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Restaurants worry bipartisan coronavirus deal is cutting them out

Owners push for direct relief through the RESTAURANTS Act rather than more loans from the Paycheck Protection Program.
Image: As Covid Cases Continue To Spike In New York City, Governor Cuomo Announces Indoor Dining To Halt On Monday
A pedestrian passes by empty tables outside of a restaurant on Dec. 11, 2020, in New York.Spencer Platt / Getty Images

The White House and congressional leaders are nearing the finish line on a bipartisan Covid-19 relief deal. But they’re running up against objections from a coalition of restaurants who argue the emerging plan will leave them without enough aid to get through the darkest days of the coronavirus pandemic.

The Independent Restaurant Coalition, a group of chefs and owners formed to advocate for aid during the pandemic, has been decrying the emerging proposal throughout the last month as insufficient. Instead they’re urging Congress to pass the RESTAURANTS Act, a bipartisan bill that would provide $120 billion in grants to smaller bars and restaurants to make up revenue lost due to coronavirus.

On paper, their task should be easy. Lawmakers of both parties are eager to back aid for local bars and restaurants. The bill has 50 sponsors in the Senate and over 200 in the House. Over 160 members sent a letter to House and Senate leaders earlier this month, including other members of leadership like Sen. John Cornyn, R-Texas, asking for it to be included in relief talks.

"If Mitch McConnell brought this to the floor this would pass easily,” Tom Colicchio, the Top Chef judge, restaurateur, and IRC co-founder, told NBC News. "Easily.”

But so far the legislation has been left out of bipartisan talks that have proposed $300 billion in new loans through the Paycheck Protection Program, which provided financial support to businesses before ending in August. The emerging deal does include targeted relief for live theater and music venues, but not a large-scale plan for restaurants along the lines of the RESTAURANTS Act.

Restaurant owners who can demonstrate revenue losses of 30 percent would be able to apply for the next round of PPP loans, which can be forgiven if owners meet requirements to spend a certain amount paying workers. But the IRC argues the program has been harder for smaller restaurants to access through banks and that its rules make it harder for owners to address costs like rent, utilities, new health measures, and paying suppliers.

Owners prefer grants that make up their revenue losses directly, rather than loans they have to spend within a limited time period and may have to pay back eventually.

“These small independent restaurants are already pretty heavily leveraged and they've had to take on more debt to just try and stay afloat,” Rep. Earl Blumenauer, D-Oregon, the House bill’s lead sponsor, said. “It was never about just payroll per se, it was to help business survive."

RESTAURANTS Act backers argue that the industry should also be given unique treatment that acknowledges their vulnerability in the pandemic, especially as infections are still peaking nationally.

Owners say they’ve been hit by a combination of surging cases frightening away customers, new health restrictions on their businesses in response, and colder winter weather that limits outdoor dining in many places. There are more than 2 million fewer restaurant workers employed since the pandemic and the industry lost jobs in November.

“We were forced to close and we get it; most of us aren't complaining. Government's number one action should be making sure people are safe,” said Colicchio. “But if we’re going to do that, someone has to support us.”

Dr. Anthony Fauci, the nation’s top infectious disease specialist, has called for closing bars and reimbursing their owners. Colicchio says he largely agrees with calls for limits backed by public health experts. But he estimates his own flagship restaurant, Craft, has $40,000 in fixed monthly costs, open or closed, and industry groups are warning of mass and likely permanent closures right before new vaccines can restore normalcy.

“I really believe that come June or July the economy will turn around, there’s a lot of pent up demand,” Colicchio said. “But if we don't get a bridge to June and July, there are millions of jobs that will not be available when people want to come back to work.”

PPP defenders argue that the program has been misconstrued and that it’s designed specifically to encourage companies to keep workers attached to their employer, even if they’re temporarily furloughed due to the pandemic.

“The biggest flaw of the RESTAURANTS Act is that it does not require grant recipients to keep or pay their employees,” Annie Clark, a spokeswoman for Sen. Susan Collins, R-Maine, who is part of the bipartisan group negotiating the relief bill, said in a statement. “For example, under the RESTAURANTS Act, a celebrity chef who owns a restaurant could pocket the federal grant money — or use it to settle old debts unrelated to the pandemic — and not pay any of his or her staff. This is precisely the situation the Paycheck Protection Program sought to avoid."

The program has also undergone some tweaks since its initial passage, including allowing 40 percent of loans to be spent on costs besides payroll, up from 25 percent originally. The latest proposal includes new measures designed to make it easier to apply for forgiveness on loans below $150,000.

Sean Feeney, co-founder of Grovehouse Hospitality Group and owner of New York City restaurants Lilia and Misi, credited PPP with helping businesses early in the pandemic, but argued its payroll requirements couldn’t be sustained long enough to prevent more businesses from going under.

"The restaurant workers are the heart and soul of the food they serve, it's vital they come back to work,” Feeney, a co-founder of the IRC, said. "But if we can’t generate revenue, the 10 weeks of payroll is spent up and we’re back to square one."

Adam Ozimek, chief economist at Upwork and a Pennsylvania restaurant owner, said he believed aid would be better distributed via programs like PPP that don’t distinguish between types of business. But he cautioned that the PPP extension currently under discussion may still not be large or flexible enough to tide restaurants over. Negotiators have been working under a self-imposed limit of about $900 billion and the emerging deal may be smaller.

“I don't think the solution to PPP being too small is to create a variety of industry-specific programs, it's to make PPP more generous,” he said.

In the end, though, they may be out of time to influence a final deal. If talks break down, they could be left with no aid until after President Biden takes office with restaurants left to struggle through at least several more weeks of winter outbreaks.

“Right now this is an all or nothing proposition,” said Sean Kennedy, executive vice president of public affairs at the National Restaurant Association, which has backed the bipartisan negotiations. “We don’t view this as a long term solution, we view this as a short term fix for an industry that has not seen anything from Congress since April."