Virus Outbreak Restaurants PPP Aftermath

In a July 2020 photo provided by Wolf’s Ridge Brewing, owner Bob Szuter, employees Allison Randolph and Alicia Herrmann, sous chef Andy Zamagias, general manager Corey Schlosser and employee Andy Powell, from left, gather inside the restaurant’s tap room in Columbus, Ohio. Szuter says he’s trying to figure out new ways to bring in revenue, focusing more on the brewery side of the business until it’s safe to have a full dining room. (Charlie Wilkerson/Wolf’s Ridge Brewing via AP)

NEW YORK (AP) — The check has arrived and beleaguered restaurant owners across America are looking down on their empty wallets.

Government coronavirus loans in the spring helped eating establishments rehire laid-off employees and ride out the pandemic’s initial surge and wave of shutdown orders.

But that Paycheck Protection Program money has now been spent at many restaurants, leaving them in the same precarious position they were in during outbreak’s early days: Thousands of restaurants are being forced to close down again on mandates from state and local officials combating the virus’s resurgence, particularly in the South and West.

And even in parts of the country where the outbreak appears contained, restaurants’ revenue is far below normal because social distancing requirements — and wary 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 the money spent and business at the restaurants down as much as 70%, Pepper had to again close two locations. The staff of 125 he had before the virus outbreak is down to 50.

“A lot of this is out of our hands at this point,” Pepper says. “At this moment, I don’t see getting my full payroll back.”

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

The virus’s resurgence has prompted officials in California, Texas, Florida and other states to order restaurants shut again. In the Northeast and other parts of the country where infection rates appear more stable, no one expects limits on inside dining to be lifted anytime soon.

Restaurants generally have a low profit margin, between 5% and 6%, and they achieve that only if they have a full house virtually every day, says Sean Kennedy, executive vice president for the trade group National Restaurant Association. They also tend to have only about two weeks of cash on hand, making them highly vulnerable when their sales are down.

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

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

Cea is still able to serve customers outside, but the intense South Florida heat and frequent summer rains are limiting him to about 40 diners a night instead of the hundreds he served before the pandemic hit. And Cea is mindful that the peak hurricane season is still to come.

“With the PPP money we received, we were able to pay 48 employees but that has run out now, so we are left with very few alternatives” for funding, Cea says. He’s hoping for more help from the government, even if it’s a loan that must be repaid.

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

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

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

The program so far has given about $42 billion in loans to restaurants, bars and lodging companies. But many restaurants burned through loans quickly because the original terms of the program required them to use the money within eight weeks in order to get loan forgiveness. Many establishments couldn’t reopen but paid staffers not to work anyway. Then when they reopened with revenue limited by social distancing, they couldn’t afford their full payrolls. Congress changed the spending requirement to 24 weeks in early June, but that was too late for many restaurants.

It’s not yet known what small business help will be in any upcoming relief package, although Treasury Secretary Steven Mnuchin has mentioned the possibility that small businesses with big revenue declines could get a second PPP loan.

But restaurants need a long-term solution that addresses their particular needs, Kennedy says. For example, allowing families that get food stamp assistance to use their benefits in restaurants.

“We’re going to be limping along or shutting down altogether” without long-term help, Kennedy says.

Reach Editor Philip Weyhe at 507-931-8567 or follow him on Twitter @EditorPhilipWeyhe. ©Copyright 2020 APG Media of Southern Minnesota. All rights reserved.

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