‘My news negates what you just said’

After two rounds of funding for the Paycheck Protection Program totaling $360 billion, restaurants are still getting crushed by the financial toll of the coronavirus pandemic. 

Despite restaurants contributing roughly $1 trillion to U.S. GDP, only 9% of PPP funding has gone to accommodation and food services as of April 13 according to the Small Business Administration, meaning that restaurants are sharing an already small piece of the money pie with hotels. 

Members of the Independent Restaurant Association as well as other industry executives met with President Trump at the White House on Monday to discuss the ongoing challenges facing the industry.

“What we’re learning is that people don’t really know how restaurants work,” IRC founding member Naomi Pomeroy told Yahoo Finance. “Restaurants really use this week’s income to pay last week’s bills. We definitely run on tight margins and so for us to take on any additional debt, [it’s] nearly impossible for us to survive.”

Pomeroy is the James Beard award-winning chef and owner of Beast Restaurant in Portland, Ore. Her restaurant has been closed since March because pivoting exclusively to takeout and delivery would have meant operating at a loss. She received a PPP loan for about $175,000, but hasn’t spent a dime.

“We all want to use our [PPP] money. I’m sitting on it. I’d like to be able to use that money but not if it means bringing my staff off unemployment only to furlough them again. It just seems like a real waste,” said Pomeroy.

The PPP money is a waste for many restaurants because it only covers employee salaries for an 8-week window. For restaurants that have been closed since March, hiring staffers for a couple of weeks and making their future employment contingent on Congress passing a new round of funding for PPP is too unpredictable. 

President Donald Trump speaks during a meeting with restaurant industry executives about the coronavirus response, in the State Dining Room of the White House, Monday, May 18, 2020, in Washington. (AP Photo/Evan Vucci)

While many restaurant owners would like to allow workers to continue collecting unemployment given that there’s no work for them, they’d like to use the PPP funds to shore up their finances. However, a condition of having the loans forgiven is keeping workers on their payrolls.

The Independent Restaurant Coalition recommended changes to the PPP, including permitting owners to use the loans when their restaurants can reopen and providing additional funding beyond that initial 8-week period. 

“Currently, we’re facing a whole year or more [of the coronavirus pandemic]. This is probably going to be a problem that we see for the next couple of years until there’s a vaccine,” said Pomeroy.

Reopening restaurants doesn’t solve financial woes

Restaurants in certain parts of the country have reopened with a focus on observing social distancing guidelines and improving cleanliness. The IRC warns that reopening doesn’t mean that restaurants will become solvent.

“My restaurant in particular is very small, gathering people is going to be very, very difficult and we’ll be facing some revenue shortfalls for the next period of time,” said Pomeroy, adding that the IRC’s recommendations to Trump are meant to provide practical solutions for stabilizing the restaurant industry as a whole, which employes 11 million people.

Patrons dine in an outdoor seating area at Plant City restaurant, Monday, May 18, 2020, in Providence, R.I. Rhode Island allowed restaurants to provide service with outdoor seated dinning Monday for the first time since the beginning of the government imposed lockdown due to the coronavirus pandemic. (AP Photo/Steven Senne)

“Restaurants actually don’t make a profit until they’re about 85% full or greater. So to be frank, operating at a limited capacity is going to mean that a lot of places will close down and I don’t think those jobs are going to come back,” she said. 

Trump: ‘My news negates what you just said’

During his meeting with restaurant owners at the White House, Trump spoke optimistically about the potential for the development of a cure that would ultimately eliminate the need for more federal funding to stabilize the restaurant industry. 

Moderna is the latest biotech company to announce that it was making progress on the development of a coronavirus vaccine.

“So what we have is big announcements coming, big announcements have already come, and tremendous progress has been made — therapeutically, cure-wise, and also, obviously, vaccine.  To me, thera- — therapeutically and cure is more important than vaccine because it’s immediate,” he said, adding, “And if we have something…let’s get it going, immediately.”

When Melvin Rodrigue, president of Galatoire’s restaurant, in New Orleans, reiterated the need for PPP fixes, Trump interjected: “Well, my news negates what you just said because you would — you would be back into business like you had it.” 

More from Sibile:

How coronavirus on your cash is payment game changer

Here’s how coronavirus will change our flying habits

The case for monthly coronavirus stimulus checks: Americans ‘need consistent liquidity’

Jobless claims remain ‘frightening’ as employers pull back on hiring

Here’s how borrowers are missing out on mortgage, auto payment relief during coronavirus

Find live stock market quotes and the latest business and finance news

Source Article