By Jim Sammon & Kyle Stroup
[12/21/2020 UPDATE: Congress has brokered a deal on a more than $900 billion coronavirus economic relief bill, expected to be passed by the House and Senate on Monday. President Trump is expected to sign it.]
Food preparation and service is the second most common occupation in the United States. The Brookings Institute estimates that at the beginning of 2020, there were more than 12 million Americans working at over 600,000 food service and drinking establishments nationwide. Over the past nine months, no industry has suffered more with such little relief provided. The original round of PPP relief provided a necessary lifeline to business – small and big alike. As the COVID-19 crisis continues, the political stalemate in Washington is wreaking untold havoc on many industries. None has been as adversely affected as the restaurant and hospitality industry. The National Restaurant Association has estimated that two out of every three restaurant employees have lost their jobs. The Council of State Governments estimated that for every dollar spent in the table service industry in 2019, between $1.51 and $2.03 was added to a state’s economy.
It’s a simple relationship: if restaurants are operating at 50% or less capacity, consumers are not spending and a significant part of each State’s economies will suffer. Estimates have put the total loss in the restaurant and foodservice industry to be over $500 Billion by the end of 2020 alone. Recent surveys reveal that operators have laid off 91% of hourly workers and 70% of salaried workers.
On Nov. 27, 2020, President Trump sent a long–awaited tweet urging Congress to pass a second coronavirus relief package:
“The restaurant business is being absolutely decimated. Congress should step up and help. Time is of the essence.”
The restaurant business is being absolutely decimated. Congress should step up and help. Time is of the essence!
— Donald J. Trump (@realDonaldTrump) November 27, 2020
Sadly, as with many things in 2020 – it’ll probably be too little, too late. While it seems that progress may finally be happening, the second round of coronavirus relief has been held up by the bickering between Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi. Both leaders drew very firm lines in the sand prior to the November election as to the size and amount of their respective sides desired relief packages. In the interim month since Congressional Leaders drew in the sand, the American people have seen an exponential rise in the spread of COVID-19 amid long lines developing at food banks and shelters.
At the same time, Governors across the country are enforcing and passing even greater restrictions on everyday life. As the winter months set in and the inevitable cold drives people indoors, these restrictions become all the more cumbersome for many small businesses. While everyday Americans are looking to their capitols – both State and Federal – for relief, they are often provided little, if any, assistance.
Many restaurants hoped for relief from the State of Ohio when Governor DeWine released a package of almost $500 million in CARES Act funding in late October. The administration designated only $37.5 million in the form of $2,500 for each restaurant with an active on-premise liquor permit. While any assistance is welcomed – this care from Columbus was tantamount to a Q-tip on a hemorrhage. On the heels of that relief, Columbus had to deal with the rising tide of COVID-19 and entered greater restrictions and curfews across the state – greatly limiting any ability for patronage to any bar or restaurant.
The original CARES Act provisions provided $350 Billion in loans to smaller businesses, including up to eight weeks of reimbursement for those loans for payroll, utilities and other eligible expenses. With added physical restrictions put in place by governmental order, many restaurants have turned to take-out and outdoor dining, laying off staff and limiting menu choices to try to curb the abuse these restrictions have to their bottom line. But with the coming winter months, this is simply not enough. Even with these limitations, restaurants and bars still have expenses such as rent. And without relief to the landlords, there is no relief to their tenants. In an industry where a 10% margin is considered remarkable – there is little room to move. Even a temporary closing doesn’t get rid of many of the businesses fixed costs.
The RESTAURANTS (Real Economic Support That Acknowledges Unique Restaurant Assistance Needed To Survives) Act (S. 4012) was proposed by the Senate in July. Likewise, there is a similar $120 Billion Restaurant Relief package proposed in the House (H.R. 7197) since June.
The RESTAURANTS Act, in part, would create a structured Restaurant Recovery Fund. At its core, it would provide grants to cover the difference between 2019 revenues and projected revenues for 2020. The grants would cover limited payroll, benefits, mortgage, maintenance, rent, food, debt, obligations to suppliers and any other expenses deemed essential by the Secretary of Treasury. To fend against the Ruth’s Chris debacle of the PPP loans, the Act only provides for non-publicly traded companies with less than 20 or more businesses of the same name and is capped at $10 million per eligible entity. Both bills are held up by leadership as part of the larger second round of relief.
If Washington waits for a President Biden to sign a relief package in late January 2021, it will be too late. The restaurant industry needs pointed and intelligent additional liquidity – yesterday. If you have any questions about the The RESTAURANTS Act or any of the subjects discussed in this article, contact Jim Sammon (jpsammon@kjk.com / 216.736.7235) or Kyle Stroup (kds@kjk.com / 216.736.7231).