Mad Money

Many restaurants would 'shut down completely' under Tennessee's reopening guidelines, Jim Cramer says

Key Points
  • About "13 million people work in the restaurant industry, or at least they did a few months ago," CNBC's Jim Cramer said.
  • "I have no idea how many will be left if we have to operate this way for an extended period of time, but I know it won't be many," the "Mad Money" host said of Tennessee's economic recovery guidelines.
  • "Running a business in the time of Covid is a nightmare," he said.
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Jim Cramer predicts as much as 30% of US bars, restaurants will cese to exist

Many restaurants will find it hard to survive if more states adopt a reopening plan akin to Tennessee's strategy, CNBC's Jim Cramer said Tuesday.

Tennessee Gov. Bill Lee laid out guidelines for restaurants to restore dine-in services as part of his "Tennessee Pledge" plan of action in April, which the state will use to guide its economic restart in the midst of the coronavirus pandemic.

Restaurants are ordered to reduce seating capacity by 50% and dining tables must be situated six feet apart from one another. Both staff and patrons must be screened for possible Covid-19 exposure and active fever before entering establishments.

Additionally, employees must wear face masks and gloves. Bar seating and self-serve buffets are also banned, according to the guidelines.

Loss revenue could be made up through carryout and delivery services, Cramer noted, however, it won't be feasible for restaurants that do not have the scale or capacity to coordinate logistics.

About "13 million people work in the restaurant industry, or at least they did a few months ago." Cramer, himself a restaurant owner in Brooklyn, New York, said on "Mad Money." "I have no idea how many will be left if we have to operate this way for an extended period of time, but I know it won't be many."

The former hedge fund manager painted an ominous picture for the dining industry. While approving of Tennessee's proposal to prioritize worker and customer safety, he said it won't be beneficial for the bottom line.

"These rules are safe and healthy for the customer, which is great, but there's simply no way most restaurants can possibly obey them without going right out of business," Cramer said.

"Running a business in the time of Covid is a nightmare," he said, predicting that 30% of the bars and restaurants in the US could shut down.

Companies like Darden, the parent company of restaurants like Olive Garden and LongHorn Steakhouse, and Starbucks will be able to adapt in the challenging times, as well as take advantage of probable falling rent costs in order to grow their footprints, Cramer said.

"I don't have a solution to this. These rules are necessary to keep people from getting sick, and they'll be fantastic for the larger operators with deeper pockets who'll have the wherewithal to survive this difficult period," Cramer said. "Once we get a vaccine, the big chains can take over the world."

"You can buy either stock" of Darden or Starbucks "if the Tennessee pledge turns out to be a model for the rest of the country."

As for the Cramer-owned Bar San Miguel and co-owned The Longshoreman in Brooklyn, the rules are not ideal for those establishments and other mom-and-pop businesses.

"We'd have to almost triple the check size to turn a profit with these rules," he said.

Cramer's comments echo a message he delivered earlier that day on "Squawk on the Street," suggesting social distancing safety rules will also impact what stocks investors will want to own in this environment.

Companies will need to open up their purses and invest in equipment to ensure safety for employees to return to the workplace. Productivity will be hurt by "honest social distancing," he said.

The cruise and airline industries have been in the center of the storm, with ships and aircraft carrying passengers in enclosed spaces.

"Social distancing is going to be the answer why you have to sell certain stocks," he said.

One panacea will be able to solve both the business and public health challenges of Covid-19, Cramer said on "Mad Money."

"What's the antidote? Well, it's just like everything else," he said. "The vaccine can't come soon enough."

Disclosure: Cramer's charitable trust owns shares of Starbucks.

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