In Massachusetts, all bars and restaurants have been shuttered for dine-in business until at least April 6. In an industry that operates on razor-thin margins in the best of times — that is, when asses are in seats night after night, and when reservations are difficult to come by — shutting down for even a couple of days can be catastrophic. Local owners are wondering how to weather the storm and are pushing for some form of relief at a legislative level, such as cancellation of the meals tax, and also appealing to landlords and lenders to help out.
“Sorry if there are typos, scrambling to close down my dream.” Daniel Myers owns Loyal Nine, a restaurant in Cambridge cooking food sourced by local producers and inspired by colonial New England. He, like so many other restaurant owners across the country, has been blindsided by the outbreak of novel coronavirus and the havoc it has wreaked on his business. At least 19 states and 6 cities have imposed some form of mandatory restaurant shutdown or another, and more are likely to do so as novel coronavirus continues to spread across the country.
With so many restaurants in the country forced to shut down their dine-in services — rightly, it should be noted, and with overwhelming support of restaurant owners — for at least a couple of weeks (and in some cases for up to a month), the question isn’t if novel coronavirus will hurt the restaurant industry, it’s how badly. In Massachusetts, Governor Charlie Baker announced that bars and restaurants would still be allowed to offer takeout and delivery services, but it’s hardly a salve (especially when third-party delivery services like Grubhub continue doing the bare minimum to cut restaurants a break on commission fees).
“Limiting restaurants to takeout is awful because it provides legal reasoning for your landlord and insurance company to say that you were allowed to operate,” Myers told Eater via email. “We literally do less than one percent of sales in takeout, and the profit margin is comparable — three percent. We pay rent for seating space, not kitchen space for takeout only.”
State and local governments could make a real impact on the economic fortunes of restaurants by canceling meals taxes — the state collects a 6.25% tax on restaurant sales, while most localities collect a .75% tax, payable by restaurants at the end of each month — until businesses are able to begin operating again. If restaurants fail to pay meals taxes at the end of each month, the state can legally seize a business and auction off its assets to cover any outstanding tax bill.
“For us, that’s around $13,000 [a month],” said Myers about meals taxes. “We can give that to the state and the city, or we can keep it to pay our staff and — unfortunately — our rent. There will be another bill next month, too. Don’t pay it, get shut down by the state. Don’t pay rent, get shutdown by your landlord — and get personally fucked.”
David Doyle, who owns a trio of restaurants in Jamaica Plain — Tres Gatos, Casa Verde, and Little Dipper — recently launched a Change.org petition urging state and local government to pass legislation offering immediate assistance to restaurants. The petition states:
If such support is not sufficient, or rapidly deployed, many of our restaurants may not be able to survive the gauntlet of a closure, especially if that extends beyond several weeks.
Like Myers, Doyle thinks canceling current meals tax payments is a good place for governments to start in terms of the relief they can offer restaurants.
“That would be a huge relief,” said Doyle. “In my opinion, many restaurants will not have an easy time making the current payroll, given little or no revenue coming in this week. Given that, having sufficient resources to start up again will be a big challenge.”
The state recently announced it had set up a $10 million small business loan fund to help mitigate the economic stressors of shut downs. Myers doesn’t think the action comes close to solving the problem.
“Let’s just say it was for only restaurants [as opposed to all small businesses] in Massachusetts,” said Myers. “That would break down to $27 per restaurant employee in the state. As you know, that’s nothing, and we’d need to return that debt later. An impossible task.”
(According to the Massachusetts Restaurant Association, there are roughly 350,000 restaurant and food service jobs in Massachusetts as of 2019. If equally distributed to every restaurant worker in the state, $10 million would come to $28.50 per worker before taxes.)
The loans — which have been capitalized by and will be administered by the Massachusetts Growth Capital Fund — are contingent on businesses being profitable prior to March 10. Applicants with adverse credit reports (60 days past due) in the past six months will not be eligible.
Doyle told Eater that such contingencies will deny a lot of business owners relief they desperately need.
“One major hurdle that I’ve already noticed is the requirement of profitability. Many new restaurants are not profitable out of the gate, and if those do not qualify for this much-needed source of funds, then I’m afraid a big segment of the business community — the most vulnerable — may not get help.”
So what do restaurant owners think could help buoy their industry and give it a fighting chance of survival in this fraught and unprecedented time?
“Mortgage and lease abatement also makes sense, though as our attorney pointed out, this gets into the thorny area of contractual agreements, and not all restaurant owners will get forgiveness from their landlords,” said Doyle. “But it’s certainly worth a try; even landlords agreeing to deferred rent payments for several months, with no penalties, would be very helpful. I think asking financial institutions to do the same with commercial loan payments would be similarly helpful. I know that many restaurateurs make a hefty loan payment on top of their rent every month. Seeking temporary relief from lenders would ease cash flow burdens considerably.”
Myers is also convinced that lease and mortgage abatement could help stem the economic tailspin many restaurants already find themselves in, saying doing so “would be the true cure for now.”
“It would allow small businesses to survive, to bounce back afterwards, and save massive dollars for our staffs who, obviously, all pay rent or an insanely high mortgage payment.”
Of course, it would also help if business interruption insurance covered losses due to global pandemic. Of course, it does not.
“We pay taxes, and get nothing,” said Myers. “We pay insurance, and get nothing.”
Restaurants urgently need a bailout. Whether they get what they need or not remains to be seen.
Update, 5 p.m.: Gov. Charlie Baker announced emergency regulations today that will provide a three-month delay, not a cancelation, on meals tax payments for eligible restaurants. To be eligible, a restaurant must have paid under $150,000 in meals taxes in 2019.
Update, March 19: 76 local restaurant owners and employees have co-signed a letter to Baker asking for emergency relief in the form of grants or zero-interest funding, a suspension of payroll and/or meals taxes, rent abatement for establishments, and loan abatements for workers, as well as immediate and expedited legislation providing compensation to restaurant workers, regardless of citizenship status.
Read the full letter below:
Eater has reached out to the offices of the Governor of Massachusetts and the Mayor of Boston for comment. Neither has replied as of publication.