Endangered Restaurants Say $120 Billion Aid Would Pay for Itself

Bookmark

(Bloomberg) -- A trade group for independent U.S. restaurants said that its proposal for a $120 billion industry stabilization fund would pay for itself more than twice over as the Republican-controlled Senate signals it wants the next response to the coronavirus crisis to be more limited.

The proposed fund could generate more than $270 billion in economic activity through savings of as much as $57 billion on government programs for the unemployed, as well as additional sales and payroll taxes, benefits in the supply chain and tourism spending, according to an analysis released Wednesday by the Independent Restaurant Coalition.

The group was formed to address the economic devastation to independent restaurants, giving a voice to smaller businesses that are privately owned and have fewer than 20 establishments. The industry, which says it employs 11 million workers directly, has faced millions of job losses during the shutdowns, severe hits to revenue and the likelihood that occupancy restrictions will imperil firms for months more even as the economy reopens. Among other findings, the analysis estimates that:

  • Independent restaurants’ revenues fell by more than 70% in the last two weeks of March compared with the same period last year and remain 60% lower on average than last year’s levels.
  • About 85% of those restaurants risk closing permanently before the end of the year without a stabilization fund.

In its early response to the crisis, Congress put a provision into its initial small-business aid package to broaden access for restaurants and hotels. And lawmakers last week passed further changes to the relief to address calls by restaurants and other industries for more flexibility in the timing and types of expenses allowed under the initiative, the Paycheck Protection Program.

Yet restaurateurs say they still face waves of closures without hundreds of billions more in support. The Senate signaled that it won’t begin considering its own alternative to a $3.5 trillion aid package passed by the House until late July. Its ambitions will be much more limited as well, with a price tag closer to $1 trillion, particularly in light of surprise job growth in May.

President Donald Trump has said he’d like additional stimulus for restaurants but has floated ideas such as restoring a tax deduction for business entertainment expenses erased by his 2017 tax law that restaurants have said won’t do enough.

“Simply put, independent restaurants need additional financial assistance to bridge the battle to contain the virus -- and they need it now,” the analysis concludes.

Economic studies that paint a dire picture and insist public spending will reap benefits elsewhere are a key tool in advocacy, but other sources of data suggest the situation is bleak in the restaurant sector. Food services and drinking places employed more than 12.3 million in February, according to the U.S. Bureau of Labor Statistics; that number was just 7.6 million by May. Some estimates, meanwhile, say a quarter of restaurants could shut permanently.

Many restaurants operate on thin margins in normal times. With the pandemic ongoing in the U.S., they now face several months during which they’ll have to limit seats even as their costs for labor and protective equipment grow. Independent restaurant revenues are down more than 50% from last year, the analysis estimates.

Other groups representing eateries have come to similar conclusions. The National Restaurant Association, which represents thousands of restaurant owners and chains including McDonald’s Corp. and Chipotle Mexican Grill Inc., has called for $240 billion in aid.

The calls seem to have gained little traction so far.

“There’s a lot of hard work to be done,” said Representative Earl Blumenauer, an Oregon Democrat who plans to release a bill setting up a $120 billion grant program through the Treasury Department to support independent restaurants. He said he’s aiming to unveil the legislation in the next week or so and has worked with other lawmakers, including Republican Senator Roger Wicker, to get “comfort with this funding level.”

“The economic case is, I think, extraordinarily strong,” Blumenauer added.

The trade group analysis contains several data points that may be designed to pressure lawmakers, particularly Democrats, to take up the cause: More than 1 million single mothers work in the $760 billion broader restaurant industry, according to the study, while 60% of chefs are minorities.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.