Coronavirus causes restaurants to struggle with August rent

Restaurants run on around a 6% margin; have about 16 days cash on hand

Restaurants nationwide are being forced to alter or roll back reopening plans, and around 100,000 operators being forced to shut down dine-in service for a second time because of spikes in coronavirus cases, industry experts say.

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One problem is that rent is still due and a growing number of restaurants are having a hard time paying up, Sean Kennedy, executive vice president for public affairs at the National Restaurant Association, told FOX Business. The organization represents more than 380,000 restaurant locations nationwide.

Not only are restaurants expected to pay this month, but they are also faced with previous rent obligations as well.

"Countless restaurants that secured rent forbearance for three or four months back in April are looking at unchanged balance sheets in August and a tidal wave of back-due payments," Kennedy said.

RESTAURANTS STRUGGLE WITH RENT UNDER CORONAVIRUS RESTRICTIONS IN NEW YORK CITY

While restaurants can control costs by limiting operations, simplifying menus and keeping fewer people on the payroll, rent is one thing that is out of their control, Kennedy said, adding that restaurants only run on around a 6% margin and typically have merely 16 days of cash on hand.

Gabriel Gordon stands behind the glass entrance door to his restaurant Beachwood BBQ, open for 14 years in Seal Beach, California on July 28, 2020 (Photo by Frederic J. BROWN / AFP) (Photo by FREDERIC J. BROWN/AFP via Getty Images)

"Virtually every restaurant is under tremendous cost pressure," he said. "This is not an industry that has deep cash reserves to weather an onslaught like this."

In New York City, more than 80% of restaurants did not pay their full July rent, according to a recent survey by the NYC Hospitality Alliance. The nonprofit trade organization surveyed 471 restaurants, bars, nightclubs and event venues in the Big Apple at the end of July to determine where they stood with rent obligations.

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Government coronavirus loans in the spring helped eating establishments rehire laid-off employees and ride out the pandemic’s initial surge and wave of shutdown orders.

But that Paycheck Protection Program money has now been spent at many restaurants, has left them in the same precarious position they were in during outbreak’s early days: Thousands of restaurants are being forced to close down again on mandates from state and local officials combating the virus’s resurgence, particularly in the South and West.

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And even in parts of the country where the outbreak appears contained, restaurants’ revenue is far below normal because of social distancing requirements and wary diners. Some eateries are taking in fewer people at a time and must increase spending on personal protective equipment, training and other added safety features in order to continue to operate.

It's a trend that is likely to continue, according to Kennedy, who noted that in a survey of restaurant operators the organization conducted in May, 75% said it was unlikely that their restaurant will be profitable over the course of the next six months.

The Associated Press contributed to this report. 

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