NEW YORK (AP) – The check has arrived and besieged restaurateurs across America are staring down at their empty wallets.
Government coronavirus loans in the spring have helped foodservice establishments rehire laid-off workers and weather the initial wave and wave of pandemic shutdown orders.
But that paycheck protection program money has now been spent in many restaurants, leaving them in the same precarious position they were at the start of the epidemic: Thousands of restaurants are forced to close again on warrant from officials. state and local governments fighting against the resurgence of the virus, especially in the South and West.
And even in parts of the country where the outbreak appears to be contained, restaurant incomes are far below normal as social distancing requirements – and cautious diners – mean fewer tables, fewer customers and limited hours.
John Pepper used a PPP loan to pay 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 shut down two locations again. The staff of 125 it had before the virus outbreak has dropped to 50.
“A lot of that is out of our hands at this point,” says Pepper. “Right now, I don’t see my entire payroll being recovered. “
Congress is debating yet another relief bill that will potentially 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 authorities 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 house almost every day, says Sean Kennedy, executive vice president of the National Restaurant Association business group. They also tend to only have about two weeks of cash on hand, which makes them very vulnerable when their sales are down.
“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.
The Cea is still able to serve customers outdoors, but the intense South Florida heat and frequent summer rains limit it to around 40 diners a night instead of the hundreds it served before the pandemic. And the Cea is aware that the peak hurricane season is yet to come.
“With the PPP money we got we were able to pay 48 employees but it’s exhausted now, so we have very few alternatives” for funding, Cea says. He is hoping for more help from the government, even though it is 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 devastated an industry that forecasted nearly $ 900 billion in revenue 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 as establishments across the country were closed.
Restaurants were among the small businesses the paycheck protection program was supposed 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 depleted their loans because the program’s original terms required them to use the money within eight weeks in order to secure a loan forgiveness. Many establishments were unable to reopen but paid employees not to work anyway. Then, when they reopened with income 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 a possible back-up plan, although Treasury Secretary Steven Mnuchin has mentioned the possibility that small businesses with sharply declining 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 stamp assistance to use their benefits in restaurants.
“We’re going to limp or shut down 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 with curb-only service and delivery; a third location that opened on weekends has remote corporate headquarters. Williams spent the PPP money she got in early May – she had recalled workers on leave, but with earnings in one store cut in half and the other by almost two-thirds, Williams had to lay off at new 20 employees.
“We assumed that after eight weeks it would be over. But here in Texas, things are drastically worse than when we closed in March, ”said Williams. Like other states where the virus is making a comeback, Texas has seen the number of cases rise after ending shutdown orders in early May.
Even in areas where the virus appears stable and where restaurants can have meals indoors, they are struggling. Wolf’s Ridge Brewing, a restaurant and brewery in Columbus, Ohio, had to shut down its dining hall and revert to takeout and delivery, having used its PPP money and not having enough income due to social distancing .
“What PPP has done is put us in a position where we’ve brought people back before we have enough business to support them,” said 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 resurgence of virus will force closure of Louisville, Kentucky facility; it had closed completely for two weeks in March before moving to sidewalk service and then gradually reopening. He paid all of his staff throughout.
Brauner hopes to get a grant from the city and would like another PPP loan. A separate economic disaster loan from the SBA gives him a bit of a break, but also presents a dilemma. Like many restaurateurs, Brauner is worried about taking on 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.”