Many restauranteurs see no choice but to close during state-ordered shutdowns of in-room dining to help halt the spread of coronavirus. Some Houston kitchens are carrying on with carry-out food to help pay the bills. (March 26)
Twelve years ago, chef extraordinaire Naomi Pomeroy opened Beast, a cozy, 26-seat fine-dining restaurant in Portland, Oregon, where she decides the menu for six-course dinners that rotate regularly. “A chef’s dream,” her peers call it.
The restaurant thrived, earning ink in the New Yorker, Food & Wine and Bon Appetit. In 2014, Pomeroy won the prestigious Best Chef for the Northwest region by the James Beard Association, the top awards in the nation’s culinary world.
But all the accolades and packed seats couldn’t save Beast from the harsh, swift consequences of a global pandemic that has forced restaurants and bars across the country to halt operations as states enforce stay-at-home orders.
Pomeroy’s restaurant and accompanying bar, Expatriate, closed March 15 – temporarily, hopefully. All 30 employees are on furlough as the nation waits out the coronavirus outbreak.
Now she is among thousands of independent restaurateurs nationwide – who collectively employ more than 11 million workers at 500,000 restaurants – looking to the federal government for assistance to stay afloat through unprecedented times. But Pomeroy and other restaurant owners say the Paycheck Protection Program, aimed at relief for small businesses in the recently approved $2.2 trillion CARES Act, doesn’t address their industry’s unique challenges.
Restaurateurs say the restrictions around how the loans are used, and the timeline in which the money must be spent, don’t work for businesses who still aren’t sure when customers will return.
They want Congress to make fixes to the fund and expand the financial aid in the next round of federal relief. But Congress is still arguing over what another cash influx to the PPP, which officially ran out of money on Thursday, would look like.
Until the outlook improves, many owners are unsure whether they can reopen.
“I’m 100% sure that I’m not sure,” Pomeroy, founding member of the newly formed Independent Restaurant Coalition, said about reopening Beast. “When somebody asked me the other day, I gave it a 50/50 chance to be honest.”
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80% of restaurants unsure about reopening
From local diners and dives to national chains and chef-driven bistros, restaurants are largely in the same boat. Some owners have kept their restaurants open selling take-out, bringing in drastically less revenue than accustomed. Others like Pomeroy decided it made more financial sense to shut the door until social distancing measures are relaxed. Nearly all are hurting, with restaurants accounting for 60 percent of the 16.8 million jobs lost during a recent three-week stretch.
A survey released Thursday by the James Beard Association found independent restaurants laid off 91% of their hourly employees and nearly 70% of salaried employees as of April 13 — double-digit increases in both categories since March. The poll of 1,400 small and independent restaurants found 38% of have closed temporarily or permanently and 77% have seen their sales drop in half or worse.
Perhaps most troubling: 28% of restaurants said they don’t believe they can survive another month of closure, and only 1 out of 5 are certain they can sustain their businesses until normal operations can resume.
“We have been decimated by coronavirus,” Tom Colicchio, co-owner of Gramercy Tavern in New York and a celebrity chef judge on the TV show “Top Chef” said during a conference call with reporters Thursday. “Last week on this call, I felt optimistic. Right now, this is a dire situation that we’re in … We need to save this industry and PPP is not going to do it.”
The Independent Restaurant Association organized quickly amid the pandemic to bring advocacy and a lobbying presence to the Hillfor small restaurants in addition to deeper-pocketed chain restaurants. The latter often has in-house legal and lobbying teams to compete for the same chunk of PPP funds with independent-owned restaurants. In one example, the upscale steakhouse chain Ruth’s Chris, the Wall Street Journal reported Friday, secured $20 million in forgivable loans this month.
The new independent association now numbers some 27,000 chefs, restaurateurs and workers. Colicchio, long politically active on food issues, said he’s spoken to about 40 member of Congress.
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Their top ask of Washington: overhaul provisions of the PPP, which allows businesses smaller than 500 employees including restaurants to apply for financial loans during the pandemic to help them from closing completely.
To have the loans completely forgiven, businesses are required to spend 75% of the federal money on payroll and 25% on fixed expenses such as rent, utilities and other bills. A business must start spending the money 10 days after getting approved, and they have eight weeks until the loan expires.
But restaurants say these are unreasonable mandates while many are closed and not accumulating normal business expenses – and could remain closed for months, well past the expiration date.
“That’s all fine and good for a business that’s currently operational. The design of the PPP is to keep people employed,” Pomeroy said. “But the problem for restaurants is that something like 90% of us have closed.
“It’s forgivable at the end, but what good does it do me if my restaurant’s not open?While we aren’t asking for necessarily a special carve-out for restaurants, we are asking to at least be acknowledged as massive contributors to the economy.”
Restaurateurs want the loan extended from eight weeks to three months after they open, noting business will probably be slow even when they open their doors again, as people remain reluctant to re-congregate until there’s a COVID-19 vaccine. They want the origination date of the loan to be when they can legally reopen fully, not within 10 days of receipt. They’ve asked that the period to replay loans be lengthened from two years to 10 years.
The National Restaurant Association, the larger restaurant lobby that includes national chains, has requested that the 75% payroll mandate be reduced to 50%. Other requests from independent restaurants include a stabilization fund, totaling $100 billion, that would offer grants to restaurants to rehire employees and pay rent. They’re also seeking changes in business interruption insurance policy so that it covers COVID-19.
‘A hole’ in communities if restaurants vanish
Besides the sheer economics, restaurateurs say their industry holds an important place within communities.
“Food plays such an important role in shaping and influencing culture as a whole,” said Sean Brock, a critically acclaimed chef from Nashville, “so if you remove that, you’re causing this enormous hole to exist within each place that makes it special. It’s is why people travel to these places – to experience a sense of place. If half of the restaurants disappear, it’s going to leave a mark.”
Brock, also a James Beard Award winner, is the founding chef of Husk, a popular restaurant in the Southeast including Charleston, South Carolina and Nashville, Tennessee. He left in 2018 to prepare to open two new restaurants, Audrey and Joyland, in the East Nashville neighborhood where he lives. Brock has a third restaurant also in the works in Nashville.
Brock assembled a crew of talented cooks, managers, purchasers and other professionals from places like Denmark, California, New York and Chicago who moved to Nashville to work at Audrey. The ambitious project will feature Appalachia-inspired cooking and include a neighborhood learning center, a podcast studio, art gallery and a research and development kitchen.
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But days before he was set to open the first of the ventures – Joyland, a concept of biscuits, fried chicken, burgers and milkshakes – East Nashville was hit by a devastating tornado. His buildings were mostly spared, but shortly after came the COVID-19 pandemic.
“That already had a huge impact on our business and our ability to open and just overall morale of the city, and then this came along,” Brock said.
He put his 14 hourly paid employees from Joyland on furlough and moved the salaried employees from Audrey, still months away from being able to open, over to Joyland, which is now serving food to-go.
“All these people who I brought from … these Michelin, 3-star restaurants – they’re all making cheeseburgers right now,” he said, adding, “They’re really good cheeseburgers.”
“Right now, we’re just scraping by to stay afloat. It’s the toughest thing I’ve ever had to deal with. It’s a pretty daunting thing to be halfway through achieving your life’s goal and then have the rug pulled out from under you.”
Small business loan money runs out
Brock said a bank recently approved his PPP loan, but he called the money a “tiny Band-Aid” that will only help for a short time: “What happens when eight weeks passes, that money’s gone and there’s another month or two months before we can open?”
He said even when restaurants are allowed to open, they could face occupancy restrictions. Then there’s the question about whether people will be willing to eat in public. The PPP requires businesses to keep 100% of full-time employees through June 30, when the program will sunset, for loans to be forgiven.
But Brock said if business is at 35% of normal business, for example, then restaurants need the same percentage of their normal workforce. “The forgiveness (loan) doesn’t work that way, so it’s kind of useless.”
Small businesses including restaurants took another hit Thursday when funds for the PPP, which started April 3 with $349 billion, evaporated. It means no new loans can be approved until more money is allocated to the program. So far, 8.9% of PPP funds have gone to food services, ranking behind the construction, science and tech, manufacturing and health care industries.
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Democrats and Republicans are at an impasse on injecting the PPP with new funding, leaving the requested changes for restaurants in jeopardy. The Trump administration asked Congress to free up an additional $250 billion for small business aid, but Democrats have sought to also include more funds for hospitals and state and local governments.
Sen. Marco Rubio, R-Florida, chairman of the Senate Small Business Committee, defended the “flexibility” of the CARES Act when asked on Fox News about requests of some businesses to change the law so 75% of the loan wouldn’t have to go toward payroll.
“Here’s the bottom line,” Rubio said. “Millions of small businesses in this country have looked at the structure and said, ‘That will help us.” And 700,000 applications today are in limbo and stuck and cannot be processed because (Democrats) are playing political games with it. This has to end.”
Other senators said they hope to help restaurants.
“This is not a Republican group or a Democratic group,” Sen. Chris Van Hollen, D-Maryland, said on the Senate floor last week. “This is a group that represents small businesses, restaurants. And what they say to us this morning is: yes, we do need additional money. We know that. But equally important, let’s fix some of the kinks. And there are kinks in this program.”
Drew Hammill, deputy chief of staff for House Speaker Nancy Pelosi, said House leadership is seeking to address concerns of small businesses, but did not say whether it would include the measures sought by restaurants.
“The sudden drop in consumer demand for goods and services is affecting small businesses in all sectors of the economy,” he said in a statement. “Recognizing the difficult challenges caused by the pandemic, we’re working toward addressing all concerns in as effective and equitable manner and in a way that preserves jobs and paychecks for as many working people as possible.”
For restaurants, action is needed quickly.
Kwame Onwuachi, a past contestant on “Top Chef” and James Beard Award winner, who operates the restaurant Kith/Kin in Washington, D.C., said the burden on restaurants isn’t just an economic problem, but a cultural issue as well.
“This isn’t just a restaurant problem. This is an American problem,” Onwuachi said. “Restaurants are the pulse of this nation. We don’t just go there to eat. We got there to celebrate, meet new people, or even reconnect with old friends.
“We need help.”
21C Museum Hotels, a hotel and restaurant company that also combines contemporary art, temporarily closed its nine properties across seven cities in rapid succession in March, putting all 1,082 employees company-wide on furlough.
“It was and is really heartbreaking,” said Sarah Robbins, chief operating officer of 21C Museum Hotels, based in Louisville, Kentucky. “Our goal is to try to get back all of those people back to work as soon as we can.”
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Noting it was restaurants that were the first to close amid the pandemic, Robbins said the industry has been out longer than most other businesses. She said if Congress could just change the 10-day loan origination date it would make an “enormous difference.”
“That’s what so many of are asking for. I’m hopeful that because it’s such a simple solve, that it could actually happen.”
21C intends to open each of its properties. Robbins said restaurants employ not just chefs and waitresses, but also a much larger network of ancillary businesses that depend on them. She said restaurants are also crucial for tourism, pointing out that travel articles often begin by detailing the restaurants and chefs of a city.
“Because of the role that restaurants play, I think that is why all of us are being so vocal about the need to ensure that all of these incredible treasures that our cities have are able to reopen,” Robbins said. “And right now there is a lot of fear that might not happen.
“There is an uphill battle, but the good news is there are some solutions that we could put in place that would significantly improve everyone’s chances.”
Staff writer Christal Hayes contributed to this report. Reach Joey Garrison on Twitter @joeygarrison.
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