Can the Restaurant Industry Recover from COVID-19?

Since the COVID-19 pandemic began, small businesses of all kinds have struggled to survive the debilitating financial burden caused by mass closures. The foodservice industry has been especially ravaged; restaurants operate on famously thin profit margins and as a result, they were unprepared for a disaster of this magnitude.

After months of struggle, the industry experienced added turbulence in late spring and early summer when individual states began passing mandates nearly every week, allowing restaurants in certain districts to reopen. Formulating and then rushing limited-capacity seating plans, and ultimately implementing immediate re-closures, created even more strain on the already overburdened industry. They were left exactly where they started but now with more community cases and even more overwhelming debt.

What are restaurants’ options?

At a fork in the road, restaurants have a few paths they can take. Unfortunately, for the hardest-hit businesses, none of those options are good.

They can permanently give up and shutter their doors, although this typically leaves them in even more debt than they already had to contend with. After years of working off extremely thin profit margins, most small restaurants don’t have the savings or capability to get out of debt and out of the game quietly.

They can pivot to delivery, takeout, or whatever new method that government officials declare to be safe enough to try, but that has its own risks and rewards. How much money does it cost to set up and maintain these delivery streams? What if they never use them again after the pandemic, and the government discovers a vaccine next month? What should they do if the industry decides, on another whim, that some other method of buying and selling is actually much more viable and the public asks restaurants to make another quick change?

They can open to the fullest extent that fluctuating capacity laws allow, but many are wary of doing so while knowing full well that it will likely put their employees and customers at risk.

They could get out of the game completely with a clean slate, but the new question is: How?

Most restaurateurs, especially those operating on a small scale, don’t have many personal or professional finances to place bets with. Many of them already used their personal assets as collateral to obtain a loan or lease, including houses, cars and the finances of personal guarantors who have put their own reputations and money on the line to help a friend realize their dreams. Trying to get quietly out of the industry can set many of them up for a major personal financial loss—which just isn’t a feasible plan.

So if they can’t stay, and they can’t go…

What do restaurants need?

In the absence of a viable solution without outside assistance, many restaurateurs connect with each other to explore other paths. They’re coming up with tangible solutions to present on a political stage.

Restaurateurs don’t see a way to come out of this through pure crowdfunding efforts alone, which has partially sustained many businesses throughout the past six months. The relief funds set up by nonprofits and other organizations are generous but not necessarily sustainable in the long-term, particularly when the general American public is also struggling to find long-term financial stability necessary to help the industry stay afloat via out-of-pocket donations. Thus restaurants are looking toward multiple levels of government to provide some kind of feasible, permanent solution.

For one, restaurants want legislation passed that would release them from all liabilities, leases, loans, bills and business taxes if they’re in a financial bind because of COVID-19 and its subsequent effects on the industry. Already, states have discussed bills that would prevent landlords from holding businesses liable for closures related to the virus. People are also pushing for the Small Business Association to forgive debt for restaurants that decide to close. This is a little bit harder to sell; however, restaurants are steadfast that they shouldn’t face bankruptcy over loans that the SBA was meant to secure. Restaurants should get a choice.

To that end, they also seek the choice to reopen, for which they would need grants from state or federal governments. They want the opportunity to reopen, post-COVID, free of major health concerns and not so indebted that they can’t pay employees owed wages, distributors for unsettled bills, and their appropriate taxes too.

Right now, restaurants all over the U.S. are staying closed for the safety of the community as a whole. They didn’t choose to go bankrupt over a virus; they’re not choosing to close with no other options; they don’t want to open and risk the health and safety of their workers, customers, and community as a whole. They need real options about what to do in case they have to close, want to close, or want to ultimately reopen in the future.

While the industry continues to fight for governmental support, it can access some of these resources for assistance in the meantime:

  • California Restaurant Association compiled resources and information for businesses, including restaurant relief funds on the local, state, and federal levels. If you operate outside of California, find the website equivalent for your state.
  • The other NRA created this guide with grassroots education and engagement resources. It also includes information about the legislation that restaurants are pushing.
  • For any restaurant that’s seeking more localized support, you can also check out this guide that breaks down industry resources on a state-by-state basis.

Restaurants can survive COVID-19. With the right community, governmental and financial support, the foodservice industry will always survive.

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