Restaurants will need a miracle to survive this

Restaurants, especially independent ones, have been decimated by the pandemic. Without access to the same financing options as large corporate chains, restaurant owners like me have to figure out whether and how to stay open — or just quit the business altogether.

Selling T-shirts, hats and gift certificates is not going to save us. As more states begin phasing in restaurant reopening, many of us have no idea what the right move is. But we do know this: We need drastic, realistic solutions so restaurants can survive into the Covid-era future.

After running my restaurants for 17 years, including 10 years in New York City and Chicago, I’ve had a lot of time during these shuttered months to pore through industry and news reports, talk to colleagues and attend Zoom forums about the state of my industry. I have had a bird’s-eye view of the crisis through the James Beard Foundation, where I am a trustee.

Though we restaurateurs have faith in our creativity and resilience, the prognosis is dire. Some 1,400 of us responded to a recent survey by the Beard Foundation and the Independent Restaurant Coalition. It predicted that months of closings, mounting debt and diminished capacity will kill perhaps 80% of America’s independent restaurants.

Two-thirds of America’s restaurants are independent small businesses. They employ 11 million of the 15 million workers in this sector. Millions of them are now unemployed and facing permanent job loss.

Amid this catastrophic reality, some champions have emerged, including the Independent Restaurant Coalition, a group representing 50,000 restaurateurs that is pushing Congress to pass a $120 billion relief fund to save local restaurants. The Beard Foundation has channeled millions in grants, and the National Restaurant Association, a powerful lobbying group that represents 380,000 businesses, has called for Congress to provide $240 billion in urgent relief directly to restaurants.

What’s at stake? A lot.

Restaurants are a mega-industry in the United States. They comprise more than a million small businesses that employ more than 10% of the workforce and generate $1 trillion in GDP. Beyond economics, restaurants are the throbbing pulse of our cities.

The fierce independence and flavor of a city or town’s restaurants are as central to its culture as any historic or natural attractions. This spans the spectrum from street fare, dives, cafes, bars, diners, neighborhood hangouts, global belts, unique eateries, swank joints, communal food halls or pricey prix-fixe venues. We are the “third places” where communities flourish.

So many of us love dining out and now we miss it terribly. It’s like movies, the arts, books, travel, shopping, or any forms of entertainment and fulfillment. We work so we can live, and eating out is thrilling — whether promiscuously trying a new place or an old, comfortingly haunt. Dining and drinking with friends around a table is something no amount of online chatting or takeout can match. Our restaurants could be the last bastion of social interaction outside our homes in our increasingly insulated, technology-driven lives.

For their part, restaurateurs and chef-owners give a lot back to their communities. We finance events and fundraisers with donated food and the labor of our chefs and staffs. We promote sustainability and give to food banks, nonprofits, schools, food events and festivals galore. When guests buy expensive gala tickets, they often don’t realize how much these events have been subsidized by America’s restaurants.

Many of us dip into our meager margins to help causes that serve the larger good, like women’s parity, education, immigrant rights and so many more. That so many restaurants are operating relief kitchens during this pandemic is a testament to this very spirit.

Fold or fight

Each one of us owners is struggling with questions about the future: whether to reopen or quit. Federal help has been marginal, illogical and would be laughable if it weren’t so tragic. The much-hyped Paycheck Protection Program reached a fraction of independent restaurants, most of whom were unable to access it.

Those who received funds are supposed to use PPP to cover eight weeks of payroll while shuttered, which is irrational — taking a loan to employ people while you’re legally closed makes no sense. Meanwhile, we keep accumulating losses and debt while we are closed by law.

Restaurants face calamitous gale winds on many fronts.

According to the research firm Datassential, as many as 68% of customers will avoid returning to restaurants at all, and 20% will be nervous when they do. Without a vaccine or universal program of testing, tracking and isolation, that rational fear will persist.

And most Americans remain uneasy about the moves to reopen, with 67% saying they would be uncomfortable going into a store and 78% saying they would be uncomfortable eating at a restaurant, according to a recent survey from The Washington Post and the University of Maryland.

Our customers can’t eat with masks on, and we can’t deliver plates while staying 6 feet away from them. Nor can we separate our employees in cramped kitchens, which are designed for compact efficiency and speed.

Guidelines for redesigning a restaurant for reopening are inconsistent at best. Each of us will have to weave through myriad manuals — from the Occupational Safety and Health Administration, the Centers for Disease Control and Prevention, city and state health officials — and consultants to figure this out.

Fearing the worst

Every restaurateur’s worst fear is an outbreak associated with our business — among either staff or guests– that harms the health of customers and workers, requires quarantining and damages our reputation, possibly beyond salvage.

Despite all social distancing and scrubbing as states tentatively begin to reopen, safety will be a nightmare to enforce with a virus that stays viable indoors in guest airflow pathways. Or for our employees that use public transportation. A paucity of basic personal protective equipment compounds this dilemma.

What’s more, much of our workforce is undocumented. Our employees live in the shadows, are left out of social safety nets and are the most defenseless among us. A surge of Covid-19 in this population is a huge vulnerability, as Singapore’s experience with the pandemic among its migrant laborers has shown.

Reorganizing our space to fit social-distancing requirements will reduce our capacity and slash revenue by at least two-thirds. Much of our space will be unusable, including bars, communal spaces, large tables and booths. All our fixed costs, meanwhile, from rent to leases to contracts, won’t shrink at all. The cost of food and safety-related sanitation will only go up, in some cases drastically.

And drawing back employees on unemployment benefits may prove difficult.

Consumer demand will spiral lower as long as high unemployment, low earnings and low demand continue to reinforce one another. Tourist demand and corporate events are dead — they are large chunks of our revenue.

To increase traffic, restaurants will likely have to slash offerings and menus. And they’ll have to cut prices, further worsening our bottom lines.

It gets worse. We will face higher unemployment insurance costs and contributions once the federal bailout winds down. We face potentially increased Covid-19 liability from employees and customers, which our insurance will not cover.

And we are likely to face repeat disruptions and shutdowns as infections surge again. Just the thought of facing another winddown and open-up is emotionally paralyzing.

What can we do?

To be blunt? Only solving the public health crisis will save the culinary industry. Everything else is a suboptimal fix.

With a vaccine possibly two years away, we are baffled that even a federally driven road to universal testing and isolation, the interim solution, is not being aggressively pursued. Experts at Harvard and New York University have called for 24 million tests a day, with the capacity for double that in surge situations.

With that solution completely off the table under the current administration, only genuine financial support can enable restaurants to get through this crisis. The first $349 billion of PPP ran out in two weeks, the second tranche of $310 billion also barely scratches the surface. To restore the small-business spirit of the legislation, all employers with less than 500 employees should be covered before extending this to others.

Secondly, the PPP should be converted into a grant to cover our deficits of fixed costs during closure, and not a payroll loan.

Making our insurance industry live up to their business interruption coverage also is necessary.

The grim reality for now is that restaurants — even ones that can partially reopen — will limp along and over time the attrition will be severe. No amount of pivot to grocery, delivery, curbside or ghost kitchens is an adequate fix.

Six weeks ago, I wrote an article asking our federal government to get over the machismo, inaction, whitewashing and denial on coronavirus. We’re still in limbo and waiting for it to get to work. Takeout is not what America’s restaurants are for. We deserve better.

Less hypocrisy and vanity, more justice

If you believe in creative destruction, maybe some good can come of this disaster.

Restaurants are not an essential business. We are a luxury item. Despite the deification of celebrity chefs and the groupie culture around food TV and the foodie press, no amount of spin can change this. Many in our industry don green halos with our backyard herb gardens. We trumpet small farms on our menus and patronize green markets — fetishizing the exquisite greens we sell at jaw-dropping price points.

In parallel, our menus and tastings flaunt ingredients like caviar, tuna, Wagyu and truffles and exorbitant tastings that undo all notions of equity. We talk about “farm to table” and “local” food, but 90% of what we use is shipped in from elsewhere — that’s how we all have a yearlong bounty of fruits, vegetables, seafood and meat in zones, with no comparative advantage in their production.

Farm-to-table makes for a good slogan for those who can afford it, but its ethical underpinning is weak in a world that staggers with basic food insecurity and starvation. If our industry could dispense with some of its own vanity and hypocritical nobility, we may be better off.

Restaurants run at terribly low margins with astonishingly high failure rates and often exploitative terms for our employees. Much of this is for sheer survival and not because of rapacious owners rolling in money.

On the contrary, we restaurateurs fuel employment against all odds, and we’re stuck in this vicious loop. But maybe there will be innovation in the aftermath of the destruction. Maybe not all our businesses are meant to survive this storm, to surface with stronger economics and with less excess capacity in the industry as a whole.

Maybe it’s time to reevaluate minimum wages, redraw tip credits and rethink the lack of parental and sick leave and social safety nets. Maybe this is true of all small business and even big business today. These are issues we have to confront as a society with our government. Now could be the perfect time to break with the past.

If we want restaurants, we have to help them

Our industry is irate that the precipice we’ve been driven to stems from mandated months of closure and that we face an incredibly uphill journey, with none of the assistance that big business receives. It is categorically not an intrinsic, reckless failure of our own making.

After the trillions expended on buoying the stock market and on unlimited quantitative easing and corporate bond financing, shouldn’t our government deliver for an industry that employs some 15 million and is #TooSmallToFail?

The White House’s Great American Economic Revival Industry Groups, the task force charted with the health and wealth of our nation and “Opening Up America,” obsesses that a national shutdown is not a long-term sustainable solution.

Its Food & Beverage Group is dominated by massive corporations and chains, and independent restaurants are represented by four white male celebrity chefs (steeped in French fine dining) who are not remotely reflective of the angst, depth or diversity of our sector. This bodes continued abysmal policy for a sector on life support. We don’t have the luxury to get our one shot at reopening wrong.

Restaurateurs that choose to come back will do so with crippling debt and the certainty of this debt deepening through the crisis and years ahead.

Only deep pockets or an intrepid sense of optimism can overcome the fatalism of these headwinds. Or perhaps sense will suddenly prevail and a genuine helping hand will emerge to #SaveRestaurants and keep them #OpenForGood.