hospitality industry

As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.

COVID-19 hit the economy hard; small businesses across the country have been forced to shut their doors or dramatically curtail their business activity in an effort to stop the spread of the virus. But while the COVID-19 crisis has negatively impacted a variety of businesses, there’s one sector that’s been hit particularly hard—the restaurant industry.

The restaurant and hospitality industry—and, more specifically, independently owned and operated restaurants—has taken a major hit from the coronavirus pandemic. While some restaurants were able to pivot their operations to focus on takeout options, many still experienced significant loss of revenue. Other restaurants had to shut down operations completely—and, to date, still don’t have a clear idea of how, when, and if they can move forward with reopening.

And when the U.S. Small Business Administration (SBA), as part of the CARES Act, launched the Paycheck Protection Program as a way to get small businesses the funds they needed to stay afloat during the COVID-19 pandemic, the loan program unfortunately fell short in providing the type of financial assistance necessary to support independent restaurants.

But small, local restaurants are a huge part of the American landscape—and as the government considers new stimulus and relief fund options, it’s imperative that steps are taken to protect independently owned and operated restaurants—and the millions of restaurant workers, food service workers, hospitality workers, restaurateurs, and small business owners who rely on them for their livelihood.

Let’s take a current look at the current state of coronavirus relief for independent restaurants, the legislation and relief programs being considered, and what needs to happen to get the financial support necessary to keep this indispensable industry moving forward:

Why supporting independent restaurants is so important

Before we jump into how to support the independent restaurants through the COVID-19 pandemic, let’s first cover why COVID-19 relief for local restaurants, industry workers, and restaurant owners is so imperative.

  • There are millions of jobs on the line. According to the Independent Restaurant Coalition (IRC), there are 500,000 independent restaurants in the United States that employ 16 million industry workers (independent restaurants directly employ 11 million restaurant workers and indirectly employ another 5 million workers across the supply chain).
  • If we lose independent restaurants, the economy will suffer. The restaurant industry, as a whole, makes up 4 percent of the United States’ GDP—and if a majority of independent restaurants were to close (according to the IRC, 85 percent are at risk), it would be a huge blow to the economy.
  • Local restaurants are a part of American culture. Small, independently owned restaurants are a staple of Main Street culture—and losing them would be a major change to the American landscape and culture.

How COVID relief programs fell short in supporting independent restaurants

When the SBA started issuing PPP loans, it was meant to provide the emergency relief funds small businesses needed to keep moving forward in the midst of the coronavirus disease and related restrictions and shutdowns. But the way these small business loans were structured fell short when it came to providing the kind of support the independent restaurant industry needs to keep moving forward.

There are a few different ways the initial Paycheck Protection Program fell short in helping local restaurants, including:

  • 8-week covered period. Initially, in order to qualify for loan forgiveness, PPP funds had to be spent on approved expenses during the eight-week period following loan origination. But with stay-at-home orders and social distancing in place, most restaurants weren’t able to operate (and had no idea when they’d be able to operate again), making the eight-week limit extremely restrictive.
  • Not including PPE as a forgivable expense. PPE is a must for operating a restaurant safely. But originally, in order to qualify for forgiveness, PPP funds couldn’t be used to purchase PPE for workers—which means restaurant owners had to purchase the equipment for their hospitality employees themselves.
  • FTE and salary requirements. Originally, applicants had to retain their employee headcount and employee wages in order to qualify for loan forgiveness—but with many independent restaurants closing down their indoor dining areas and unable to serve customers, maintaining FTE and wages just wasn’t realistic.

Many of these challenges were addressed with the passing of the Paycheck Protection Program Flexibility Act (PPPFA); for example, the eight-week covered period has been extended to 24 weeks and the FTE requirement has been waived for businesses that are unable to resume their normal operations because of the coronavirus crisis—but the initial oversight from the SBA on what eateries needed to stay afloat put the independent restaurant industry in serious jeopardy.

Legislation currently being considered to provide support to independent restaurants—and resources currently in place to support the restaurant and hospitality industry

In order for the independent restaurant industry to keep moving forward, the next round of stimulus and emergency relief funding needs to address the unique needs of this industry. Let’s take a look at some of the legislation currently being considered to provide support to the independent restaurant industry (and some of the independent resources already in place to support restaurant owners and workers):

HEROES Act

The HEROES Act, which is currently being fiercely debated by the Senate, would extend unemployment benefits out-of-work employees—which is hugely important for restaurant workers, particularly when many independent restaurants remain unsure of when they’ll be able to fully open and rehire their staff.

RESTAURANTS Act

Spearheaded by the Independent Restaurant Coalition, the RESTAURANTS Act of 2020 would establish the $120 billion Independent Restaurant Revitalization Fund, an emergency relief fund specifically geared towards helping independently owned restaurants and bars navigate the ongoing COVID-19 crisis.

COVID-19 resources for the independent restaurant industry

While the HEROES Act and RESTAURANTS Act haven’t yet passed, there are a number of independent resources in place to support the restaurant community (including independent restaurants, business owners, and restaurant and hospitality workers):

Keep independent restaurants moving forward

In order for local restaurants to emerge from the COVID-19 pandemic, the government needs to meet the call for coronavirus relief in the restaurant and hospitality industry. And hopefully, with the next round of relief and emergency funding, that call will be met—and independent restaurants will continue to be the backbone of Main Street and an integral part of the American food landscape.

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