April 2 – Letter to Congress
Dear Speaker Pelosi, Leader McConnell, Leader Schumer and Leader McCarthy;
On behalf of the nearly 500,000 independent restaurants across the country, we want to thank you for taking action to help keep our critical industry alive through this crisis. Independent restaurants directly employ 11 million people. Indirectly, we employ tens of millions more through a vast, robust supply chain of farmers, fishermen, beverage distributors, linen services, and others.
Although the CARES Act attempted to provide a temporary lifeline, it unfortunately does not provide adequate resources or the right tools to ensure the survival of the independently owned restaurants nationwide that contribute nearly $1 trillion to the economy annually.
Over the last three weeks, nearly every independent restaurant in America has closed its doors and been forced to terminate their employees. With a sense of moral, ethical, and patriotic duty, we shuttered our businesses quickly to protect the American public, our employees, and the fabric of our communities. Many of us are now unable to pay vendors. This means that when we do reopen, we will first have to pay outstanding supplier bills before we can restock or rehire.
Independent restaurants have a business model that is unique from the vast majority of small businesses. Restaurants are cash flow businesses with extremely small margins and these closures have put a hard stop to incoming revenue. Meanwhile, expenses such as payroll, rent, and utilities continue to upend the industry. There is no more severely distressed, yet systemically critical sector in our economy. These unique circumstances must be addressed independently of other small businesses seeking relief from the CARES Act.
As Congress moves toward additional legislation, there are fresh actions needed to ensure we survive not just the near-term crisis but the long-term negative impact on revenue. We have significant issues with the CARES Act treatment of independent restaurants as it currently stands. If these can be resolved to better reflect the realities of our industry’s unique operating challenges, we will have a better chance of reopening, rebuilding, and ensuring our continued position as fundamental to the fabric of our rich and diverse communities across America.
Federal Request from the Independent Restaurant Coalition
The following requests are required to ensure independent restaurants will be able to survive this crisis. The Paycheck Protection Program, if amended as described below, will help us rehire our employees and reopen. The additional requests are also required to ensure the entire restaurant industry will be allowed to survive in the long term.
1. Fix the Flaws Within the Paycheck Protection Program
The Paycheck Protection Program (PPP) was designed to accommodate all small businesses, including restaurants, and allow them to secure necessary capital to reopen their doors and hire back employees. However, the bill was written in such a way that prevents restaurants from taking advantage of the program’s benefits. The following changes are required:
• Extend the maximum loan amounts to 3 months after we are allowed to reopen and operate at full capacity. The intention of the CARES Act is to make sure independent restaurants can survive as engines of our economy. Yet, the current structure of loan forgiveness does not help the tens of thousands of restaurants who are prohibited from opening their doors. After the 8-week clock runs out, independent restaurants will still be closed and we will be forced to lay off our entire staffs again. Relief is needed until independent restaurants are allowed to reopen and operate at full capacity.
• Increase the size of the PPP beyond the $350B and reinstate the $500 million gross revenue cap. There is a real fear that the funding set aside in the CARES Act for small businesses will run out before we are allowed to reopen. In fact, it is estimated that demand for forgivable loans could exceed $1 trillion. Moreover, Congress should reestablish the $500 million gross revenue cap that was included in an earlier version of the CARES Act. This cap was meant to separate the small, independent restaurants from other large, well-capitalized businesses that have infinitely more resources. Reinstalling the cap would mean that more funds would be available for small, independent restaurants.
• Increase the loan repayment to 10 years from its current 2 years. As described in the points above, some restaurants will struggle to qualify for 100% loan forgiveness. Unforgiven loans will result in restaurants being saddled with debt at a time when we can least afford it. The original Senate bill language set a 10-year term to repay a PPP loan that was not fully forgiven. Treasury then provided guidance setting the term to two years. This is unworkable and could cause the very problem this bill seeks to prevent — the large-scale failure of small businesses.
2. Create a Restaurant Stabilization Fund
The Paycheck Protection Program will help us rehire our employees if the timing issue noted above can be resolved. But, more is required to ensure our businesses can reopen. If we do not have funds to pay our vendors and the associated reopening costs, this will prove an insurmountable barrier to reopening our restaurants. A dedicated restaurant recovery fund is critical to the recovery of our independent restaurants. With a $50-$100 billion reinvestment, independent restaurants would be able to navigate local and state closure mandates, hire back our employees, and survive for the future as patrons return to dining out in restaurants again.
3. Create New Tax Rebates for Independent Restaurants to Survive Post-Crisis
Independent restaurants will face a very challenging and a completely unknown operating environment in the months to come. Assuming we have enough resources to reopen, business will likely be down by at least 30% through 2021, which could mean running out of cash and forcing massive layoffs and possible closures. Two new rebate programs are required to get us up and running and to keep us in business during the difficult time ahead.
A “jobs provider rebate” will give tax relief to restaurants and reward them based on how many people we employ. With 11 million workers, we are one of the largest employers in the nation. We also have some of the smallest margins of any sector. We should be incentivized for keeping millions of Americans employed during a difficult time.
A “rent rebate” is required so we can make our landlords whole when revenue will inevitably be down. Going forward, a “rent rebate” ensures restaurants can maintain their lease through this recovery.
4. Require Business Interruption Insurance to Cover COVID-19
Every restaurant across the country pays premiums for business interruption insurance to safeguard their businesses and the livelihoods of their employees in the case of natural disaster or Civil Authority Shutdown. Unfortunately, these very firms we rely on to protect us are avoiding coverage during this disaster by falsely claiming that the virus does not cause a dangerous condition to property. The entire restaurant sector and all connected industries are crippled by a nationwide public health shutdown impacting all of our livelihoods. Whether policies have virus exclusions or not, we need Congress to mandate that insurance companies fulfill their obligations.
We appreciate your consideration and support in our efforts to return 11 million people to work in our businesses and to restore the supply chain of farmers, fishermen, beverage distributors, linen services and all of the small businesses we rely on daily. We are too many to fail.
If independent restaurants do not prevail, the systemic impact will be unprecedented and gravely consequential. We hope you’ll continue to work to help us survive this crisis by addressing the concerns we’ve detailed above. Through your swift action, we feel confident we can reopen our restaurants, rehire our staff, pay our suppliers and be even stronger. We are eager to help restart our communities and to make a significant contribution to the broad recovery our country so needs.
Independent Restaurant Coalition