Restaurants on Life Support

As the pandemic surges across the U.S., hundreds of thousands of restaurants are at risk of closing. Why aren’t we doing something?

Restaurants on Life Support
Vaucluse in New York City is one of 110,000 restaurants that have closed since the pandemic began. How many more will follow? (Courtesy Vaucluse)
Dec 10, 2020

What would happen if Walmart announced it was going out of business, shutting down and laying off its 2.3 million employees? How about Amazon, Home Depot, FedEx, UPS, IBM, Target and Starbucks too? These are among the largest employers in the United States, with close to 6 million people working for them and a huge impact on the economy.

If their executives suddenly announced that the pandemic had rendered their businesses unsustainable, the U.S. government would take action. Both Congress and the president would move quickly to offer support. That's what the government did for the financial sector and auto industries during the Great Recession a decade ago. Their actions weren’t popular, but they likely helped prevent a depression.

While those companies are doing OK, and in some cases managing to prosper during our twin crises of pandemic and economic misery, another large employer is failing, and the government has taken almost no action. It’s the U.S. restaurant industry, made up of more than a million restaurants across the nation, some of them owned by corporations but many owned by small business owners trying to realize the American dream. They are temples of haute cuisine and that diner down the block with those fries you can't resist at 2 a.m.

At the start of 2020, the industry employed more than 12 million people, according to the National Restaurant Association (the other NRA). In March and April, when the pandemic first surged in many parts of the country, restaurants were forced to close their doors. They laid off more than 6 million workers and furloughed millions more.

In May, they began rehiring as lockdowns eased. But their recovery slowed in July, and in November layoffs surpassed hires again. About 2.1 million of their people remain out of work, and restaurant owners warn that more layoffs are coming as infection rates, hospitalizations and deaths continue to rise. Industry analysts report both traffic and sales are falling. Vaccines are on the way, but most Americans won’t get one until late spring, if not summer, of 2021.

More than 17 percent of restaurants have permanently closed in the past 10 months. That's 110,000 kitchens shuttered for good. The NRA and others predict that will rise to 38 percent by the end of this winter if no action is taken.

Across much of the country, we’re continuing to have the wrong debate: lives or livelihoods, to shut down indoor dining or not. In states and cities where officials decide to shutter restaurants rather than schools, they are condemned for driving mom-and-pop businesses into the ground.

But in communities where dining rooms are still open, the continued surge in COVID infections means few people are dining out regardless. Restaurants face the devil’s choice: Limit themselves to takeout and do 10 percent of their usual business or open their dining rooms, worry about their staff and still do less than half.

The fact is, until the virus is under control, business will not return to normal for the hospitality industry.

That’s exactly when government is most needed. But Congress and the White House have yet to pass real relief for restaurants. The main vehicle for help—Payroll Protection Program loans (PPP)—helped a lot of businesses. But while restaurants could use it to help keep staff employed, they could only use a small share of it for pressing expenses like rent and utilities. And last month, the window to use the money ran out.

The current lame duck Congress is still working on the next act of pandemic relief. House Democrats have pushed a $2.2 trillion plan with multiple parts for several months. Republicans in the Senate have kept their plan to about $500 billion. In recent weeks, a bipartisan group of senators has pushed a compromise plan of about $900 billion, which would include more unemployment aid and a fresh round of PPP money.

They continue to debate over how much unemployment help should be included, whether it should include stimulus checks, whether aid should go to state and local governments and whether businesses should have liability protection if workers get sick. But it looks like the best shot at getting any help passed before a new Congress and president take office in late January.

One crucial thing is missing from the compromise proposal: help for the industry that is suffering most. The House’s $2.2 trillion bill included the Real Economic Support That Acknowledges Unique Restaurant Assistance Needed To Survive Act (aka RESTAURANTS Act), a $120 billion proposal that would establish a fund for restaurants and bars that aren’t publicly traded or part of a large chain. Restaurants and bars would receive grants. Outlets with annual revenues less than $1.5 million would receive priority.

Adding an extra $120 billion to the current compromise proposal isn’t cheap, but it would provide targeted aid to the industry that is arguably in the greatest danger from this pandemic. It would help keep millions of people employed, allowing them to keep their jobs, their homes and continue to spend money in other parts of the economy.

To help save our restaurants, you can do several things. You can order takeout from local, independent restaurants. Better yet, order direct rather than using a delivery app that takes a big cut of the payment. Perhaps buy a gift card from a restaurant this holiday season—consider it an interest-free loan to that chef and their team.

And tell your elected representatives to back the RESTAURANTS Act. It could help preserve an industry that has blossomed in the past 50 years to be one of the best in the world. We should take pride in our restaurants. They deserve our help.

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