The RESTAURANTS Act Could be the Lifeline That Small Eateries & Bars Need for Survival

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With the Paycheck Protection Program (PPP) largely failing to meet the needs of independent bars and restaurants hit hard by the COVID-19 pandemic, organizations and lawmakers are now trying to get a bill known as the RESTAURANTS Act to the House floor. The bipartisan measure was introduced by Congressman Earl Blumenaur (D-Ore) and co-sponsored by Senator Roger Wicker (R-Miss) on June 18. A statement issued by Blumenauer noted that 11 million restaurant jobs as well as an additional 5 million throughout the food supply chain are at risk. The combined economic impact is estimated to be $1 trillion and affects a wide swath of the economic sector, including farms, fisheries, freight and shipping services and restaurant suppliers. 

“If we lose independent restaurants, we start to lose everything from supply chains and delivery chains. The impact is way bigger than restaurants,” said Chris Shepherd, chef and owner of Underbelly Hospitality which operates UB Preserv, Georgia James, The Hay Merchant and One Fifth. “When COVID first hit, you had cattle farmers who couldn’t sell ribeyes to restaurants, so they added them to ground beef which led to a leaner grind. Remember when ground beef got up to $6 and $7 a pound?  That’s going to happen all the time if we don’t save small restaurants.”. 

James Beard Award-winning hometown chef Chris Shepherd. Photo courtesy of On the Mark Communications.

According to survey statistics included in Blumenaurer’s statement, operators have laid off 91% of their hourly workforces and 70% of salaried employees. The National Bureau of Economic Research predicts that only 15% of restaurants will survive if the pandemic lasts another six months. An Independent Restaurants Coalition (IRC) report from June 10 states that, compared to 2019, independent restaurant revenues plummeted by over 70% in the last two weeks of March 2020 and even now are still 60% lower on average. Restaurants operate on thin profit margins even under ideal circumstances, so the additional debt and revenue deficit brought on by the pandemic isn’t sustainable. 

“The goal right now is getting [the RESTAURANTS ACT] done fast and getting it done right,” Shepherd said. “When you talk about $120 billion dollars, it seems like a big amount to ask for, but if you save independent restaurants, they’ll make it up in taxes in two years.” 

When many bars were ordered to close and restaurants ordered to offer to-go only in many major cities last March, it was hoped and expected that the PPP and Economic Injury Disaster Loans (EIDL) would be the lifelines that would keep these businesses afloat. Unfortunately, the approval process didn’t prioritize independent restaurants. Over 70 publicly traded chain restaurants and hoteliers applied for and received millions, which exhausted the PPP funds in only 13 days. 

The new proposed legislation under the RESTAURANTS Act includes a $120 billion grant program to provide structured relief to restaurants through the end of 2020. The Department of Treasury would administer the program. It would be available to all food service or drinking establishments including caterers, food trucks and food carts, but exclude publicly traded companies or chains with 20 or more locations doing business under the same name. Grant values would cover the difference between revenues from 2019 and the projected revenues through 2020. 

alba huerta
Alba Huerta of Julep. Photo by Julie Soefer.

“The grants process of the bill helps independents specifically because it is needs-based,” said Alba Huerta, the owner of the bar Julep in Houston. “So there’s a checks-and-balances component by establishing the needs of a business as opposed to just an open grants system. The needs of restaurants and the industry are unique and the bill is the beginning of addressing those.”

Restaurant Stabilization Grants would not need to be paid back. Businesses could use the funds to pay employees (exclusive of anyone employed who already makes $100,000 a year or more), health or retirement benefits, mortgage, rent, utilities, maintenance, supplies (including protective equipment and cleaning supplies), food, debt obligations to vendors, and any normal expense deemed essential by the Secretary of the Treasury. The first 14 days of funds would only be made available to restaurants with annual revenues of $1.5 million or less to help ensure availability to local small restaurants, particularly those that are women, veteran, or minority-owned. 

“The goal is to get independent restaurants through the beginning of next year. The RESTAURANTS Act is designed to get you enough money to make it by looking at what were your sales last year, what are your sales now, and how do we get you into next year,” Shepherd said when asked what the aid would achieve. 

If a restaurant permanently closes before the end of 2020, any unspent funds would need to be returned. However, if the grant balance exceeds the actual end-of-year revenues, the grant would be converted to a 10-year loan with a mere 1% interest rate. 

To put into perspective the economic and cultural impact of independent restaurants: it’s estimated that there are 500,000 in the United States. These account for 76% of the 658,000 total restaurants and bars. Sixty percent of all chefs nationwide are minorities, and minorities also make up 53% of all bussers, runners, baristas, prep-cooks, dishwashers and kitchen porters. Restaurants routinely employ more minority employees and managers than any other industry. As much as 65% or more of independent restaurant revenue gets recirculated into the local economy, compared to just 30% for chain restaurants. In short, chain restaurants are a smaller segment of the industry and don’t stimulate local economies as much due to where and how these businesses spend cash. 

“The important thing is that [the RESTAURANTS Act] focuses on the future of our community. It focuses on what is happening from the next quarter onwards and gives businesses a way to look forward,” Huerta said. “The most important thing people can do is to write to their representatives and senators and let them know that you’re in support of independents that make up the fabric of our communities.” 

There’s a big benefit to taxpayers as well: the RESTAURANTS Act would help small businesses retain or rehire workers, thus reducing the unemployment rate from 14.7% to 12.3% and easing the burden on public assistance programs. 

“Every day there’s another senator or congressperson signing on to support this legislation, so it’s getting momentum, but we have a lot more work to do,” Shepherd said. 

Those who want to express support for the RESTAURANTS Act can go online and sign the Independent Restaurant Coalition petition. To find the Congressional representatives for your area, visit the United States House of Representatives website.

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