As the world struggles with how to move forward in the face of the continuing coronavirus crisis, a beloved American institution is hanging on by a thin thread: the restaurant industry.
“March was bad, but April was the worst case scenario for independent restaurants,” says Andrew Zimmern, chef and host of ‘What’s Eating America?’ on MSNBC. “We went from an economic boom to an economic coma literally overnight.”
The restaurant industry contributes $1 trillion annually, or 4% of the country’s GDP, with it’s 500,000 independent restaurants responsible for employing 11 million people—many of whom have found themselves in dire financial straits after being laid off or furloughed due to the pandemic.
According to a recent study by the James Beard Foundation, four out of five of these small business owners are unsure if they’ll be able to sustain their business until normal operations resume.
“Every single day we're getting restaurants announcing that they're just simply not going to bother reopening. It's unlike any other industry,” Zimmern shared via Skype from his home in Minneapolis where he is quarantining with his family.
A chef by training and respected leader in the hospitality field, Zimmern is an expert on the subject. Perhaps most well-known for his travel channel show ‘Bizarre Foods with Andrew Zimmern,’ he’s devoted his life to food through his restaurants, writing, teaching, and as a social justice advocate.
Now he’s joined forces with other respected industry leaders like Jose Andres, Tom Colicchio, and Sam Kass to form the Independent Restaurant Coalition. Their mission is to positively affect legislative policy change and help restaurants navigate the global pandemic and reopen safely and securely.
Together with hundreds of chefs and restaurateurs around the country, they are asking congress for a restaurant stabilization fund to provide $100 billion in grants for upfront capital, to fix the time restrictions in the Paycheck Protection Program, to create new tax rebates to incentivize employment, and to ensure business interruption insurance covers COVID-19.
“It's staggering how big this collection of your neighborhood restaurants really is,” remarks Zimmern. “There is strength in numbers and we need everybody who loves food and restaurants to join our fight.”
Zimmern breaks down why the industry needs the additional assistance.
The restaurant sector is currently the No. 1 contributor to national unemployment
5.5 million jobs were lost last month, accounting for about 27% of total job losses in April. At-risk populations have been hit particularly hard.
“Restaurants are still the number one employer of returning citizens, people coming out of jails and institutions,” Zimmern explains. “They're the number one resource for first time job seekers. They're a major resource for last time job seekers, retirees that are looking to pick up a couple extra hours. They're the largest employer of single mothers. They are a major employer of immigrants in America. So you have to understand that restaurant employees are the ones that if there's no restaurant to go to, they immediately go out onto public assistance programs.”
Indirectly, restaurants also support a vast supply chain of farmers, fisherman, producers, distributors, and other service providers.
“These restaurants are pass-through economic systems,” Zimmern asserts. “95% of the money that comes into a restaurant goes back out the back door, making it a vital piece of the local economy. Every dollar that we spend is going to farmers and truckers and local sales taxes that help build our roads and keep our schools open. Restaurants are like miniature economic stimulus programs,” he continues.
“This is a drop in the bucket investment to make sure that a vital piece of our economy is backstopped. We're not asking for a bailout. We're asking for grants to help the United States economy get back on its feet by reinvigorating a major resource.”
Restaurants are more fragile than you may think
Though we’re accustomed to seeing celebrity chefs on TV and assuming that they live lavish lifestyles because of their restaurant successes, the reality is much less glamorous. The average profit margin for a restaurant, after removing all other costs, is only between 2-6%.
“We don't get into this to get rich,” Zimmern admits. “People get into the restaurant business because we love what happens when people sit down and share a bowl of soup at a table together. The majority of restaurants close before their first year is complete.”
Restaurants can’t just “flip on the lights”
As states relax restrictions, restaurant owners and employees are eager to get back to work, but they face challenges that are unique to their industry. Zimmern outlines some of the hurdles that restaurants are currently facing.
“We've cleaned out our walk-ins. We've shut everything down. We've paid our utilities, our insurance and our rent. Maybe we're behind in some of those, so we're already in the hole a little bit. Then we have to order all the food,” he explains.
For many restaurants the slow winter months led right into a decrease in customers due to coronavirus fears in early March, even before the industry shut down. According to Zimmern, “A lot of restaurants had a really bad couple of weeks before they finally shut their doors. Restaurants only have 2-4 weeks of prudent reserve.” In mid-May, many states’ dining restrictions have already well exceeded the month mark.
Restaurants will also be required to adhere to strict safety regulations, including capacity limits, which may change the way they’ve been doing business or the space itself.
“We have to reorganize how food comes into the restaurant and where it's prepped,” Zimmern states. “In some cases, we have to redesign the cooking line itself. We're going to have to erect barriers and supply and train our people with PPE.” All of these changes have associated costs and timelines.
It’s also uncertain whether customers will want—or be able to—return in the same numbers as before, even as capacity restrictions are lifted over time. “You're opening your door in the middle of a giant-sized recession,” Zimmern worries. “Who's to say what segment of the population can afford to come in?”
PPP is not enough
Currently, The Paycheck Protection Program (PPP) is providing forgivable loans to small businesses to pay their employees during the COVID-19 crisis.
The funds can be used for payroll, mortgage interest, rent, and utility costs over the 8-week period after the loan is received, as long as employee and compensation levels are maintained.
While Zimmern admits that this has been extremely helpful for small businesses like his production company, the restaurant business model presents a unique problem.
“It’s an 8-week bandaid for an 18-month problem,” he argues. “One of my restaurants isn't going to be open again for three or four more weeks. And when it does, it's going to be serving 60% less customers.”
Roughly half of the U.S. has already begun to lift restrictions on dine-in establishments, albeit with strict protocols in place. Among the state-mandated restrictions are limits on capacity, maximum party sizes, mandatory PPE, and employee screenings.
“We can only fill to a certain percentage of occupancy,” says Zimmern of the state mandates, “but we're still paying 100% of our bills.”
Restaurants are still at the heart of the communities they serve
Though restaurants are struggling to make it through this crisis and on to the next chapter, that hasn’t stopped many small businesses from devoting precious resources to helping out their communities.
“Do you remember when 9/11 happened? The policemen, the firemen, the paramedics all rushed in and right behind them on their heels were the restaurants and the chefs setting up makeshift kitchens on the street to feed all those people. Hurricane Katrina, even more so. Chefs building temporary kitchens on stilts in three feet of water feeding people who needed a meal. That's what our industry does. We show up and we cook for people and we've been out there helping in every crisis during my lifetime,” says Zimmern. “And that's what we're doing now while at the same time trying to juggle our return to business and getting our doors back open so we can welcome our guests, our friends, and our neighbors back into our restaurants.”
Making a successful comeback will require flexibility
Despite these challenges, Zimmern is confident that restaurants are poised to make a comeback—if they can get creative.
“I think restaurants need to diversify their revenue streams,” he suggests. “I do think people are going to want to be getting to-go and delivery from restaurants that never did it before,” he adds.
Zimmern continues, “There’s always a neighborhood restaurant where they make their own pickles and hot sauce and it’s available next to the T-shirts at the front door. I think you’re going to see a lot more of that kind of thing.”
So what does the “new normal” look like?
Zimmern wants everyone to remember that this is an unprecedented global event and that there’s no crystal ball or easy answers.
“Trying to outguess the future is just always futile. It's ambiguous and uncertain and that breeds fear, anxiety, and creates stress. It also creates trauma,” he explains.
“I think the best healing in the world happens over a bowl of soup at your neighborhood restaurant. So I hope we're able to put the most people in our industry back to work doing what we do best, which is serving our customers.”
We’ll be waiting, spoon in hand, ready to dig in.