Government shutdown hits DC restaurants, but some are offering free food and other deals

Key Points
  • The government shutdown is now tied with the 1995-1996 shutdown as the longest in U.S. history.
  • Restaurants in the Washington, D.C.-area like Founding Farmers are seeing sales drop, while others are using the shutdown to lure federal workers.
  • Because most national parks remain accessible to tourists, restaurant sales do not appear to be affected.
Michael Northern, vice president of WJP Restaurant Group, stands next to an empty table at dinnertime at Rocket City Tavern near numerous federal agencies in Huntsville, Ala., Wednesday, Jan. 9, 2019.
David Goldman | AP

Amid the government shutdown, restaurants are starting to feel the pinch.

The partial shutdown entered its 21st day Friday, tying it with the 1995-1996 shutdown as the longest in U.S. history. And it doesn't look like there is an end in sight, with Democrats refusing to capitulate to President Donald Trump's demands for a $5.7 billion border wall.

About 800,000 federal workers are on temporary leave or working without pay due to the shutdown. The last time that most received a paycheck was Dec. 28. Many of the federal employees missing their paychecks are concentrated in Washington, D.C. and the surrounding suburbs.

The economic effect of the shutdown could be at least $2 billion per week, according to an estimate from Wells Fargo retail analysts. The monetary impact is rippling out to restaurants as federal employees avoid eating out while they wait to get paid.

Founding Farmers, a usually busy restaurant with locations in D.C., Maryland and Virginia, has seen sales decrease by 15 to 30 percent once the holiday season ended. Co-founder Dan Simons called the decline "staggering."

"I'm really concerned about my staff," Simons told CNBC.

The slowdown at his restaurants means that Founding Farmers waiters are seeing less tips and staff hours could be cut if the shutdown does not end soon. Additionally, it buys from small family-owned farms and sends some profits back to them. With decreased traffic to the restaurants, Founding Farmers is buying less of those farms' products.

Meanwhile, many D.C.-area restaurants are using the shutdown as marketing opportunity. While these promotions will hurt revenue, they could introduce cash-strapped federal employees to the restaurants and build goodwill.

On Wednesday, the Meatball Shop started offering all visitors to its D.C. location a 50 percent discount on some alcoholic beverages and selling mini buffalo chicken balls for 50 cents each. CEO Adam Rosenbaum said he thought the shutdown would've ended much earlier, which is why it only started the deals two days ago, as a way to give back to the community.

"People need to eat," he said.

The New York-based restaurant chain opened its first D.C. location several months ago. Since then, Rosenbaum said that he's noticed that traffic ebbs and flows with the activities of the federal government, even when it's not shut down. With the shutdown, however, he said that the restaurant has noticed a definite "softening" in business.

&pizza, a fast-casual chain based in the city, has given out between 15,000 to 20,000 free pizzas since the shutdown began to federal workers, CEO Michael Lastoria said. All customers need is a valid government-issued ID to pick up a complimentary pie at one of its 13 locations in the nation's capital. For the pizza chain, it's about the organization's values, not marketing, Lastoria told CNBC.

The number of federal workers stopping by its stores to pick up a free pie has led to long lines at participating locations, which Lastoria said has affected his paying customers' ability to pick up pizza.

"Sales have been a mixed bag, but in general the registers are still ringing," he said. "But you can definitely see the impact of lower traffic overall in Washington, D.C."