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One of the industries hit hardest by measures taken to prevent the spread of the coronavirus – the restaurant sector – is concerned that without additional help from the federal government many of its businesses will fail.
To start, the industry says a major program aimed to provide a lifeline to small businesses isn’t doing much to help.
The Paycheck Protection Program, or PPP, is designed to incentivize companies with fewer than 500 employees to retain staff despite difficult economic conditions that have resulted from the coronavirus pandemic. Applicants can receive up to $10 million, which can be forgiven in certain cases. At least 75 percent of the money must be put toward payroll costs.
There is a catch, however. The money is expected to be used within eight weeks – at a time when restaurants and bars across the country are either completely closed or only partially operating.
“Even with the Paycheck Protection Program at their disposal, almost 80 percent of restaurants aren’t certain they will survive this crisis,” Tom Colicchio, chef & owner of Crafted Hospitality and a founding member of the Independent Restaurant Coalition, said in a statement Thursday. “If Congress can give special treatment to industries that employ far less Americans, they can level the playing field for a business that directly employs over 11 million Americans and contributes nearly $1 trillion to the GDP. Saving independent restaurants will be crucial to getting the U.S. economy back on track.”
The National Restaurant Association penned a letter to Congress last week asking for additional assistance where PPP is concerned, including the ability to allocate a larger percentage of funding toward non-payroll expenses and extending the eight-week period to use the loan.
And then there are concerns about how quickly customers will return to restaurants once economies begin to reopen.
Apple-Metro Inc. CEO Zane Tankel told FOX Business last week that it’s not going to be a “light switch” that goes on where people come rushing back into restaurants.
“Not going to happen,” Tankel said. “So we’re kind of trying to prepare for that.”
Tankel also pointed to the “irony” of the CARES Act, which gives restaurants money while they are still “mandated to stay closed.”
Employment in leisure and hospitality fell by 459,000 in March, according to data from the Bureau of Labor Statistics, mainly in food services and drinking places. That drop accounted for roughly two-thirds of the 701,000 total decline in jobs.
Business interruption insurance typically doesn’t cover communicable diseases, pertaining instead to disruptions attributable to physical damage – like a fire, flooding or vandalism.
Oftentimes these policies don’t mention pandemics, though sometimes they include it as an exclusion.
Through PPP, more than 1.6 million loans have been approved.
The $350 billion worth of funding for the program, however, had officially run out as of Thursday – and lawmakers were at an impasse in negotiations to replenish it.