WEST SENECA, N.Y. — Jim Revelas sits in a booth in his empty diner. He is reading the latest Covid-19 news on his cell phone, hoping a customer will call in a takeout order. In the last seven hours, only four have.
Once filled with businessmen, young families, and retired couples–rushing in for potato pancakes and chicken souvlakis–Union Family Restaurant is now a ghost town. Since the novel coronavirus hit, business has gone down 95 percent. “It’s not enough to pay the bills, or even break even,” Revelas, 48, tells me as he sits in a separate booth, more than 6 feet away.
He just had another 11-hour workday in which he made $0. So, too, did his wife. Anne, a hair stylist, lost her job due to the outbreak. The financial burdens are overwhelming. The couple has mortgage and car payments and utility bills coming up. They also have four children to support. “I’m literally petrified we’re not going to be able to pay our bills,” Anne tells me. “I’m scared of my kids not being able to live a normal life.”
This kind of fear has become the new norm for independent restaurant owners in America.
Over the last month, elected officials have taken drastic measures to stop the spread of the virus. That includes shutting down non-essential businesses, such as hair salons, gyms, and most retail stores. Like many states, New York ordered restaurants and bars to close their dining rooms but allowed them to offer takeout and delivery.
Takeout and delivery are hardly providing enough revenue for eateries to stay afloat. In fact, since the pandemic began, the restaurant and food service industry has suffered more sales and job losses than any other in the nation, according to the National Restaurant Association. It’s expected to lose more than $80 billion in sales by the end of April. Four in 10 restaurants are now closed.
The federal government is trying to help. On Tuesday, the Senate passed its second coronavirus relief package. A large chunk of which will replenish the small-business loan program created by the initial $2.2 trillion stimulus; the program already ran out of money last week. Those loans can ultimately be forgiven if businesses follow certain stipulations, like keeping employees on payroll. That’s much easier said than done. As a consequence, many restaurants won’t be eligible for forgiveness. They already operate on razor-thin profit margins and a host of monthly expenses. In other words, the government is issuing loans that most restaurants won’t be able to pay back.
“I’ll be honest, I’m simply scared,” Ryan Sutton, chief restaurant critic for Eater New York, told me. “I’m scared that restaurants won’t be able to open, and they’ll be saddled with too much debt. We really need some comprehensive relief, not in the form of loans, but in the form of grants and forgiveness.”
Indeed, lawmakers need a much more dramatic and long-term solution—and they will need to act fast. If they don’t, we may lose our favorite local restaurants forever.
No doubt, state and local governments’ extreme social distancing measures are helping to slow the spread of the virus, especially in New York, the current epicenter. But they have also come at a profound economic cost for independent restaurants, which have not been able to transform into takeout businesses overnight.
Just ask Angelo Canna. Last year, he invested $150,000 to open Hooked, an upscale seafood restaurant in the Wyndham Garden Hotel in Williamsville, a suburb just outside of Buffalo. In the first two weeks of the outbreak, Canna lost $65,000 worth of business and inventory. He made adjustments—creating a carryout menu, cutting his salary, and, most painfully, laying off his staff. Still, he couldn’t get enough orders to break even.
Like all restaurateurs, he waited to see what kind of relief the government would offer. Unfortunately, the loan, while generous, didn’t address the specific dynamics of the restaurant industry. So, a New York State group created a plan that does.
Relief Opportunities for all Restaurants (ROAR) is a non-profit started by New York City restaurant owners to advocate for the protection of independent restaurants during the pandemic. The group has crafted an eight-point plan it wants Governor Andrew Cuomo to implement in New York. It includes: creating a 6-month income replacement program; providing rent abatement during the duration of the administrative closure; suspending state sales and payroll taxes through the end of the year; and requiring business loss insurance to cover COVID-19 closures for hospitality businesses.
Simply put, it’s a plan that could help restaurants stay open, sustain a one-year recovery process, and prevent mass unemployment.
Cuomo has already taken a major leadership role in his handling of the coronavirus outbreak. If he can take a leadership role in saving New York’s restaurants, perhaps then other states—and maybe even the federal government—can follow suit.
Otherwise, restaurants will be relying on thesmall-business loan program, called the Paycheck Protection Program (PPP). Here’s the problem. The loan allows businesses to borrowup to 2.5 times their monthly payroll costs. It can be completely forgiven, but only if the business owners rehire the equivalent of their full-time staff, spend 75 percent of the loan on payroll, and spend the other 25 percent on operating expenses, like rent and utilities. Few, if any, restaurants will be able to pull that off. They may not have any money left over to cover other expenses or their own salaries. In fact, every restaurant owner interviewed for this story has forgone their salary.
Furthermore, for restaurants to rehire their entire staff, they will need work to offer them. That would require the coronavirus to be under control, dining rooms to open back up, and crowds of customers to immediately return. That’s unlikely to happen any time soon. The nation’s top epidemiologist, Anthony Fauci, says it will take 12-18 months for a vaccine to be developed and approved. In the meantime, the federal government will need to ramp up testing to allow even a modified reopening of the economy.
Still, workers won’t have much incentive to return. They will have to risk their own health and, under the aid package’s new unemployment program, most will get paid more by staying home.
On top of that, the PPP is far too broad. It’s applicable to businesses with up to 500 employees. As a result, the Small Business Administration and thousands of banks have been overwhelmed by applications. Large restaurant chains have had more success getting loans than their smaller independent counterparts. Potbelly, a Chicago-based sandwich chain with more than 470 locations across the nation, received a $10 million loan while smaller shops were left dry.
That’s why New York and other state governments should look to ROAR’s outline as a blueprint for a broader solution. It’s crucial for lawmakers to save independent restaurants. Not only are they the cultural lifeblood of their communities, they stimulate the economy. Independent restaurants employ more than 11 million people in the United States and contribute nearly $1 trillion in annual economic activity. Two thirds of restaurants nationwide are owned independently.
Yet, when Congress first sat down to draft the stimulus package in Washington, only large restaurant chains were invited. Perhaps that helps explain why Ruth’s Chris Steakhouse got $20 million in relief, but most small restaurants are clawing to hang on.
Camilla Marcus, who owns West Bourne in SoHo, was not okay with not having a seat at the table. Neither were dozens of other NYC restaurant owners. In a matter of hours, they got on the phone and created ROAR. Shortly thereafter, they outlined a change.org petition that eventually landed some independent restaurant representatives at meetings with members of Congress and their staff. While didn’t get everything they asked for in the aid package, they didbegin a dialogue on Capitol Hill.
“We never before came together as a singular industry, that’s the silver lining of a really terrible, terrible situation,” Marcus told me. “Is it everything that is necessary to make the stimulus viable? No. But I think we’ve made a tremendous step forward.”
Now, Congress and state governments need to take the next step by crafting a policy that can save the small restaurants of America. Luckily, there’s already a damn good plan waiting for them.