- PPP doesn't account for the creativity, diversity and resourcefulness of America's businesses, writes Sunil Bhatt, who owns restaurants in Florida and Ohio.
I am proud that my own senator, Marco Rubio, worked quickly to assemble a relief program at the beginning of the pandemic to address the economic catastrophe facing our country. The swift action he and other members of Congress took with the Paycheck Protection Program helped to stabilize our economic free fall in the face of immense uncertainty.
However, as a restaurant owner in Florida and Ohio, I must disagree with the senator's claim that PPP was a "life raft" for all industries.
Since I took a PPP loan earlier this year, I've been unable to rehire my full staff because my restaurants in Florida are only generating 25% to 50% less revenue than 2019, and my business in Cleveland is earning a whopping 80% less and surviving only by the good graces of a benevolent landlord. In total, my company will finish the year with less than half the sales it had in 2019.
Another 10 weeks of payroll simply won't come close to making up for the carnage that has befallen my company and my industry. It's a life jacket, not a raft, and while we are doggy paddling as hard as we can, it doesn't seem like there's anything on the horizon to save us right now.
Take a drive around your own neighborhood and look at the growing number of "for lease" signs replacing laughter, music, and hot food along sidewalk windows. In a survey conducted in April, when restaurant owners were still optimistic about the prospects of PPP loans, up to 85% of restaurant owners reported they were not confident they could stay in business if the pandemic lasted six months. The pandemic has now lasted 10 months, and more than one in six restaurants across the country, or 110,000, have closed as a result. Up to a third may close by the end of December.
The issue is not that the PPP is fatally flawed. It's a one-size-fits-all solution that doesn't account for the creativity, diversity, and resourcefulness of America's businesses.
In the best of times, restaurants and bars operate on very narrow profit margins. With sales the way they are now, those profits are all gone and now we are just desperately trying to limit the losses. Serious losses. Today, we are one of the only industries required by law to shut down in cities and states across the country.
And even where we are not shut down, curfews and capacity constraints cut into our valuable dinner sales dramatically. Month after month of dramatically reduced revenue means restaurant owners have piled up bills of unpaid rent, utilities and debt service, sunk cost on food supplies, and have exhausted whatever savings they had paying for employee's salaries and benefits.
We shouldn't have to choose between using the 10 weeks of payroll given to us through PPP to pay our employees – who deserve and need a wage – or paying the bills we need to keep them employed another 10 months from now. Ten weeks of payroll does not make up for 36 weeks of losses we've already sustained through no fault of our own.
When I received my PPP loan in May, I struggled with the fact that many of the expenses I most desperately needed to cover were not eligible for forgiveness. The PPP is designed to primarily help with payroll expenses. WhileI was thrilled to start hiring my employees back, those loans can't be applied to vital costs like supplies, operating expenses (insurance, maintenance, cleaning, landscaping etc), food costs, and PPE. All of these are major costs for restaurants who are being asked to reopen, close, and reopen again with very little notice. This creates a massive gap in our thin budgets.
We have all done our best to limit the damage. We have been creative and resourceful. Restaurants simply do not have the flexibility to address these stark deficits. How many businesses could survive an 80% drop in their sales for an extended period?
Today, 2.1 million people from the restaurant industry remain jobless after Rubio's "emergency brake" was supposed to stop people from leaving the workforce – that's more unemployed workers than from any other single industry.
Restaurants cannot rehire our employees until we can fill our dining rooms again. When operating at less than 100% of our normal revenue, roles like cooks, servers, hosts, dishwashers, and janitors are difficult to keep employed even with outdoor dining and a takeout program. They are among the 11 million jobs in restaurants across the country that have been put at risk as a result of this pandemic.
PPP was also inaccessible to many neighborhood restaurants across the country. In the second quarter of this year, restaurants lost over $220 billion in revenue but received less than $42 billion in PPP loans, or 8% of all loans awarded. Restaurants and accommodations ranked fifth among industries in loans awarded despite being the top contributor to national unemployment month after month.
Why? Smaller businesses simply don't have the same relationships to banks that larger businesses have. Because PPP loans are coordinated through banks – with many banks even opting not to participate in the program – it was clear from the beginning that this program would not be easily accessible to the smallest and most vulnerable businesses in our industry.
Independent restaurants organized themselves for the first time in the spring, launching the Independent Restaurant Coalition and creating a plan that specifically addressed the needs of these 500,000 locally owned businesses. Over 50 senators and 215 members of the House from both parties have listened. The bipartisan RESTAURANTS Act they support would set aside $120 Billion for a program run by the Treasury, not banks, that would award grants – not loans – to businesses based on lost revenues and not payroll.
It would help my business and tens of thousands of others survive. The RESTAURANTS Act would create up to $271 billion in economic benefits in its boost to tourism, support for supply chain industries, and savings on unemployment benefits that would otherwise go to millions of displaced restaurant workers.
Our government represents us and it has rightly said to be careful about Covid-19 for the sake of our own health and for the greater good. One of the primary ways to be careful seems to be avoiding going to eat in restaurants. We hear it time and time again. Avoid us. We in the restaurant industry have absolutely and willingly supported the efforts our country has made to stem the tide of this awful virus. And we will continue to do so.
But for many of us to still be here on the other side of this, restaurants need something tailored to their needs to make it to the light at the end of this long tunnel. Congress should listen when restaurants and bars – America's second largest private sector employer – are sounding the alarm.
Let's work together to make the PPP program a viable economic engine for all businesses, not just ones with large bank accounts. Otherwise, when the vaccine has taken hold and we are all ready to go out to eat, drink and be merry again, there simply won't be many places left to do that.
Sunil Bhatt, is the CEO of Genuine Hospitality Group, which operates six award-winning restaurants in Miami and Cleveland. He is a member of the Independent Restaurant Coalition.