Report: 85% of independent restaurants could close without direct help

At least 4.5 million jobs have been cut from the segment.

Dan Wu, an immigrant chef and owner of Atomic Ramen in Lexington, Ky., Operated his restaurant for two and a half years before COVID hit.

The location’s closure has gone from temporary to indefinite as the government institutes stay-at-home orders and dining restrictions. Takeout and delivery were not feasible lifesavers. Eventually it became clear that the restaurant was not going to hold up, so Atomic Ramen closed for good about three weeks ago.

Wu’s situation is an example of what many independent operators are facing across the country. According to a report released by Compass Lexecon in conjunction with the Independent Restaurant Coalition, 85% of independent restaurants could close permanently by the end of 2020, crumbling a segment that generates around $ 760 billion in sales and employs 11 million people. . This is if direct aid, such as a stabilization fund, is not provided.

Independent restaurants are more at risk of closing their doors permanently due to the pandemic, as consumer spending at these establishments has been disproportionately affected and they do not have the same access to capital markets, the Coalition said. .

“With millions of jobs at stake, the collapse of independent restaurants would set off a downward economic spiral with ripple effects in other sectors already hard hit in the travel, hospitality and leisure sector that is emerging. would be felt for years, ”the report says. “A massive default can also destabilize the commercial real estate market if these restaurants cannot pay the rent, which could also have a ripple effect on the economy at large. “

Wu said this created problems for owners of minority businesses.

“What I’m afraid of is that the people who are least likely to survive are these small, isolated sites – operations run by immigrants, women, people of color.… We are the ones who don’t. don’t have the infrastructure like chain restaurants to survive this, ”Wu said at a briefing Wednesday.

At the federal government level, Democratic Representative Earl Blumeanuer of Oregon is proposing a law called the RESTAURANTS Act, which would establish a $ 120 billion fund for food establishments or drinking places that are not publicly traded or that are not part of a chain that has 20 or more establishments. under the same name. The funds would provide grants to restaurants and bars and prioritize locations with annual revenues of less than $ 1.5 million. The money is intended to target small local restaurants, especially those owned by women and people of color. The dollars would cover typical costs such as payroll, benefits, mortgage, rent, utilities, maintenance, supplies, food, and debt.

The Compass Lexecon report estimates that Blumeanuer’s legislation would grow the economy to $ 271 billion and reduce the unemployment rate by about 2.4 percentage points.

Blumeanuer said he was working with Republican Senator Roger Wicker of Mississippi to refine the proposal and ensure it receives bipartisan and bicameral support. The bill could be tabled as early as this week.

“We are ready to move,” said Blumeanuer. “I had expressions of support from Republicans and Democrats in the [House of Representatives]. “

The report says independent restaurant revenues fell more than 70% in the last two weeks of March and are still 60% lower than last year. At least 4.5 million of the roughly six million jobs that have been lost in the food industry come from independent brands.

On May 18, a handful of restaurateurs, including some representing the Coalition, met with President Trump and his administration at the White House. Although it was not a major topic, the idea of ​​a stabilization fund was launched in the middle of the conversations.

“Our people came away very happy with the interest,” said Blumeanuer. “There was no actual proposal from the administration, but they felt it was a very productive conversation. People recognized how essential and critical the restaurant industry is. how much they are hanging from a thread.

The Coalition sees the stabilization fund as a long-term solution as opposed to the Paycheck Protection Program, which has proven insufficient.

Originally, the program provided for eight weeks of loan cancellations, which was nowhere near enough for restaurants to rehire employees and reopen their operations. Congress recently extended the pardon period to 24 weeks and the deadline for rehiring employees to December 31.

Wu received a PPP loan, but described the program as cumbersome and confusing and couldn’t use it. The changes to the program came too late.

However, the chef said the stabilization fund would give him and many other independent operators hope to reopen their restaurants.

“For us, something like the stabilization fund that goes directly to our industry, I think, is going to be of great help because we need more than eight weeks of confusing loans,” Wu said. need money to get through this and we need money to keep going because by the time our customers go out and feel safe to eat and dine with us again, they can walk in a decimated landscape and it is really not something for us. want to.”

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