As Independent Restaurants Struggle to Adapt During the Pandemic, Dining Out as We Know It Could Change Forever
Apr 30, 2020 03:03PM
By Pam Kessler
They’re the heart and soul of America; the social center of our communities where magic happens when we get together, sit down, and share food. But for the 11 million people across the country employed by restaurants—and the millions of others up and down the food supply chain who depend on them—the future is uncertain.
When the federal government announced the Paycheck Protection Program (PPP) to aid small businesses, it offered $349 billion in forgivable loans to businesses with under 500 employees, promising to support Main Street until the economy recovered. While well-intentioned, most of the restaurants, salons, and boutiques the program was designed to benefit did not receive PPP funding before the money ran out. Now that another $320 billion in PPP funding hit banks this week, independent restaurant owners hold out hope it will ensure enough liquidity to stay afloat.
“Everyone thinks the loans are the answer for restaurants to be fine and to reopen, but local banks are struggling to help their clients. It seems like the big dogs in our industry got relief, despite the fact they had plenty of money in their bank accounts before PPP became available to them,” says restaurateur Rolla Ghaben, whose family has been in the business since the 1980s and currently operates a portfolio that includes Broderick Roadhouse and Mel’s Diner in Walnut Creek. “Our world has changed dramatically in the last 45 days, and all the money being dumped into the economy is not reaching the people who need it,” Ghaben says.
KNOW THE FACTS Ghaben is, of course, hardly alone in that pain. As the coronavirus pandemic wreaks its havoc, the hospitality industry is feeling the hurt collectively as business screeches to a halt. The U.S. Department of Labor Statistics estimates 60% of the recent layoffs occurred in the food and drink industries. While dine-in service has been suspended for all restaurants in California, many have pivoted to providing takeout and delivery and working with homeless shelters and hospitals.
According to the Independent Restaurant Coalition, a national group formed in recent weeks to save the industry, only one in five restaurant owners feel they can continue operating their business, and only 30% of owners expect to remain in business if the crisis continues beyond four months.
Notorious for operating on tight margins—for every dollar most take in, 90 cents goes back out to employees and vendors—restaurants across the country are reporting revenue drops over 75%. Unable to withstand the loss of income, some are closing for good, while countless cooks, waiters, sommeliers, bartenders, and bussers remain out of work.
While many are waiting for funding, others are struggling with the legislation’s stringent guidelines requiring 75% of the loan money be used for payroll, leaving only 25% for other expenses like rent and insurance. Once funded, businesses have eight-weeks to bring back their entire staff or forgo loan forgiveness.
“We laid off 40 people,” says Walnut Creek Yacht Club Chef/Owner Kevin Weinberg. “We have three staff members left. PPP is not really geared to help a restaurant, especially if you want to have some of it forgiven. How do you hire employees back when you’re not open? Many are getting unemployment benefits, and with the $600 bonus until the end of July, many are making more money on unemployment. Why would they come back to risk getting laid off again? We applied for PPP but so far nothing. I’m not very hopeful about PPP 2.0 either.”
Walnut Creek Yacht Club, like others who stayed open, switched up its menu to offer carryout cocktails and quarts of soup to go. Other local restaurants are doing family-style meals, build-your-own pizza kits, and even selling groceries.
LOANS AND UNEMPLOYMENT INSURANCE California Restaurant Association Representative Mike Shirinian agrees that PPP is not the answer, “Once you get funded you have eight-weeks to bring everybody back to work, but with sales off 85%, how do you bring back 100% of your workforce? It doesn’t make sense to fund a full payroll with 15% of the revenue, especially when you have no way of knowing when you can reopen full-service dining to the public.”
Others, like Buttercup Diner Chef/Owner Debbie Shahvar who secured PPP funding, are anxious to reopen. “We closed down all five of our restaurants on March 17, we’re looking forward to serving our customers again on May 1 with take-out at all of our East Bay locations,” she says. “It’s not going to save us, but it’s going to keep us working for two months. Shahvar, like other restaurant owners, expected her insurance policy to pay forced closure benefits. “Our insurance carrier has denied our claims for the business interruption insurance that we have spent money on for decades,” she says. “When we finally really need that coverage, our insurance carriers have let us down.”
The Independent Restaurant Coalition (IRC) is asking Congress for $120 billion in aid to save the trillion-dollar industry from the shortfalls of PPP and denied business interruption insurance claims. On a Zoom conference hosted by IRC this week, Chef José Andrés, who is running food rescue operations out of his shuttered restaurant kitchens said, “We are fighting for the people, the DNA of our restaurants. Behind every restaurant is the story of a farmer. Behind every dish is a fisherman. Behind every person is the story of diversity in America. We need a long-term fix to a long-term problem; we expect our revenue to be down at least 50% for the next 12-18 months.”
Diners have stepped in to help, buying up gift certificates and T-shirts, in addition to takeaway meals and cocktails, to help restaurants survive. But those are stopgap measures at best while restaurants wait for broader solutions. “Things are going to change,” says Rocco Biale from his Ygnacio Valley pizzeria, Rocco’s, “and we don’t know what it will be like on the other side.” Biale, who has successfully pivoted to take out service, emphasizes the social nature of his industry, “We’re a family neighborhood restaurant. People come here to see each other, talk to bartenders, what is the point of going out if you have to sit six-feet apart in masks?”
IRC is asking the dining public to go to Saverestaurants.com and call on Congress as well as local officials to lobby for the vital aid required to restore this creative community.