The National Restaurant Association said it supports a $900 billion bipartisan bill that would provide relief to businesses and individuals as the COVID-19 pandemic continues to wreak havoc on the restaurant industry and the national economy.
The Association has sent a letter to Congressional leaders sharing new survey findings about sales and job losses. The letter expressed the Association’s support for “the moderate compromise proposal as a ‘down payment’ toward a larger relief package in early 2021.”
“What these findings make clear is that more than 500,000 restaurants of every business type—franchise, chain, and independent—are in an economic free fall,” said Sean Kennedy, the Association’s executive vice president for public affairs, in the letter. “And for every month that passes without a solution from Congress, thousands more restaurants will close their doors for good.”
Unlike a bill passed by the House of Representatives in September, the new proposed legislation does not offer targeted relief for restaurants. It provides $288 billion for the Paycheck Protection Program, which could benefit restaurant operators as well as other small business owners. It also contains $180 billion in additional unemployment benefits that would boost weekly checks by $300 for 18 weeks.
The National Restaurant Association Research Group conducted a survey of 6,000 restaurant operators and 250 supply chain businesses in late November, and the findings were stark:
- Eighty-seven percent of full-service restaurants (independent, chain and franchise) report an average 36 percent drop in sales revenue. “For an industry with an average profit margin of 5-6 percent, this is simply unsustainable,” the Association notes, adding that 83 percent of full-service operators expect sales to worsen over the next three months.
- Although sales are significantly lower for most independent and franchise owners, their costs have not fallen by a proportional level. Fifty-nine percent of operators say their total labor costs (as a percentage of sales) are higher than they were before the pandemic.
- Fifty-eight percent of chain and independent full-service operators expect continued furloughs and layoffs for at least the next three months.
- Seventeen percent of restaurants—more than 110,000 establishments—are closed permanently or long-term.
- The vast majority of permanently closed restaurants were well-established businesses and fixtures in their communities, the Association asserts. On average, these restaurants had been in business for 16 years, and 16 percent had been open for at least 30 years.
- Only 48% of these former restaurant owners say they will likely remain in the industry in any form in the months or years ahead. “Our nation is losing a generation of industry talent, knowledge and entrepreneurial spirit,” the Association says.
With winter just around the corner, many restaurants face a looming crisis since traffic ordinarily worsens during cold-weather months even in a booming economy. “In short, the restaurant industry simply cannot wait for relief any longer,” Kennedy said in the letter. “We appreciate the efforts of a group of moderate members of the House and Senate to advance a true compromise between the competing proposals from Democratic and Republican leaders. If this moderate plan represents a ‘down payment’ for a larger relief package in early 2021, it will provide restaurants with immediate relief to hold on through the most dangerous point in our business year.”
In addition to support of the $900 billion package, the Association offered a plan for how a proposed second round of Paycheck Protection Program (PPP) loans could be strengthened to help restaurant owners. Among the plan’s priorities:
- To qualify for a second round of PPP funding, the small business must demonstrate a gross receipts loss of at least 25 percent in any calendar quarter of 2020 compared to the same quarter in 2019. “While the Association continues to advocate for a threshold of 20 percent, which allows 430,000 restaurants suffering major losses to qualify for a second loan, we urge Congress not to raise the threshold any higher than 25 percent.”
- PPP borrowers must be able to deduct ordinary and necessary expenses. The Association notes that the CARES Act provides favorable tax treatment to small businesses that received PPP loans, but the Treasury Department has been denying ordinary and necessary tax deductions if there is a “reasonable expectation” of loan forgiveness. The Association said this “deeply flawed interpretation [of the CARES Act provision] … severely undercuts the PPP and would undermine the economic benefits” of a second round of loans.
- Loans under $150,000 should be eligible for streamlined forgiveness. At present, restaurants seeking PPP loan forgiveness are hamstrung by “a continually evolving regulatory process that is burdened with legal and accounting challenges,” the Association points out. “The loan forgiveness application is a cumbersome, complicated process that creates a disincentive for lenders to work with smaller businesses” that can’t afford to hire an accountant or attorney to advise them. Instead of extensive paperwork, the Association called for a “one-page attestation form” that would save time and money for businesses that receive loans under $150,000. “For original PPP borrowers or future PPP borrowers—who are eligible only because they have sustained major losses in revenue—streamlined forgiveness fulfills the intent of the program and encourages lenders to work with the smallest of businesses.”