Although many businesses have recovered from the blow the pandemic has dealt them, restaurants are still struggling two years after the fact. The amount of revenue lost by restaurants in 2020 has been catastrophic for some establishments, namely those whose margins were already thin before the outbreak began. And while it’s been several months since restaurants faced operating restrictions such as capacity limits, more recently they’ve encountered new challenges such as difficulty sourcing the products they need and hire workers.
But if restaurants fail to fully recover from the pandemic and secure their place as pillars of the community, it could have a disastrous impact on local real estate markets. Successful restaurants can increase property values, while closed businesses – including restaurants – can cause property values to plummet. As such, real estate investors stand to lose a lot of time if restaurants start dropping like flies two years into the COVID-19 health crisis.
To continue, however, many restaurants need a financial lifeline. And a food delivery service may soon come to the rescue.
Giving restaurants the capital they need
During the pandemic, restaurants have relied heavily on food delivery to stay afloat. Thus, partnerships with delivery apps like DoorDash ( HYPHEN 4.21% ) have been invaluable.
Now DoorDash is going even further to help ensure restaurants can keep operating. He’s launching a finance arm called DoorDash Capital to make business loans available to restaurants in need.
Restaurants in need of capital will be able to apply for loans through DoorDash to pay for everything from rent to equipment to staff salaries. And DoorDash will work with restaurants individually to establish a reimbursement plan based on their revenue.
Although DoorDash’s food delivery service is essential for restaurants, it comes at a high cost. In fact, the relationship between restaurants and delivery apps has long been complicated, because while companies like DoorDash undoubtedly help food establishments thrive, the high fees they charge can take a heavy toll on restaurant profits. By launching a fundraising arm, DoorDash may end up buying itself a degree of goodwill at a time when restaurants may be exploring alternate food delivery modalities.
But to be clear, helping restaurants stay in business also benefits DoorDash. The more food establishments forced to close due to financial constraints, the more DoorDash loses partnerships. So this new venture could ultimately be good for DoorDash and restaurants.
It is also something real estate investors should be happy about. Restaurants play a central role in establishing and maintaining local property values. Allowing them to stick around can benefit investors in both commercial and residential space.
Keeping restaurants operating could also help commercial owners avoid a massive vacancy crisis. Many small businesses have closed permanently during the pandemic, leaving landlords with rental spaces to fill. The easier it becomes for restaurants to stay, the less owners will have to deal with the hassle and loss of revenue.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.