On May 6, 2020

Restaurants prepare for eventual opening despite unknowns

Relief loans are an awkward fit for the industry

By Polly Mikula and Anne Wallace Allen/VTDigger

“It’s all speculation, no one really knows what to expect or plan for,” said Phil Black, co-owner of the Lookout Tavern in Killington.

Chris Karr, owner of multiple restaurants and businesses in Killington including the Foundry, Jax, Mad Hatter Scoops, Charities, and the Pickle Barrel, agreed.  “Our goal is to open by Memorial Day weekend,” said Karr, adding “But we don’t really know what the restrictions will be and the last thing I want to do is to ‘kick the bear’,” he said. “So it’s kind of wait-and-see at this point.”

Both are preparing to reopen in some fashion despite many unknowns regarding new  social distancing restrictions from the state and limitations on service.

“I think that it’s going to be limited to a snack-bar type experience more than a restaurant one,” Black said, adding that he hopes the state doesn’t open up just to have to shut down again “like an accordion.”

“We were lucky that this didn’t happen in January… we’re fortunate,” Black said. “I think the summer will be rough, but we’re just really hoping it doesn’t go into the next couple seasons — the fall and winter.”

Black said they were able to get a Paycheck Protection Program (PPP) loan and have brought back their entire summer staff, but it’s an awkward fit.

Like most in Vermont, his staff was making more on unemployment. He says they are all happy and excited now to be back, though, and everyone is painting and staining to get ready for an eventual reopening. “Everybody’s on board,” he said.

The PPP will last him until the third week of June, “Hopefully by then people will be back and we’ll at least have enough business to break even. The first six week before the PPP loan took effect we lost money, but there’s nothing we could do about that so we’re looking ahead and hoping we made the right moves.”

“I’m not sure who’s coming up. But if trailheads are any indication it’s going to be packed,” Black added hopefully.

Despite the uncertainty, there are a few things that Karr feels he can count on: “There will be reduced capacity,” he said. “There is simply no way around it. It’s needed for health and safety but also to make consumers feel comfortable going out.”

While the Foundry is a large building, and thus a bit easier to space tables out for required social distance, there is no guarantee that inside dining will be permitted anytime soon. So Karr filed for permits to be reviewed by the town Tuesday night, May 5, to expand his dining services outside into the parking lot for more seating by Summit Pond.

Karr’s other businesses, particularly the Pickle Barrel, are a bit more challenging to fit into new norms of social distancing. “The Pickle Barrel holds 700, if we have to limit it to 350, say, I’m not sure how that will work… our costs do not get cut in half.”

But Karr maintains a positive outlook: “This is a chance for us to come out with a new version of ourselves, both in business and in life altogether. It’s an opportunity to rethink how we can be our best,” he said.

“The big prize is next fall and winter,” he added, agreeing with Black. “We need to do all we can well to ensure that that happens… Really, this couldn’t have happened at a better time for us. If this happened in November we’d be dead. For us, now, we’re ok.”

Karr, too, has taken out the PPP loan, but said, “It’s not going to work for me, I can’t hire enough staff back without my businesses open.”

“But we’re definitely gearing up and making plans, multiple plans based on different scenarios,” he said.

While big event and concerts at the Pickle Barrel Nightclub might be on hold for a while, Karr is planning a FaceBook Live event there on May17 from 7-9 p.m. with Jamie’s Junk Show. “We need to spiritually lift ourselves, we need to get back to life,” he said.

Industry fights for aid

Vermont restaurateurs are hard at work on plans to bolster the recovery for themselves and their peers. Restaurant owners have banded together to share ideas and information about economic survival in the face of social distancing measures. A group of  about 40 Vermont restaurants has launched the Vermont Hospitality Coalition and is actively seeking more members. They’re lobbying for state assistance and for a rooms and meals tax abatement. And they’re looking for ways to change the existing federal emergency funding for small business, which in its primary form, the Paycheck Protection Program (PPP), isn’t of much use to cash-strapped eateries that don’t know when they are going to be able to rehire their staff.

“It’s a very dangerous loan,” said Sue Bette, who owns Bluebird Barbecue in Burlington. PPP loans carry a two-year repayment term. Business owners can have the loans forgiven as long as they meet certain conditions, including rehiring their employees. But with no way of knowing when they’ll be able to reopen, restaurants can’t meet those terms.

“If you do not achieve forgiveness, a loan of $150,000 would carry a payment of about $8,000 starting in November” because of the two-year repayment window,” said Bette, who has been approved for a PPP loan that she applied for in the first round of the popular program. She hasn’t decided whether to use it.

“Without any changes made to it, it is not going to be of benefit to us,” she said.

No opening date in sight

Vermont has 4,500 retail food licensees at 4,000 locations, according to the Vermont Department of Health Food & Lodging Program. Of those, 2,300 have seating licenses. More than 800 of those accommodate less than 25 people. Another 550 have seating for 26-50.

Local restaurants contribute more than $500 million to Vermont’s GDP, according to the state Agency for Commerce and Community Development. Before Gov. Phil Scott issued an order that closed restaurants and bars to dine-in service March 17 to mitigate the spread of Covid-19, they employed an estimated 20,000 people.

With Covid-19 infections hitting a plateau in Vermont (with less than 10 new cases per day), the Scott administration is now slowly opening some businesses, such as construction and manufacturing, to limited activity. But the timeline for restaurants to open to dine-in service anytime soon is less clear.

Even after laying off their workforce, restaurants still have to meet continuing expenses such as rent, insurance and electricity. To help them survive the extended downturn, the National Restaurant Association is asking for $240 billion from Congress as part of an extensive “Blueprint for Recovery.”

The Vermont Chamber, which is the state affiliate for the National Restaurant Association, is also working on a plan that would make it easier for restaurateurs to use the PPP, among other things by extending the two-year repayment period to 10 years. And the Chamber is pushing Congress to increase funding for Economic Injury Disaster Loans program, or EIDL, and allow businesses to take out a second EIDL if they need to.

Restaurants are cash-flow dependent businesses with industry statistics showing that for every $1 the typical restaurant takes in, 90 cents goes immediately back out to cover payroll, rent, ingredients and other costs. Because of this a recent James Beard Foundation survey showed that only one in five restaurants around the country had any confidence it would be able to reopen. A National Bureau of Economic Research independently  projected that restaurants have just a 30% chance of staying open if the Covid-19 crisis lasts four months — a lower business survival rate than any other sector.

Rep. Peter Welch, D-Vt., said he’s hopeful the PPP rules can be changed, and through the U.S. Treasury, not through the legislative process.

“People ask me this: Can I guarantee we’ll get the guidance changed? I can’t guarantee it; I can guarantee I’ll advocate for it,” he said. “The problems they have are not unique to Vermont, and what that indicates to me is I’ll have a lot of colleagues, Republican and Democrat, who want to make it right for the small businesses that are in our districts.”

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