E&S Extra

Editorial Director Joe Carbonara provides insights and commentary on the state of the foodservice equipment and supplies marketplace.


Expect a few Potholes on the Restaurant Industry’s Road to Recovery

During the past year, there has been plenty of time to prognosticate about the restaurant industry’s recovery from the damage caused by COVID-19. While some predict the road to recovery will be short and fast, others predict a longer, more winding road. Either way, it would be wise to plan on a few potholes along the way.

joe carbonara hsJoseph CarbonaraTake, for example, the Restaurants Revitalization Act. Part of the American Rescue Plan Act of 2021 signed into law by President Joe Biden on March 11, this $1.9 trillion package includes $28.6 billion in relief for restaurants, bars, caterers, food trucks and the like. In other words, the money will go to what many would describe as traditional foodservice operators. Foodservice operators eligible for this relief are those with less than 20 units and not publicly traded. The legislation caps the amount that can go to one location at $5 million or $20 million for businesses with more than one location, per Datassential’s Jack Li, who spent some time reviewing this bill. Li shared his findings in a March Datassential webcast.

Of the money allocated for the Restaurants Revitalization Act, $5 billion will go to operations with less than $500,000 in annual revenues, according to Datassential’s Jack Li. The remaining $23.6 billion will take the form of administrator dispersed grants, Li adds.

After reviewing the legislation, Li came away viewing it as a revenue adjustment program. “It looks like it covers your revenue between what you made in 2019 and what you made in 2020,” he says. So, to determine how much money an operation is ultimately eligible for, the business would have to subtract its 2019 earnings from its 2020 earnings and deduct any PPP (payroll protection plan) money received.

The program also prioritizes businesses owned by women, veterans, racial minorities and socially disadvantaged groups. “I would imagine this would not be without some political conversation and controversy about how this was handled,” Li says.

Here’s where things really start to get interesting. Li cited data from the International Foodservice Manufacturers Association and Datassential that showed restaurant industry sales declined by 27.9% in 2020, which translates into $108 billion, Li says. “The relief is great, but it does not close the gap entirely.”

While the approval of the funding represents a hopeful first step for the industry, the fact remains there are lots to do and many questions require answers before the industry can truly begin to feel the impact of this legislation. “Who will be able to successfully access these funds? How long before the money runs out?” Li asks. And given that the money does not come close to covering all of the industry’s losses, will applicants receive the full amount of their requests or will they only receive a portion? “There’s a lot of unknowns here,” Li notes.

Add to that list of unknowns the timing around when the money will start to flow to the restaurant industry. The Small Business Administration will manage this process and it will likely take time for the agency to get personnel in place, adopt proper policies, procedures and the like.

While it may take some time for these funds to trickle down to the industry, there continues to be signs of life in the industry. Across the country, governments continue to loosen the restrictions that pertain to dining as vaccines become more widely dispersed. In fact, Massachusetts became one of the last two states to loosen restrictions on dining. While the state appears to have no capacities on indoor dining, Massachusetts is encouraging operators to focus on serving customers outdoors to minimize the risk of the spread of COVID-19.

These shifts continue to elevate operators’ outlook. For example, 47% of operators are cautiously optimistic their businesses will survive the pandemic, per Datassential. This represents a 10% improvement from a study the Chicago-based firm released in mid-February. In addition, 43% of operators say they are worried but remain fairly confident their businesses will get through this, compared to 55% in January.

Without a doubt, things are slowly starting to improve for the foodservice industry. Increasingly, we hear foodservice designers reporting projects that had been put on hold for months becoming active again and with very aggressive timeframes. Further, as more businesses develop their plans to slowly bring employees back to the office, corporate dining operators continue to look for ways to welcome employees back and make them feel safe.