How Shuttered Restaurants Shatter a City’s Economy
The coronavirus shutdowns have shed new light on the role of restaurants in the economic health of cities. “The benefit of having good restaurants outweighs just their tax benefits,” said Andrew Salkin, former member of New York City’s Finance Department and founding principal of the city-strengthening nonprofit Resilient Cities Catalyst. “They are the anchors of communities,” said Salkin. “They support tourism and the neighborhood they are in.”
For poverty-ridden cities, including areas of Indianapolis, Cleveland, and Detroit, restaurants have proven to be strong economic growth engines. In other well-known “food cities” such as Providence, Rhode Island and Asheville, North Carolina, restaurants form a key piece of the city’s identity. Restaurants also employ over 15 million people, according to the National Restaurant Association, and in some states, they are among the largest private-sector employers. Many cities rely on restaurants for both residential and commercial expansion, and without them, a city’s reputation and livelihood could be severely damaged. In Washington D.C. alone, restaurants and bars accumulated sales taxes of $1.3 billion last year, a significant revenue contribution.
In cities like Detroit, restaurants help attract residents who would otherwise choose the suburbs. In Providence, the tourism industry sometimes relies on the national reputation of its restaurants. “When we pitch Providence, whether for leisure tourism or meetings and conventions, we look at things that make us special, and a lot of that is you get meals you wouldn’t ordinarily get in a city of about 175,000,” said Kristen Adamo, president and chief executive of the Providence Warwick Convention and Visitors Bureau.
It remains to be seen how many restaurants will survive the pandemic and the ripple effects that shuttered restaurants will have on local economies. Many restaurateurs have not yet received federal relief, and insurers are unlikely to pay their business interruption claims. Most independent owners also say the Paycheck Protection Program is not useful to restaurants that will have to remain closed longer than other businesses. And when they reopen, they will have to operate at 50% or 25% capacity. “How do I make money if I have to bring back all my staff doing less volume and less sales?” asked award-winning chef Nina Compton, owner of Compère Lapin in New Orleans. When discussing the repayment of these federal loans, Compton added, “Getting forgiveness is going to be impossible.”
Must Restaurants Dumb Down To Survive?
Since the pandemic shutdown began in March, restaurant spending has decreased by 60 percent, and $3 out of every $4 is now going to chains. Head judge on Top Chef, Tom Colicchio says that to survive the reopening, “restaurants are going to have to change.” When asked how restaurants will adapt, Colicchio suggested that “restaurants will have to cobble together a business of delivery and community-supported agriculture.” The chef added that restaurants will be selling proteins, vegetables, and cheese, buying from their supply chain and selling products much like a grocery store. The independent restaurant of the future may operate very differently than it did just a few months ago.
Colicchio has been critical of the federal Paycheck Protection Program. He does not think the program protects independent restaurants, as most of the funds have gone to large restaurant chains and the loan repayment rules don’t make sense for smaller operations. As an alternative, Colicchio helped establish the Independent Restaurant Coalition to lobby Congress for financial relief, asking for $120 billion of replacement income to help independent restaurateurs pay rent and other expenses. This figure was derived from estimated revenue losses over a period of six months. Under the proposed program, publicly traded restaurants and those with over 20 locations would not have access to these funds, since the Paycheck Protection Program already covers them. Colicchio added that the plan will act “more like a countercyclical program to keep restaurants alive during the crisis, rather than a block grant where the money runs out long before the crisis ends.”
While some restaurants are now surviving on life support with delivery services, Colicchio says many of them can’t afford to keep paying delivery service fees, which run as high as 30 percent for processing, delivery, and commissions. By Colicchio’s estimates, all he can afford to pay is 11 percent. The chef agrees with the bill in New York City that aims to cap delivery charges at 10 percent of an order’s total amount. .
Restaurant In A Jar Is Popular In Moscow
Aleksander Khasanov launched his “Restaurant from a Jar” business just days before Moscow’s stay-at-home order went into effect. As the city’s restaurants and bars remain closed, residents have become accustomed to using food delivery services and now, buying restaurant meals packed and delivered in jars. Options include beef stroganoff, rabbit sausage in broth, and marinated pork cubes cooked over an open fire. Khasanov offers more than 100 different dishes from Russian, Indian, Armenian, Uzbek, and other cuisines. The bottled meals can be stored for up to a year and are certified by Russia’s food quality watchdog, Rosselkhoznadzor.
Khasanov has amassed more than 2,000 customers and expects demand to remain high or even increase at the end of the lockdown since people will work more and have less time and money to cook or eat out. The entrepreneur suspects that the convenience of delivery services will challenge restaurants far into the future.
European Restaurants Navigate Reopening Post-Lockdown
European countries are beginning to set dates and regulations for reopening restaurants, such as Austria’s date of May 15 and Italy’s target date of June 1. Socially distanced dining will make restaurants quite a different experience across the continent. In Austria, staff must wear face masks, no more than four adults may be seated per table, and there must be a minimum of 1 meter (about 3 1/4 feet) between patrons. In Madrid, Spain, the city council may require the installation of screens that separate diners at outdoor tables.
The French government has not set a specific date for reopening its 240,000 restaurants and cafés, but mid-June has been suggested. Other countries have begun various initiatives to help the restaurant industry recover. It Italy, where as many as 50,000 restaurants may close for good, the businesses can claim €600 ($655.69) for every month closed and tax payments have been postponed. Italian restaurateurs can also apply for subsidized bank loans to be paid back after two years. In Germany, to help jumpstart the restaurant industry recovery, economy minister Peter Altmaier announced the government would cut VAT taxes from 19% to 7% starting July 1.
Restaurateurs Torn As Landlords Demand Rent
While the coronavirus shutdown continues, delivery and takeout sales are not paying the rent for many restaurateurs. In February, the owners of Urban Bar-B-Que in Rockville, MD unsuccessfully requested rent relief from White Flint Express Realty Group. Owners David Calkins and Lee Howard were forced to close the location, but they still owe rent on their lease, which doesn’t expire until August. Calkins and Howard and Calkins offered their landlord all the equipment inside and their security deposit in exchange for being released from the lease. But in a written response from White Flint Express’s attorney, the landlord threatened to sue Calkins and Howard for the full amount of the least through August.
Other realtor-restaurateur relationships are less contentious. On March 13th, the owner of Buffalo & Bergen in Washington, D.C., Gina Chersevani, received an email from her landlord, Eric Korsvall of Massachusetts Avenue Properties. “You probably have a lot of pressing concerns with respect to your operations, staff, guests,” Korsvall wrote. “Paying your rent at 3rd & Mass might be a concern, and we want to help you by taking that off the table for a few months. We want you to take care of your people first, and to help you do that, we will forgo any rent due.” The offer released Chersevani from paying potentially tens of thousands of dollars in rent while under the economic pressure brought on by the outbreak.
These are just two examples on opposite ends of the spectrum. Even if some landlords grant temporary rent relief to restaurateurs, many owners face mounting expenses and reduced business prospects as the pandemic lockdowns are extended.
Some Restaurateurs Configure Pandemic-Friendly Dining Rooms
Gov. Brian Kemp gave permission to restaurants in Georgia to start table service again on Monday, April 27th, allowing many to dip their toes back into business. Gov. Kemp’s decision came after health data suggested the state’s death toll had peaked. The idea of reopening a dining room still seems unthinkable to many American restaurateurs, considering the nation’s death toll has exceeded 60,000 and the majority of U.S. states have remained locked down.
“There is no fancy meal right now that is worth my people’s health and the health of other people who come into a restaurant,” said award-winning chef Hugh Acheson, who runs restaurants in Atlanta and Athens, Georgia. While some restaurateurs remain opposed to the idea, others are finding ways to reopen safely. Yardbird, a popular restaurant in Hong Kong, China, has installed plexiglass partitions between diners so they can still see and interact with each other and the restaurant staff safely. The dining rooms in China must follow strict regulations, including a table distance of 1.5 meters, customer temperature checks, health declaration form signatures, and a requirement for both workers and customers to wear masks at all times. Masks may only be removed to eat or drink with an envelope for mask storage provided by the restaurant. “You don’t have that huge vibe,” said co-owner Lindsay Jang, who opened Yardbird in 2011 with chef Matt Abergel, “but it’s still good. It’s still a restaurant.”
Restaurant Worker Relief Fund Hits $20 million
The Restaurant Employee Relief Fund (RERF), founded by Guy Fieri and the National Restaurant Association Educational Foundation (NRAEF), has recently reached a new milestone of $20 million after PepsiCo chipped in with a $3 million donation.
Initially opened for applications on April 2, the fund was set up as a one-time $500 payment for restaurant workers, operated on a “first-come, first-serve” basis. However, the fund site immediately shut down due to the overwhelming number of applications. After another try just one week later, the site was taken down again for similar reasons. By the third week of April, RERF was able to send their first award notice and the fund has since approved and notified over 10,000 hospitality employees.
To be eligible, restaurant workers are required to have been employed in the industry for at least 90 days, had significant loss of income as a result of COVID-19, and have documentation of these circumstances. Income loss includes cuts in hours and at least a 50% reduction in pay. RERF has been processing grants and delivering much needed cash to former restaurant workers for over two weeks now, said Rob Gifford, NRAEF president. Applications are being judged on eligibility and “not all 63,000 people who apply for the fund are going to be proved eligible,” said Gifford.
Chef Gabrielle Hamilton Reveals Longstanding Vulnerabilities In Independent Restaurant Industry
Gabrielle Hamilton, award-winning chef/owner of Prune restaurant in New York City, found herself in a tough spot this past March–10 days of inbox-clogging chaos among those in the food industry searching for answers on what actions to take in the face of COVID-19. With sales dwindling day by day, on March 15th, Hamilton decided to pull the plug on the operation just five hours before New York Mayor Bill De Blasio enacted the city’s shutdown, according to her article in the New York Times.
After closing Prune and watching many other restaurants on her street close, Hamilton had a realization. The independent “restaurant” we know and love today may not survive this turmoil. “You can’t buy a $3 can of cheap beer at a dive bar in the East Village if the ‘dive bar’ is actually paying $18,000 a month in rent, $30,000 a month in payroll; it would have to cost $10,” she said. Chef-owned restaurants already operate on razor-thin margins. Most have been struggling to keep the lights on for years, as food and labor costs have risen and staff seek adequate health insurance.
Takeout, delivery, and contactless transactions have given many restaurateurs a life raft during the coronavirus shutdown. But some are not excited about running such impersonal restaurants in the future. After all, the entire industry is built on person-to-person hospitality. “I started my restaurant as a place for people to talk to one another, with a very decent but affordable glass of wine and an expertly prepared plate of simply braised lamb shoulder on the table to keep the conversation flowing, and ran it as such as long as I could. If this kind of place is not relevant to society, then it — we — should become extinct.”
Table For One In A Swedish Meadow
Linda Karlsson and her husband Rasmus Persson are opening a one-table, contactless restaurant at their home in Ransäter, Sweden. Set to open May 10, the restaurant will be named Bord för En, Swedish for “Table for One.” The idea was born after Karlsson’s parents, who are over 70 and at high risk for the coronavirus, visited their home unannounced. Persson and Karlsson simply sat them down at a table outside their home and served them food through the window, completely contact-free.
From opening day until August, one of their home’s two kitchens will be used solely for the restaurant. Reservations can be booked for one person a day anytime from 10 a.m. to 10:45 p.m. Bord för En offers guests a three-course breakfast, lunch, or dinner sent down a rope in a picnic basket. According to Persson, who grew up in Ransäter, Bord för En is possibly the first and only restaurant in Ransäter. The couple has received reservations from throughout Sweden and even Japan.
The entire menu is vegetarian, as the couple only occasionally eats meat that is humanely raised and locally sourced. Each course will feature a non-alcoholic beverage crafted by Persson’s childhood friend, Joel Söderbäck, who owns several upscale bars in Stockholm. Guests leave used plates and utensils in a bucket alongside the table between courses. When guests have finished their meal, the cost is up to them. Karlsson says, “There shouldn’t be a price tag that is too high for anyone to enjoy this” and believes that one-person meals will be here long after the pandemic subsides. .
Fine Dining Faces Long Road to Recovery
Restaurant reopenings in China offer a glimpse into the future of fine dining in America. In March, chef Jean-Georges Vongerichten reopened his restaurants in Shanghai and Guangzhou, following extensive government rules such as regular temperature checks for both staff and customers, no more than four guests per table, mandatory space of six to eight feet between tables, and app-based ordering so that no cash changes hands. As America adjusts to its pandemic restrictions, a similar business model will likely govern the chef’s dine-in restaurants in the U.S. American restaurateurs are planning now for a three-phase approach to resuming business in dining rooms, following the White House “Guidelines for Opening America Again.”
These guidelines urge U.S. restaurateurs to operate at lower capacity with fewer tables and fewer dine-in guests, at least during phases one and two. Within this limited-capacity business model, mobile ordering, takeout, and delivery may be the only way for fine dining restaurants to pay the rent. Restaurateurs may also need to invest in new personal protective equipment for staff and, possibly, health insurance. It remains to be seen whether guests will perceive a decreased public health risk in frequenting restaurants that provide health insurance to staff in the post-COVID-19 era. If so, the expense may be more than most restaurants can bear. Depending on how many months the lockdown continues and how quickly cities proceed through all three phases of reopening, some restaurants simply may not survive. Many public health officials predict waves of rolling, temporary lockdowns that will last until a new coronavirus vaccine is available, which could be at least a year or more. As a result, by some estimates, about 30% of fine-dining restaurants will close permanently.
These are sobering times for the hospitality industry and for the tourism industry in general. It could be years before destination dining fully recovers. When it does, new dining guidelines and restrictions will almost certainly be in place. Be prepared for a new normal that minimizes the public health effects of a single person on a larger group of people, as in a restaurant or public market.
