Joel Gott, founder of Gott’s Roadside, the Napa-based restaurant chain with seven locations in Northern California, is desperately trying to retain jobs for as many employees as possible during the coronavirus pandemic. Five Gott’s locations remain open for delivery and take-out business, which has been brisk. Yet it’s far from sustainable: “Our daily payroll is larger than our revenue,” he reports. In spite of this, he is donating all sales to his employee relief fund to offer support to the workers that have been most affected by the crisis.
It’s grim indeed, yet Gott’s Roadside is faring better than most. Within just the last week, as almost every state has mandated bars and restaurants close doors temporarily to dine-in business, the entire restaurant industry is on the brink of collapse, and waiters, dishwashers, line cooks, and bartenders are among the most vulnerable victims.
There are 15.6 million Americans with jobs at restaurants; the National Restaurant Association (NRA) estimates that up to 7 million of those jobs will be lost without immediate government action. The outplacement firm Challenger, Gray, and Christmas, puts that number at 8 million.
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Most restaurant workers are paid hourly and have little savings and no health insurance: 40 percent live on poverty-level wages, according to the Restaurant Workers’ Community Foundation. Many are already unable to pay for rent or groceries, and face the uncertainty of when they will ever go back to work.
“Just how busy are restaurants going to be when we reopen?,” wonders Naomi Pomeroy, chef/owner of Beast PDX, a 26-seat fine dining restaurant in Portland, Oregon, where the entire staff has been laid off and is applying for unemployment—including herself. “Will people want to sit in a crowded dining room when we still don’t have a vaccine for COVID-19? Plus, the financial beat down we have all taken and the possibility of a major recession do not bode well for restaurants. We have no idea what we are looking at on the backside of this.” Pomeroy is paying out of pocket $5,000 per month for her staff’s health insurance, an expense she says she won’t be able to shoulder much longer.
Saving Livelihoods—and Future Jobs
A variety of relief funds have been set up by restaurants themselves, such as Danny Meyer’s Union Square Hospitality Group, which laid off 2,000 workers (80 percent of staff) in mid-March. Industry groups like the Restaurant Workers’ Community Foundation and the U.S. Bartenders Guild are steering money to laid-off workers while unemployment claims surge. But it’s not enough.
Most industry professionals agree that immediate government financial assistance is absolutely essential. “Restaurants closed to help protect Americans, and now we need Congress to help protect us and our workers,” says Bobby Stuckey, Master Sommelier and owner of Frasca and four other restaurants in Colorado. “Saving the restaurant industry will save more jobs than any other industry asking for money at the moment.”
Many restaurant owners feel that the current White House administration does not understand the depressing reality for restaurants. For example, most small to medium-sized restaurants won’t be able to take advantage of the paid employee sick leave funds in President Trump’s proposed coronavirus economic relief package because it only applies to businesses with less than 500 and more than 50 employees.
The NRA has drafted their own emergency relief proposal and sent it to the White House and Congress. Some of the association’s top asks: $145 billion recovery fund for restaurants, $100 billion in federally-backed interruption insurance, the ability to delay or forgo tax obligations, tax credits for restaurants who are retaining employees, a federal loan program equal to lost revenue, and unemployment assistance.
The best way to distribute funds to workers is through the existing infrastructure of restaurants, insists the Independent Restaurant Coalition, a group of independent restaurateurs that came together last week to make sure their voice was heard after Trump met with fast-food giants such as Domino’s Pizza, McDonald’s, and Subway.
“We are uniquely positioned for quick, efficient distribution of funds to tens of millions of workers up and down the food supply and delivery chain,” the group states on their website, along with recommendations for a 6-month income replacement program valued at $440 billion for “full and continued employment of staff, rent payments, and ongoing payables to suppliers.”
Why Restaurants are Uniquely Vulnerable
“Just as many individuals live from paycheck to paycheck, so too do restaurants and bars; there is no nestegg,” says the Change.org petition launched by a coalition of chefs that’s pushing for a government relief package that addresses both businesses and individuals (which approached 300,000 signatures in its first two days). They propose immediate emergency employment benefits to all laid off workers, waiving payroll tax, rent and loan abatement for workers, and loosening permit and zoning restrictions for restaurants to use their spaces for other businesses, like boutique food and beverage markets.
Because of the immediate cash-flow dependency of the restaurant business model, “most won’t be able to survive for long,” without a bail out, Gott believes. “Very few restaurants will be able to execute delivery- and pick-up volume that is sufficient to stay in business for even one month without help.”
Seeking “business interruption” insurance money, many restaurants discovered they were ineligible. “Most of us have been paying our business interruption insurance for decades only to find out that the insurance industry submitted an exclusion in 2006 that makes an exception for virus or bacteria, so none of us will receive any help from the insurance companies,” says Stuckey.
In Colorado alone, Stuckey notes, 10 percent of the workforce—285,000 people—is employed by the restaurant industry, 75 percent of which consists of independent businesses. “This county may lose a craft and an industry.”
Some predict one-third of restaurants will not be able to reopen, because the cost of reopening is extremely high, even for small establishments. Chall Gray, co-owner of Slings & Arrows Consulting and Little Jumbo bars in Asheville, North Carolina laid off all nine of his employees, yet he still feels luckier than most, as he was able to secure a three month deferral on his bars’ mortgages and has a small emergency fund. “I’m hearing numerous stories of other bar operators and restaurateurs already saying they simply won’t have the money to reopen,” Gray says. “It’s so much more expensive than simply turning the lights back on.”
“I believe this is going to reshape the industry as we know it,” says Gott. “Many small independent restaurants and fine dining restaurants are not going to make it through this.”
Kristen Bieler is the editor-in-chief of SevenFifty Daily and the editor in chief of Beverage Media Group publications. Based in New York City, she has been writing about wine, spirits and food for nearly two decades, and her work has appeared in GQ, TASTE, and Food & Wine Magazine’s Annual Wine Guide, among others. She is also a judge at the Ultimate Wine Challenge. Follow her on Instagram: @bielerkristen.