In response to the economic disruption from the COVID-19 pandemic, a $349 billion Paycheck Protection Program (PPP) was guaranteed by the Small Business Administration. Established under the CARES Act, the program was designed to offer small business loans to bridge the shutdowns and help businesses keep employees in their jobs — and in turn, the loans taken out would be forgiven, essentially shifting into a grant. By June, the COVID relief program had been utilized by more than 4.8 million small business owners and had saved 51 million jobs in the United States.
While the government program has offered some respite, the pandemic continues to ravage. Restaurants and other small businesses in the hospitality industry continue to be flattened by the fallout of the virus. Restaurant closures have fluctuated from March through July based on the rapidly evolving and disparate mandates that have been put into place at local levels. In late June, Yelp released an economic impact report, citing that more than 57,000 restaurants listed on the site had closed permanently since the onset of the coronavirus pandemic. By mid-July permanent restaurant closures had risen to 72,842.
In the early days of the pandemic, food service business analysts predicted that major chains might have a better chance of surviving shutdowns and capacity restrictions than independents. However, that hasn’t necessarily proved to be the case. From big brand names, to local eateries, iconic eating places with dedicated followings, illustrious histories, and often celebrated names attached, all are falling fowl when it comes to the virus. It seems that COVID-19 is an equal opportunity destroyer.
In New York City, the situation has been particularly dire. Gov. Andrew Cuomo continues to maintain an order barring restaurants’ in the Big Apple from allowing indoor seating. As a result, restaurants across the Empire State are struggling to stay in business citing that restrictions on indoor seating are killing their establishments. Findings from the New York State Restaurant Association latest report underpins their sentiment. From speaking to over 1,000 New York restaurants, nearly two-thirds of them said they could be out of business as soon as January. To emphasize just how grim the situation is, New York City’s restaurant industry held a wake for itself—complete with a white coffin and bagpipes — to protest COVID-19 restrictions.
Restaurants have suffered more losses in dollars and jobs than any other industry. There’s no question that they are high on the list of small businesses that need the most help during the COVID-19 crisis. The Paycheck Protection Program, which helped keep more than 5 million small businesses afloat during the coronavirus pandemic, is now due to expire with no clear consensus about its future. At a recent Select Revenue Measures Subcommittee hearing, the National Restaurant Association urged Congress to take measures to help restaurants and their employees before it adjourned until November. “I implore you — please take action before leaving town for the elections…If Congress adjourns without extending the Paycheck Protection Program (PPP) or providing other enhanced relief, more restaurants will close, more employees will lose their jobs and the pandemic economic crisis will deepen.” Melvin Rodrigue, National Restaurant Association.
Along with the request for a second round of the PPP, with greater flexibility for both operating expenses and payroll outlays, the Association asked the committee to also consider long-term tools from their Blueprint for Restaurant Revival, including:
- Passing the Senate version of the RESTAURANTS Act, which takes a balanced approach to support independent and locally owned franchise restaurants.
- Ensuring that business expenses paid from PPP proceeds are tax-deductible.
- Enacting a refundable tax credit to cover investments in equipment and safety programs and to set up social distancing in facilities amid a crippling economic climate.
- Enhancing the Employee Retention Tax Credit.
While there does seem to be bipartisan sentiment to extend the program in a way that helps businesses survive there is disagreement over exactly how to do that. One thing that is for certain, is that without some sort of additional government aid, many restaurant owners are struggling and many will not survive without more help. For many, federal relief can hardly come soon enough.