the survival of the businesses. Secondly, and related to the first point, it is useful to analyse how the regional and national institutional setting (e.g. regional development agencies or financial organisations) can support the companies in overcoming the crisis and contribute to the robustness of the industry (Martin, 2018, p. 856). We could not find any evidence on whether government aid (e.g. short-time allowance and the loan programme) determine the resilience of the enterprises in the first phase of the COVID-19 crisis. However, it is possible that the aid programmes may have a positive impact in the long run. Next, sociodemographic and economic variables at the regional level (e.g. purchasing power, location of business and economic strength) could provide further important insights into understanding the resilience of restaurants and bars. Third, future research should aim to understand how innovative business practices and products that emerged during the crisis are consolidating in the aftermath. The COVID-19 crisis provided a blueprint for the creation of new products and services, e.g. through digitalisation. For example, in-depth interviews should focus on whether restaurants and bars are willing to keep new producrs or services in their portfolio because there is enough demand and a positive return of investment. In sum, future research should, therefore, investigate how the restaurant and bar industry is changing and explicitly in which direction. Such research enables a closer look at the adaptability of the industry, which is still going through a tough time, with or without COVID-19.

Acknowledgement

We express our gratitude to Franziska Sohns, Peter Dannenberg, and Felix Bücken for their helpful comments on the paper.

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