Inside Alewife, Lee Gregory's Church Hill restaurant. Gregory says he doesn't believe the funds coming via the CARES Act will be enough for independent restaurants to stay in business. (Photo by Eileen Mellon)
Friday, April 2, marked the opening day of the application process for the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion stimulus package rolled out by Congress intended to provide relief for small businesses. For many restaurateurs, the lifeline they have desperately sought since closing their doors and furloughing employees weeks ago simply isn’t going to be enough to save them. The ever-changing practical details of the legislation, the lack of clarity in its language and its prohibitive guidelines have made many entrepreneurs fearful and unsettled, they say.
“So many restaurants aren’t coming back,” says Joe Sparatta, co-owner of Richmond's Heritage and Southbound restaurants. He applied for Small Business Administration (SBA) loans along with the Paycheck Protection Program (PPP), one of the major provisions of the CARES Act meant to help businesses keep their workforce employed during the coronavirus crisis, for both establishments last week.
Loans through PPP are distributed via existing SBA lenders, banks or credit unions. Since opening applications on Friday, those institutions have been flooded with inquiries. Wells Fargo announced April 5 they could no longer accept applicants due to lack of capacity.
Southbound's co-owner and the solo operator of Alewife in Church Hill, Lee Gregory, applied for PPP on Friday and immediately encountered problems. While Gregory is a Bank of America customer, applicants must have a credit card or loan through the bank — he has neither. After backlash from applicants, the issue has been resolved and the rules have been changed, still Gregory remains apprehensive.
“It doesn’t seem like it’s enough money for our country to go around, people will be left out of this thing. It could be me, could be whoever, could be anybody,” Gregory says. “It’s just not enough.”
He says the entire scenario feels like a mental disaster.
“Do I take care of my family? Do I need money? Do I go in debt? Is it better to keep some people working a little bit, or should they all be on unemployment? It’s one tough decision after another, and one none of us should have ever been [faced with],” Gregory continues. "How much further can you responsibly go in debt before it's a bad idea?"
“I’m very worried about digging myself into even more debt,” Sparatta echoes. “It’s been a nightmare. I have no idea if it’s going to be enough; we’re still not approved yet. I know it’s supposed to turn into a grant, but seeing how this has all been managed so far leads me to believe we will be on the hook for all this money.”
PPP, which provides loans equivalent to 2.5 times a company’s average monthly payroll for 2019 or February 2020, has the potential to be converted into a grant, as Sparatta mentions. However, the program requires businesses to retain 90% of their staff on payroll for eight weeks after the loan is made.
Currently, restaurants are either completely lifeless or operating with skeleton crews and earning minimal funds through takeout business. The thought of having eight weeks to rehire staff and transform empty spaces into full-capacity restaurants is like gazing into a clouded crystal ball, especially when the date businesses can reopen has yet to be determined.
“I don’t know what it’s going to look like or how we are going to come back, if we will even see people in dining rooms this year,” Gregory says.
PPP also requires that 75% of allotted funds be used to cover labor costs, with the other 25% left for rent, utilities and other expenses. But restaurants are a different kind of business.
“Restaurants are not payroll heavy,” says Julia Battaglini, owner of Secco Wine Bar, who says she didn’t apply for PPP, which matures at two years and has a 1% interest rate, due to her lack of loan and credit history. “Restaurants are goods heavy, overhead heavy.”
The week leading up to St. Patrick’s Day, Battaglini, who has her accountant saved as “Curtis 911” in her phone, looked down to a text that read, "You have to lay everyone off, it’s coming."
“It was the second hardest day of my life, the first being having to pull the plug on my mother in the ICU, and that is no exaggeration,” Battaglini says of letting go her 11-person staff, including her co-owner and husband, David Martin.
After, she immediately applied for the Economic Injury Disaster Loan (EIDL) Emergency Advance, a $10,000 payment through the CARES Act meant to provide relief within days of application that does not have to be repaid. But that was three weeks ago. Since then, Battaglini has heard nothing and says she doesn’t know anyone who has received funds through the program.
She is also concerned about what, if any, priority restaurants have over other businesses applying for loans, adding that many of the solutions are Band-Aids for an industry that is hemorrhaging.
“People just don’t give money to food and wine businesses, they just don’t — they never have,” Battaglini says, noting she sold her house to pay for the first iteration of Secco. “I have zero confidence in government funding for restaurants. Should we get help? Yes. Will we get help? No."
Eric Terry, president of the Virginia Restaurant, Lodging & Travel Association, says he is also unaware of anyone who has received the EIDL payments and that “Many have filed for the PPP loans, but that process is not going very well.”
Although Terry encourages restaurants to apply for assistance through the CARES Act, he also views the loans as short-term solutions.
“We would like to have a state grant that isn’t a quick hit,” he explains. “It is crucially important that we have some sort of state program that helps with the gaps in the others.”
Locally, Mayor Levar Stoney introduced the Richmond Small Business Disaster Loan program last week. It allows businesses with 25 employees or fewer to qualify for up to $20,000 with no interest that is disbursed over the course of six months. Applications opened April 6.
According to the Independent Restaurant Coalition, independent restaurants employ 11 million people in the U.S., and the feelings of many local owners are echoed by restaurateurs across the country. The IRC and Richmond Restaurants United — both groups formed in mid-March — have been sending letters to urge legislators to adopt revisions to the CARES Act. Their request: a PPP loan repayment extended from two years to 10, the maximum loan amount increased, tax rebates and a Restaurant Stabilization Fund that extends aid to ensure businesses have the capital they need to reopen.
Michelle Williams, veteran chef and co-owner of the 25-year-old Richmond Restaurant Group, believes insurance companies should cover the impact from COVID-19 under business interruption insurance.
“I think [government agencies] are trying to help, but the bureaucracy of it all is somewhat maddening,” says Williams, who applied for PPP and SBA loans. “I'm sure I’m oversimplifying, but to me, the thing that makes the most sense is to require insurance companies to pay out the claims on business interruption insurance, then bail out the insurance companies like they did the auto and airline industry.”
Terry says that the tourism sector, the third largest in the state, is capsizing, and that we are looking at a vastly smaller restaurant world in the future.
“We are going to have to figure out a way to help our hotel and restaurant industry in the state or it will never recover at the level we had before," he says. "Having been through a couple of these [crises] — 9/11 and the first Gulf War — I’ve never seen anything this dramatic in terms of its immediate impact. This is the most impactful crisis I have ever been through in our industry.”
