Dan Wu, an immigrant chef and owner of Atomic Ramen in Lexington, Kentucky, operated his restaurant for two and a half years before COVID hit.
The location’s closure turned from temporary to indefinite as the government instituted stay-at-home orders and dining room restrictions. To-go and delivery weren’t feasible lifelines. Eventually it became clear the restaurant wasn’t going to hang on, so Atomic Ramen closed permanently about three weeks ago.
Wu’s situation is an example of what numerous independent operators are facing nationwide. According to a report released by Compass Lexecon in conjunction with the Independent Restaurant Coalition, 85 percent of independent restaurants could permanently close by the end of 2020—crumbling a segment that generates about $760 billion in sales and employs 11 million people. This if direct aid, like a stabilization fund, is not provided.
Independent restaurants are more at risk of permanently going out of business due to the pandemic because consumer spending at these establishments has been disproportionately affected and they lack the same access to capital markets, the Coalition said.
“With millions of jobs at stake, the collapse of independent restaurants would ignite a downward economic spiral with ripple effects in other already hard-hit industries in the travel, hospitality and leisure sector that would be felt for years,” the report reads. “Mass failure may also destabilize the commercial real estate market if these restaurants cannot pay rent, which could also incite a spillover effect in the larger economy.”
Wu said this spells trouble for minority business owners.
“What I’m afraid of is that the people that are least likely to survive are going to be these small single locations—immigrant-run, women-run, people-of-color-run operations. … We’re the ones that don’t have the infrastructure like the chain restaurants to survive this,” Wu said during a briefing Wednesday.
At the federal government level, Democratic Rep. Earl Blumeanuer from Oregon is proposing legislation called the RESTAURANTS Act, which would establish a $120 billion fund for foodservice or drinking establishments that aren’t publicly traded or part of a chain that includes 20 or more locations under the same name. The funds would provide grants to restaurants and bars and prioritize locations with annual revenues less than $1.5 million. The money is intended to target small, local restaurants, particularly 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 obligations.
Compass Lexecon’s report estimates that Blumeanuer’s legislation would grow the economy up to $271 billion and reduce the unemployment rate by an estimated 2.4 percentage points.
Blumeanuer said he’s working with Republican Sen. Roger Wicker from Mississippi to refine the proposal and ensure it receives bipartisan and bicameral support. The bill could be introduced as early as this week.
“We’re ready to move,” Blumeanuer said. “I’ve had expressions of support from Republicans and Democrats in the [House of Representatives].”
The report states independent restaurant revenues dropped more than 70 percent in the final two weeks of March and are still 60 percent lower compared to last year. At least 4.5 million of the roughly six million jobs that have been lost in the food and drink industry have come from independent brands.
On May 18, a handful of restaurant operators—including some representing the Coalition—met with President Trump and his administration at the White House. Although it wasn’t a major topic, the idea of a stabilization fund was floated amid conversation.
“Our people walked away feeling very good about the interest,” Blumeanuer said. “There’s been no proposal per say from the administration but they felt that it was a very productive conversation. People recognized how essential the restaurant industry is and how they’re hanging by a thread.”
The Coalition views the stabilization fund as a long-term solution as opposed to the Paycheck Protection Program, which has proven insufficient.
Originally, the program provided eight weeks of loan forgiveness, which wasn’t nearly enough time for restaurants to rehire employees and reopen business. Congress recently extended the forgiveness period to 24 weeks and the deadline to rehire employees to December 31.
Wu received a PPP loan, but he described the program as cumbersome and confusing and couldn’t make use of 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 of reopening their restaurants.
“For us, something like the stabilization fund that’s geared directly toward our industry I think is going to be a huge help because we need more than eight weeks worth of confusing loans,” Wu said. “We need money to get through this and we need money to continue because by the time our customers are coming out and feeling safe about eating and dining with us again, they may be walking into a decimated landscape and that’s really not something any of us want.”
