By Sierra Hatfield, CSG policy analyst
It’s no secret that small businesses in America are struggling in the current economic reality created by COVID-19. It is a reality that has spawned two massive rounds of federal loans to keep small businesses alive and has caused many states to enter into guessing games — what is the outlook of reopening their economies now? Will more people get sick? If they reopen later, will there be any ma and pa shops left? Will their customers be financially stable enough to return in the first place? These are the questions faced by all in the small business industry, especially restaurants.
Before COVID-19, the restaurant industry employed at least 100,000 people in 36 out of 50 states. Additionally, it employs at least 10% of a state’s workforce in 37 states. In 2018, every state had at least $1 billion in sales, with Texas and California leading the way with $66 billion and $97 billion in sales, respectively. To fully illustrate the booming picture of the restaurant industry, consider that every dollar spent in the table service industry contributed at least $1.51 to states’ economies, sometimes up to over $2.
But that was before COVID-19. The National Restaurant Association published a COVID-19 impact survey in April detailing the significant losses sustained by the restaurant industry — losses larger and more devastating than any other industry in the country. Among the sobering statistics are the estimated 8 million restaurant employees who have been laid off or furloughed and the estimated $80 billion in sales that will be lost by the end of April.
When states began to limit the gathering sizes of people and mandating restaurants to delivery or take-out only, they did so in an effort to preserve public health and stop the spread of COVID-19, which is believed to have the highest rate of transmission from person to person. This characteristic makes restaurants breeding grounds for the potentially deadly virus. However, state leaders want their favorite local eateries to survive the pandemic just as much as we do. But when restaurants cannot survive on revenue from take-out and deliveries; when reopening their indefinitely closed doors may prove harmful; when over half of restaurant operators say existing federal relief won’t prevent more layoffs, what can states do to help?
Texas, a state that has already seen almost 700,000 restaurant employees laid off, is preparing to jump all in. The state is about to let restaurants reopen their doors under a set of rules intended to minimalize COVID-19 transmission, among them the requirement to operate at only 25% capacity and seat customers away from each other. Connecticut also plans to reopen restaurants while encouraging citizens to maintain six feet of distance, and South Carolina will allow restaurants to reopen if they space tables eight feet apart and sanitize tables and chairs after every customer.
Other states are following the federal government’s lead by offering their own form of emergency loans. Delaware for instance has established the Hospitality Emergency Loan Program (HELP), which provides up to $10,000 per business per month for immediate non-avoidable costs. Illinois is working to launch its own emergency small business loans of up to $50,000 where applicants will owe nothing for six months and then make fixed payments toward the loan. But on the fiscal front, some restaurants seek more direct, immediate help such as tax breaks and caps on delivery fees from third-party delivery services. While no sweeping state or federal action has been taken on these potential solutions, some cities are considering the latter option and at least one, Seattle, has implemented it.
It is a sad truth that COVID-19 has had such drastic consequences on the restaurant industry. Yes, states made the decision to shut down dining rooms to stop the virus. However, what they do next will be what matters. States are exploring the best options they have for the industry: loans, reopened economies, health ordinances for dine-in options, and more. States know restaurants need more help than they are getting. It is on the way.