This paper investigated the challenges of small and medium-sized enterprises (SMEs) during the COVID-19 pandemic, particularly in the context of restaurant industry. This study also examined how the restaurant operators overcome the challenges faced in order to retain their competitiveness during the coronavirus crisis. Qualitative research approach was used in this study. We conducted semi-structured interviews with three small and medium-sized restaurants between 18 December 2020 and 10 February 2021 in Macao. Content analysis was employed for this study. The results indicate that the restaurant operators faced major challenges including dramatic drops in business, labor shortages, food safety concern and successive competitions among restaurant industry. In order to stay competitive, the restaurant operators made several changes in their business operation. The restaurant operators also reported that the strategies implemented by the government to support the restaurant industry during this difficult period helped their businesses to remain sustainable. As this is the primary study to investigate the challenges on the small and medium-sized restaurants in Macao, the findings contribute to the current literature on crisis management in hospitality industry. Practical implications for the restaurant operators and suggestions to policy makers will be provided.