Restaurants have had a brutal run this past year and a half. Pandemic-related closures put a ton of restaurants out of business temporarily, and sadly for some, permanently. Those who were able to survive with to-go sales or a reduction in business are now met with a staffing shortage, supply chain interruptions, and record-high inflation pushing food costs up, making it extremely difficult to operate a restaurant. When you couple all that with the rise in the delta variant and increased consumer concerns over indoor dining regardless of vaccination status, it's easy to understand why restaurants need additional help amid these worsening conditions.
Restaurants are on the chopping block once again
Leading up to August, job employment in the restaurant industry was growing slowly but steadily, having added 1.4 million jobs over the trailing seven months. But August ended the employment streak, with Southern states in particular having more job losses than hires.
The National Restaurant Association's Restaurant Performance Index (RPI) also fell to a six-month low in August. This neutral index, which sits at 100 normally, is still showing increased demand in food and beverages at restaurants, as it sits above 100, but it's down to 104.2, indicating a sign of slowing sales for restaurants.
Indeed, a survey conducted by the National Restaurant Association found that six in 10 adults changed their restaurant consumption because of the delta variant, and one in five adults have stopped dining in restaurants altogether because of the COVID variant.
With fewer people feeling comfortable dining out, sales are starting to slump. This is hurting already-slim profit margins as restaurant owners are forced to offer higher wages and sign-on bonuses and are battling increased food costs (around 3.7% higher than just one year ago). It's a really tough time for a lot of restaurant owners, which is why many want federal programs like the Restaurant Rescue Plan that was a part of the CARES Act to return for a new round of relief.
Help is here in the form of a low-interest loan
The American Rescue Plan Act established the Restaurant Revitalization Fund (RRF) through the Small Business Administration (SBA) back in spring 2021. The program allocated up to $10 million for struggling small-to-midsize restaurant or bar owners with less than 20 locations.
The RRF has definitely helped a number of restaurants in need, but considering the application period for the program has ended, new struggling businesses are out of luck. Thankfully, the Economic Injury Disaster Loan (EIDL) is being revamped and revived as a means to provide more funds to restaurant and bar owners in need.
The SBA recently quadrupled the cap of allowable funds from $500,000 to $2 million while adding in new ways recipients can use the money. The loan is a low-interest, 3.75% 30-year loan with a 24-month deferment, meaning restaurant owners aren't required to make principal and interest payments for up to two years after receiving the funds and can repay the loan at a low cost of capital over a long period of time.
The program is open for applications until year's end or when all of the funds are exhausted, whichever comes first. Given the current state of the restaurant industry, it's likely these loans will go fast. There is a short exclusivity window for those seeking loans under $500,000 until Oct. 8, 2021. After that, loans up to $2 million will be considered.
Hopefully this will be the bit of financial support the industry needs to stay afloat until conditions improve again. But restaurant owners can rest easy knowing help is back, at least for now.