This Week In Foodservice

Jerry Stiegler aggregates key industry information and provides brief analysis to help foodservice professionals navigate the data.

Advertisement

Restaurants Turn to Washington, D.C., for Help

Restaurants turn to Washington, D.C., for help. Travel may be on the decline, again. One city takes aim at single-use plastic items. These stories and more This Week in Foodservice.

Is more help on the menu for the beleaguered restaurant industry? Perhaps. The White House and the U.S. Small Business Administration overhauled the Economic Injury Disaster Loan program, increasing the loan cap and expanding the ways small business restaurants can use the funds.

Notable changes include an increase in the loan cap amount to $2 million, from a current cap of $500,000. Eligible businesses that have already received an EIDL loan at a smaller loan cap can apply to increase their loan to the max for which they’re eligible based on the SBA calculation. Also, requirements for affiliated businesses will now mirror the Restaurant Revitalization Fund. And EIDL funds can be used to pre-pay business debt, which means that small business restaurants carrying higher-interest commercial debt, or even credit-card debt acquired over the last year, can use an EIDL to pay outstanding balances in one lump sum.

According to the National Restaurant Association, the EIDL program is a valuable option for restaurants because the government-backed loans carry a lower interest and longer terms than a commercial bank loan or line of credit which makes taking on new debt more manageable. Additionally, EIDLs are easier to access for small business owners who may have a hard time securing regular commercial capital.

“At a time when there is still an extreme need for small business restaurants to access working capital, these changes will improve the outlook for thousands of operators and will lift the economic outlook for communities small and large,” said Sean Kennedy, executive vice president of Public Policy for the NRA. “We worked with the SBA to improve the terms and use of these federal loans so they could be more impactful. The changes we secured will provide an additional rebuilding tool at a time when operators are once again faced with uncertainty.”

As long as funds are available, small business owners have until Dec. 31, 2021, to apply for or increase the amount of an EIDL. The NRA also created a fact sheet to provide a quick look at the EIDL.

Updates to the EIDL come at a crucial time for restaurant operators, specifically independents, who continue to feel the impacts of the pandemic. In fact, low-interest loans may not be enough for some operators. More than 82% of operators will likely permanently close if Congress does not replenish the Restaurant Revitalization Fund, per data from the Independent Restaurant Coalition. And despite the RRF targeting restaurants, among other businesses, 85% of owners reported not receiving a RRF grant, per the IRC.

“We took on so much debt to be able to continue what we were doing and now all those things are coming back,” says Chris Shepherd, chef/owner of Underbelly Hospitality in Houston. “Without the RRF, I’m not sure how we will figure it out.

Economic News This Week

  • Initial unemployment claims totaled 310,000 a decline of 35,000 for the week ending Sept. 4, 2021. This represents the lowest level for initial claims since March 14, 2020, when it was 256,000, per the Department of Labor. The 4-week moving average was 339,500, a decrease of 16,750 from the previous week. This also represents the lowest level for this average since March 14, 2020, when it was 225,500.
  • Private sector employment increased by 374,000 jobs from July to August, according to the August ADP National Employment Report. Looking at the data by business size, small business (1 to 49 employees) added 86,000 positions, medium-sized businesses (50 to 999 employees) added 149,000 positions and large businesses (more than 1,000 employees) added 138,000 positions.
  • Consumer credit increased at a seasonally adjusted annual rate of 4.7% in July, per the Federal Reserve. Revolving credit increased at an annual rate of 6.7%, while nonrevolving credit increased at an annual rate of 4.1%. It’s interesting to note credit scores continue to improve. Fortune reports the average credit score increased to 695 this year, up from 688 last year and 682 in 2019, prior to the pandemic. A variety of pandemic-related factors seem to have driven this improvement, per published reports.
  • The Producer Price Index for final demand increased 0.7% in August, the Bureau of Labor Statistics reports. This represents a 0.3% decline from July and June. Leading to the August increase in the index for final demand, prices for final demand services rose 0.7%. The index for final demand goods moved up 1.0%. Prices for final demand fewer foods, energy, and trade services moved up 0.3% in August after increasing 0.9%. For the 12 months ending in August, the index for final demand fewer foods, energy, and trade services rose 6.3%, the largest advance since 12-month data were first calculated in August 2014.
  • The Consumer Price Index increased 0.3% in August, per the U.S. Bureau of Labor Statistics. This comes after a 0.5% July increase. The indexes for gasoline, household furnishings and operations, food, and shelter all increased in August and contributed to the monthly all items seasonally adjusted increase. The energy index increased 2.0%, mainly due to a 2.8% increase in the gasoline index. The index for food rose 0.4%, with the indexes for food at home and food away from home both increasing 0.4%. The index for all items less food and energy rose 0.1% in August, its smallest increase since February 2021.
  • The NFIB Small Business Optimism Index increased in August to 100.1, up 0.4 points from July. Five of the 10 index components improved, four declined, and one was unchanged. The NFIB Uncertainty Index decreased 7 points to 69, the lowest level since January 2016. Owners expecting better business conditions over the next 6 months decreased by 8 points to a net negative 28%. This indicator has declined 16 points over the past 2 months to its lowest reading since January 2013. Also, 50% of small business owners reported job openings that could not be filled, an increase of one point from July and a 48-year record high for the second consecutive month.

Foodservice News

  • A proposed Chicago ordinance would limit restaurants’ use of plastic utensils, the Chicago Tribune reports. The ordinance, put forth by Chicago’s City Council Environmental Protection Committee, requires consumers who want plastic utensils with their carryout and delivery meals from local restaurants to request them. Restaurants would have to provide a self-service station for diners to pick up utensils, napkins, toothpicks, drink trays and other disposables themselves, or would have to ask people if they want them. Items such as straws, drink lids, Styrofoam takeout containers and cup sleeves for coffee would be exempt from the new rules, as would orders picked up at drive-thrus.
  • As the number of COVID-19 cases rise so, too, does the number of leisure travelers postponing or canceling trips, per data from the American Hotel & Lodging Association. In a study conducted August 11-12, 69% of consumers say they were likely to take fewer trips and 55% say they are likely to postpone travel, the AH&LA reports. More telling is the fact that 42% are likely to cancel trips with no intent of rescheduling. These trends impact more than hotels and other forms of lodging. They also impact restaurants, entertainment venues and the like. This remains a problem for the entire industry.
  • The battle over whether municipalities can cap fees from third-party delivery companies continues, this time in New York City. DoorDash, Grubhub, Caviar, Seamless, Postmates and Uber Eats sued New York City on Thursday over the Big Apple's permanent 15% delivery fee cap, which the city passed in August. This lawsuit comes roughly one and half months after a similar one was filed in San Francisco.
  • The industry’s labor woes forced a 35-year-old barbecue restaurant in Florida to close for good. Bubbalou’s Bodacious Bar-B-Que is a regional chain serving the Florida market. The restaurant opened its first location in Winter Park, Fla., in 1986 and that’s the unit it closed. Bubbalou’s other locations remain open. In explaining why it had to close, the company said “We closed our Winter Park store with a whopping four employees. We were closed two whole days per week as well as two half days. It wasn’t by design; it was simply due to the fact we have no staff and can’t find any.”
  • Growth Chains: Chicken Salad Chick opened a location in Midlothian, Texas. The chain now has 20 restaurants in Texas, including 9 in the Dallas-Fort Worth metropolitan area. Chicken Salad Chick plans to open a restaurant in Pasadena, Texas, later this year and Southlake, Texas, in early 2022. Dickey’s Barbecue Pit’s international expansion efforts will lead to an increased presence in Africa. The company plans to open eight locations in Botswana over the next decade. Dickey’s already has a presence in Africa via a location in Cairo, Egypt. Donato’s Pizza intends to add three locations to the greater Cleveland market in the next couple of years. The chain already has five units in the region.