With loan money gone, restaurants are at the mercy of the coronvirus


NEW YORK (AP) – The check has arrived and struggling restaurateurs across America are staring at their empty wallets.

© Provided by Associated Press
In a July 2020 photo provided by Wolf’s Ridge Brewing, owner Bob Szuter, employees Allison Randolph and Alicia Herrmann, Deputy Chief Andy Zamagias, General Manager Corey Schlosser and employee Andy Powell, from left, gather in the restaurant’s tap room in Columbus, Ohio. Szuter says he’s trying to find new ways to generate income, focusing more on the brewery side of the business until he’s sure he has a full dining room. (Charlie Wilkerson / Wolf’s Ridge Brewing via AP)

Government loans made in the spring for the covronavirus helped foodservice establishments rehire laid-off employees and weather the initial outbreak of the pandemic and the wave of shutdown orders.

But that paycheck protection program money has now been spent at many restaurants, leaving them in the same precarious situation they found themselves in when the epidemic began: Thousands of restaurants are being forced to close again on mandate of national and local authorities to fight the resurgence of the virus. , especially in the south and west.

© Provided by Associated Press
In a June 2020 photo provided by Wolf’s Ridge Brewing, is the dining room at Wolf’s Ridge Brewing in Columbus, Ohio. Wolf’s Ridge Brewing has had to shut down its dining hall and return to take-out and delivery, having used its PPP money and not having enough income due to social distancing, amid the coronavirus pandemic. (Jenny Hauck / Wolf’s Ridge Brewing via AP)

And even in areas of the country where the outbreak appears to be contained, restaurant incomes are far below normal as demands for social distancing – and wary dinners – mean fewer tables, fewer customers and limited hours.

John Pepper used a PPP loan to pay his employees and reopen four of his eight Boloco restaurants when Massachusetts lifted its shutdown order in early May. But with money spent and restaurant business down 70%, Pepper had to close two establishments again. The staff of 125 it had before the virus outbreak has dropped to 50.

“A lot of it is out of our control at this point,” Pepper says. “For the moment, I do not see recovering all of my payroll.”

Congress is debating another relief bill that potentially will have more help for small businesses, but even with more loans or grants, restaurants will remain at the mercy of the virus that has decimated their businesses.

The resurgence of the virus has prompted officials in California, Texas, Florida and other states to re-order restaurants to close. In the northeast and other parts of the country where infection rates appear to be more stable, no one expects indoor dining limits to be lifted anytime soon.

Restaurants typically have a low profit margin, between 5% and 6%, and they only get there if they have a full room almost every day, says Sean Kennedy, executive vice president of the National Restaurant Association trade group. . They also tend to only have about two weeks of cash on hand, which makes them very vulnerable when their sales decline.

“They are not designed to have an on-off switch. They are designed to be used seven days a week, 14 to 15 hours a day at 100% capacity, ”says Kennedy.

Gerry Cea was forced to close his Miami restaurant, Cafe Prima Pasta, from March through May when the outbreak began. Now he has closed the dining room again as local authorities try to contain the virus; the Miami / Dade area is one of the hardest hit by the virus in Florida.

Cea is still able to serve customers outdoors, but South Florida’s intense heat and frequent summer rains limit him to around 40 diners a night instead of the hundreds he served before the pandemic hit. . And Cea is aware that the peak of hurricane season is yet to come.

“With the PPP money we received we were able to pay 48 employees, but that is now exhausted, so we have very few alternatives left,” for funding, says Cea. He hopes to get more help from the government, even though it’s a loan that needs to be repaid.

In the meantime, says Cea, “the only reason we’re pretty much surviving is because we own the building,” he says.

The pandemic has devastated an industry that expected to achieve nearly $ 900 billion in sales this year. Before the outbreak, the Department of Labor had 12 million workers in restaurants and bars, and nearly two-thirds worked in small businesses with fewer than 500 workers. In April, employment in restaurants and bars of all sizes had been cut by almost half due to the closure of establishments across the country.

Restaurants were among the small businesses the Paycheck Protection Program was designed to help, but some owners say it was of limited use.

So far, the program has provided approximately $ 42 billion in loans to restaurants, bars and accommodation companies. But many restaurants quickly reduced their loans because the program’s original terms required them to use the money within eight weeks to get their loans canceled. Many establishments were unable to reopen but employees paid not to work anyway. Then, when they reopened with incomes limited by social distancing, they couldn’t afford their entire payroll. Congress changed the spending requirement to 24 weeks in early June, but it was too late for many restaurants.

It is not yet clear how much help small businesses will be in an upcoming relief program, although Treasury Secretary Steven Mnuchin has mentioned the possibility that small businesses with large declines in income could get a second P3 loan.

But restaurants need a long-term solution that meets their unique needs, Kennedy says. For example, allowing families who receive food assistance to enjoy their benefits in restaurants.

“We’re going to limp or stop completely” with no long-term help, Kennedy said.

Stephanie Williams still hasn’t fully reopened two of her Bennu cafes in Austin, TX, and continues to operate only with curbside service and delivery; a third location that opened over the weekend has remote headquarters. Williams spent the PPP money she got in early May – she had recalled workers on leave, but with earnings at one store in half and almost two-thirds of the other, Williams has had to let 20 employees leave.

“We assumed that after eight weeks it would be over. But here in Texas, things are much worse than when we closed in March, ”says Williams. Like other states where the virus is making a comeback, Texas has seen the number of cases rise after ending stop orders in early May.

Even in areas where the virus appears to be stable and where restaurants can eat indoors, they are struggling. Wolf’s Ridge Brewing, a restaurant and brewery in Columbus, Ohio, had to shut down its dining hall and return to take out and delivery, after using its PPP money and not having enough income due social distancing.

“What the PPP did was put us in a position where we brought people back before we had enough business to support them,” says co-founder Bob Szuter. He’s trying to find new ways to generate income, focusing more on the brewery side of the business until he’s sure he has a full dining room.

Jason Brauner’s restaurant, Bourbon Bistro, has exhausted its PPP loan, is operating at 50% capacity, and is not doing enough to cover expenses. Brauner fears the virus resurgence may force the Louisville, Kentucky facility to close; it had closed completely for two weeks in March before moving to curbside service, then gradually reopened. He paid all of his staff throughout.

Brauner hopes to get a grant from the city and he would like another PPP loan. A separate economic disaster loan from the SBA gives it some leeway, but also presents a dilemma. Like many restaurateurs, Brauner fears going into long-term debt when the future is uncertain.

“I’m almost tempted to give it back,” he said. “We just have to see how this all goes.”

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