Restaurants Struggle With Shutdown, Federal Aid Programs

Apr 23, 2020

Sonja Finn closed her East Liberty restaurant, Dinette, the day after Allegheny County reported its first case of COVID-19.

Omar Abuhejleh kept his Lawrenceville place, B52, open for takeout after the state barred dine-in service because of the coronavirus pandemic – but a week later decided it wasn’t worth the health risk.

Restaurants that have remained open through the pandemic have endured big layoffs and huge drops in business.

"Everybody is hurting. Everybody is losing money"

And everyone’s navigating an often confusing – and, for many to date, inadequate – maze of federal aid meant to get small businesses through an unprecedented crisis.

Welcome to the world of Pittsburgh restaurants in the era of COVID-19.

“Everybody has been affected. Everybody is hurting. Everybody is losing money,” says Finn, a celebrated chef who for 12 years has run Dinette, beloved for its gourmet pizzas and sun-lit dining room.

Of course, most businesses of all kinds are suffering during a near-comprehensive ban on doing business in person. But restaurants were hit earlier and harder than most. Gov. Wolf’s ban on dining-in service took effect in Allegheny County March 16, and shortly afterward went statewide. Layoffs and furloughs began immediately.

According to a new survey by the National Restaurant Association, some 332,000 restaurant employees have been laid off since, or 81 percent of Pennsylvania’s bar and restaurant employees. Half the commonwealth’s restaurants remain open for takeout or delivery. But for the period April 1-10, restaurant operators reported an average decline in sales of 82 percent compared to the same period last year.

About 1 percent of restaurants surveyed had permanently closed with no plans to re-open (a fate that apparently befell Oakland’s iconic Essie’s Original Hot Dog Shop, or “the O,” this past weekend). But the survivors still face an uncertain future.

"We're in a pandemic! So there's just no plan for this"

“When this first started, I thought we’d be able to stay open through it doing limited services, but that just didn’t work out in the end,” says Abuhejleh, owner of vegetarian restaurant B52. “We’re in a pandemic! So there’s just no plan for this. It’s just one day at a time at this point.”

When the shutdown hit, Abuhejleh wasn’t considering layoffs. During week one, he says, he gave hours to all employees who wanted to work. (Some didn’t, fearing exposure to the virus.) Takeout business was decent, he says. But staff soon became alarmed about random walk-in traffic off Butler Street, people who’d just pop in for “a cup of coffee, or French fries,” he said. “Those transactions clearly weren’t necessary, and I was subjecting my staff to exposure for these really unnecessary transactions.”

“We just all kinda got weirded out by it,” says Abuhejleh. “None of us wanted to be there.” B52’s last day was March 23. A week later, he shuttered his Allegro Hearth Bakery, in Squirrel Hill, for similar reasons.

Finn said the cost of being closed is substantial. She told her 11 employees to file for unemployment, but she still has fixed costs – rent, utilities, insurance. In March, “I knew that by the end of the month I would have $20,000 dollars due in bills that couldn’t be paid,” she said. Now, she said, “Each month I’m not open is $10,000 in fixed costs, so I’m just going deeper in debt by $10,000 each month.”

PPP loans are meant to pay employees for eight weeks

Some restaurants have tapped into aid programs for small businesses included in the federal Coronavirus Aid, Relief and Economic Security Act, or CARES. Burgatory, a local chain, is earning only 15 percent to 20 percent of its normal revenues at its seven restaurants, said co-owner Herky Pollock. But while Burgatory laid off some 450 part-time workers, it had retained all 180 full-timers, Pollock said.

“We’re taking some losses, yes, but we’re doing it largely to keep our fulltime employees employed with the hopes that one day we’ll come out of this and be able to reopen to the public and we’ll have our key staff, and be raring to go at that point,” he said.

Burgatory was paying them with help from the federal Paycheck Protection Program (PPP), a Small Business Administration loan that is forgivable if a business retains all its full-time workers, and at least 75 percent of the funds are used to pay them. The loans are meant to pay employees for eight weeks.

Doublewide Grill closed its Irwin location but continues with takeout and delivery at its spots on the South Side and in Mars. Co-owner Scott Kramer said takeout sales at the South Side barbecue spot are about 12 percent of the normal amount; he added that working with delivery services like GrubHub and Door Dash cuts into profits even further. Kramer said he and partner Steve Zumoff ­­– who also closed their South Side bar Tiki Lounge – had received PPP funds, Kramer said.

"The concept of PPP was to put people back on the payroll, not necessarily to get them back to work"

But not every restaurant has been able to tap into the PPP. For one, the initial funding round of $349 billion has run dry. Some critics have said the process, unfairly favors large, corporate operators, including a number of publicly traded companies.

PPP loans are administered through applicants’ banks, which might have given an advantage to larger businesses. (Pollock credited Burgatory’s successful application in part to its strong relationship with its bank.)

Many restaurateurs add that the PPP rules are unclear. “No loans like this have ever happened before,” said Finn. “And there’s so much confusion about them.”

The PPP, restaurant owners say, is ill-designed to help restaurants, whose needs are unique. Some owners are uncertain how to spend the funds to ensure that the loans are forgiven. Restaurant owners who have laid off workers, and don’t need any more staffers for operations that are scaled-down or halted altogether, are unsure whether they are allowed to pay workers who’ll only sit idle. Some operators fear that if they do call back laid-off or furloughed staff, they might have a hard time going back on unemployment if the eight weeks of PPP benefits run out before the restaurant reopens.

And some restaurateurs say another big problem is that PPP funds would pay for something they don’t need right now – employees – and limit their ability to pay for fixed costs – rent, utilities, insurance.

John Longstreet, president and CEO of the Pennsylvania Restaurant & Lodging Association, said the confusion is understandable. Coronavirus-relief programs were assembled in a fraction of the time such legislation would normally take, and the rules have kept changing, he said.

Other programs, like an SBA disaster-relief loan, the first $10,000 of which is forgivable, are more straightforward. But the PPP, which was designed as an alternative to some states’ overburdened unemployment systems, hasn’t worked out for everyone.

“The concept of PPP was to put people back on the payroll, not necessarily to get them back to work,” he said. But some workers who receive unemployment plus a weekly, $600 federal coronavirus-relief benefit, have declined to return to their restaurant jobs under PPP, he said: “They’re actually making as much as they were making before, or more. And they’re actually saying, ‘I don’t need to come to work now.’” (At least one local restaurant-owner who received PPP benefits said this had happened to him.)

Finn had applied for a PPP loan, but was concerned that if her workers did leave behind unemployment benefits to return to Dinette’s payroll, they might have a hard time going back on unemployment benefits if PPP funding ran out before the restaurant reopened.

A second, revamped PPP is working its way through Congress.

“It is disheartening how our lawmakers in Washington greatly underestimated the need that there would be, and how many people are affected,” said Finn.