Hundreds of thousands of restaurants in the United States — from mom and pops to huge chains like McDonald’s — are in even more desperate straits than Washington realizes and need more help to survive the coronavirus pandemic and its aftermath.
So says the industry’s leading lobbying group in Washington, the National Restaurant Association.
Sean Kennedy, the group’s executive vice president of public affairs, penned a letter last week to Congress on the NRA’s behalf urging more aid and a relaxation in certain rules in the government’s Paycheck Protection Program, the popular relief package for small businesses.
“The severity of this pandemic has made it clear that restaurants will remain closed — or severely curtailed in service — for far longer than originally anticipated,” Kennedy wrote. “Once ‘normal’ operations resume, virtually every restaurant in this country, from the favorite diner to the local icon, will be a virtual startup in desperate need of cash.”
Kennedy shared his thoughts with MarketWatch about an industry suddenly at the crossroads.
MarketWatch: How many restaurant jobs have been lost so far and how many could be lost if Washington doesn’t offer more help?
Kennedy: The food-service industry employed 10% of the U.S. workforce at the beginning of the year — more than 15 million people. In the first three weeks of March, more than 3 million of those people were laid off. We expect that number will grow dramatically as more restaurants across the country are forced to close permanently.
MarketWatch: How many restaurants are in danger of closing without extra aid?
Kennedy: In good times, restaurants are a very low margin business. They generally have about 16 days of cash on hand. We’re more than a month into the shutdown that forced us to make very difficult decisions. We know that 3% of restaurants have already closed for good, and thousands more across the country are trying to decide if they can make the math work to keep going.
MarketWatch: You wrote to Congress on the NRA’s behalf seeking more flexibility in how restaurants can use government loans and grants to keep them afloat. What are the two or three most important things lawmakers can do?
Kennedy: The Paycheck Protection Program is a well-intentioned plan and is a good start for 100,000s of small businesses . But restaurant owners are discovering the design of the PPP is not going to provide the real relief restaurants need. We need Congress to provide additional funding, and make changes to the program that reflect the unique restaurant business model.
The three most important corrections we are seeking are for Congress to give more flexibility on when to use the PPP loan, so restaurants can use the money when they will be most vulnerable during re-opening; to change the spending ratio on the loans, allowing more money to go to operations costs; and we would like Treasury to extend the loan terms from two years to the 10 years Congress included in the law.
MarketWatch: Is it realistic to expect restaurants to ever return to pre-crisis ways of doing business? How could a restaurant make enough money if it had to space out tables, for instance? And it would seem like everyone will need an online or delivery option.
Kennedy: What we love most about restaurants is the hospitality and socialization. Following any natural disaster it takes a while for people to come back for restaurants. And we expect that will be true, on a national level, following the shutdown.
When state and local health officials start to allow restaurants to reopen their dining rooms, we expect there will be social distancing guidance and other safety requirements we have to meet. Evaluating a business model against these requirements will be just one of the complicated decisions restaurant owners are going to be making for months to come.
MarketWatch: Could the coronavirus end up forcing widespread industry consolidation and destroy a lot of small, local restaurants without a cure or vaccine?
Kennedy: The restaurant industry is going to be the hardest hit by this pandemic, and we’re going to lose some amazing restaurants in every community across this country.
Restaurants are a hard business, even in the best of times. Our members take pride in the work they do, the jobs they create, and their place in their communities. We’re fighting to make sure as many of them as possible can survive.
MarketWatch: What will the restaurant business look like in five years?
Kennedy: The one thing we can count on is that people love going to restaurants. When people are comfortable with how we’ve changed following the pandemic, they will come back to restaurants, and we’ll be here to welcome them to our tables.
Originally Published on MarketWatch
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