Bill tosses restaurants a $28B lifeline
Tucked into the $1.9 trillion coronavirus pandemic relief bill signed into law last week is more than $28 billion for independent restaurants.
Ohio restaurateurs cheered the carve-out, hoping the American Rescue Plan will correct some of the problems with previous rounds of aid – and keep them open until COVID-19 becomes only a memory.
This pot of money is aimed at small restaurants and restaurant companies. Publicly traded companies and chains with more than 20 locations aren’t eligible. Roughly $5 billion is earmarked for restaurants with less than $500,000 in annual revenue, and minority-owned businesses are prioritized for initial grants.
Restaurants, food stands, food trucks, caterers and bars can apply. Applicants can use the money on a variety of expenses, including payroll, rent or mortgage payments, personal protective equipment, utilities, debt payments, even expanded outdoor seating.
Dozens of central Ohio restaurants permanently shuttered during the pandemic, and industry officials say more undoubtedly would have closed without help like the Paycheck Protection Program, which provided emergency loans as part of a 2020 COVID relief bill.
This new round of aid comes in the form of Small Business Administration grants, rather than loans.
PPP loans were converted to grants if recipients spent most of the money keeping people employed. Restaurant operators found that stipulation too restrictive.
The first round “was helpful in that it allowed us to keep the doors open and pay rent, and keep some staff, but the way it was set up and rolled out basically forced us to use all of that money in an eight-week period when we didn’t need it,” said Bob Szuter, co-founder of Wolf ’s Ridge Brewing Company, which has a Downtown Columbus taproom. “It really just amounted to us paying employees we didn’t need when they could have gotten unemployment.”
The next round came with fewer
strings attached and helped Wolf’s Ridge survive until the summer, when the taproom could seat customers on the patio, Szuter said. In all, the brewing company lost around $2.5 million during the pandemic and received $1.4 million in PPP loans The company borrowed another $500,000 through a disaster loan program.
Sales still haven’t rebounded to prepandemic levels, Szuter said.
The next round of aid “will help offset some of the money we’ve borrowed to get through this,” he said. “The disaster loan payments start next month. So we’re starting to pay back the money we used to get through this and we’re not even through it.”
The Ohio Restaurant Association, along with the National Restaurant Association, lobbied for restaurant-focused aid, arguing the economic downturn hit the service industry especially hard thanks to lockdowns and customers unwilling to risk infection.
The Ohio organization praised the carve-out in the latest relief bill.
Nationwide, restaurants lost roughly $255 billion in revenue since March 2020 when much of the economy was shuttered, and around 20% of restaurants closed, according to figures from the National Restaurant Association.
Though the association doesn’t break down the figures by state, Ohio’s numbers are likely similar, an Ohio Restaurant Association spokesperson said.
“This package will help operators turn the corner towards recovery,” Ohio Restaurant Association President and CEO John Barker said.
Every adult in Ohio will be eligible for a COVID-19 vaccine on March 29, and infection rates and deaths connected to the disease are falling.
Michael Goldberg, a professor in Case Western Reserve University’s Weatherhead School of Management, sees the end of the pandemic on the horizon.
“I haven’t been inside restaurants for a long time,” he said, but after receiving his COVID-19 vaccine, “I’m much more enthusiastic about eating in a restaurant than I was for the last year.”
But vaccinating everyone could take months, and the service industry still needs help getting over the hump, Goldberg said.
“It’s not back to normal yet; we need this bridge to get us there,” he said.
It’s not entirely clear whether the $28.6 billion is enough or too much, said Michael Dedad, a professor of macro economics at the University of Akron.
After a massive revenue drop a year ago, the service industry recovered some of the ground it lost from widespread lockdowns, but sales remain down 17% compared with pre-pandemic levels, and service industry employment is down 16%, according to the U.S. Census Bureau and the U.S. Bureau of Labor Statistics. Those figures are relatively unchanged since October, and Dedad isn’t convinced the industry will ever fully recover.
“It’s kind of unclear just how many people should be employed in the restaurant industry going forward,” he said.
Food lovers who cooked at home throughout the pandemic might continue to do so, and patrons who switched from in-person dining to third-party delivery apps, which charge high fees, could keep ordering through those services, Dedad said.
But he still thinks the restaurant-focused aid is necessary.
“I think this is a good thing to stop the bleeding for now, to make sure those restaurants who are able to be productive on the other side (of the pandemic) are able to keep workers employed,” Dedad said.
The Ohio Restaurant Association, however, is predicting a resurgence in dining out once enough of Ohio’s population is vaccinated, Barker said. Dining habits might change, but he said it’s too early to know exactly how.
“It will take another year to know where we really land,” he said.
Cara Woodhouse, who owns Woodhouse Vegan Cafe in Italian Village, is grateful some help is aimed at small eateries such as hers that don’t have the resources of larger chains.
When Gov. Mike Dewine temporarily shuttered most non-essential businesses in mid-march last year, Woodhouse Vegan had been open for only five months.
“We lost 70% of our business,” Woodhouse said.
The vegan cafe was depending on that lost revenue to pay off the debts it accrued opening up shop, and with little extra money to draw from, the restaurant took on additional debt to keep paying its bills.
“We are surviving, but not thriving,” Woodhouse said.
But even as small operators are the focus of these grants, some economists worry that money will still go to big companies.
Large corporations managed to secure PPP funds intended for small businesses thanks to savvy accountants and close relationships with banks distributing the loans, and economists such as Dedad say letting restaurant groups with 20 locations apply leaves the door open for big companies to claim some of the money.
Although he added, “I think it is constructed in a better way than previous rounds of help.”
Barker, however, stressed that bigger companies also are struggling as a result of the pandemic, and failing to help them means more job losses at a time when the state has yet to recover all of the jobs lost from the downturn.
“If we don’t take care of folks that are just a bit bigger, we won’t get jobs back that help the economy,” he said.
The restaurant association is continuing to work with legislators to find ways to help everyone in the service industry, he said. pcooley@dispatch.com @Patrickacooley