Bailouts

The Restaurant Industry Doesn't Need Another Bailout

The Restaurant Revitalization Fund Replenishment Act would give restaurants another $42 billion in grants to cover the lingering costs of the pandemic.

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Diners have returned to eating out at pre-pandemic levels. But many restaurant owners themselves—still feeling the lingering effects of the pandemic and government-ordered closures—are demanding another round of federal support for their industry.

Last week, the Democrat-controlled House passed the Restaurant Revitalization Fund Replenishment Act on a mostly party-line 223–203 vote. The bill would spend another $42 billion on grants to cover the pandemic-era losses of restaurants, bars, and other hospitality businesses.

The federal government's Restaurant Revitalization Fund was created by the American Rescue Plan legislation that passed in March 2021. Three months later, it had already spent $28 billion in grants for restaurants and bars to make up for lost income during the pandemic. By June 2021, some 100,000 applicants had been approved for grants averaging $283,000, according to data from the Small Business Administration (SBA), which administers the program.

The SBA had received a total of 278,304 grant applications from restaurants and bars asking for a combined $72 billion in COVID relief grants. Members of the restaurant industry argue another round of funding is necessary to get money to those who missed out on the first handout.

A survey conducted by the Independent Restaurant Coalition (IRC) found that half of restaurants that had not received a grant from the SBA predicted they would close within the next six months. About 20 percent of restaurateurs who did receive an SBA relief grant said they'd close in six months.

"After two years of missed rent, supplier, and utility payments, navigating astronomical food costs, and multiple COVID-19 surges that brought businesses to a halt, independent restaurants and bars are out of time, options and money," said Erika Polmar, Executive Director of the Independent Restaurant Coalition (IRC). "There is only one solution to this crisis: provide these businesses the financial support they need before it's too late."

The apocalyptic tone is contrasted with other data points showing a restaurant industry that's steadily rebounding from the dark days of COVID-19.

Reservation app OpenTable's latest State of the Industry numbers shows that close to 95 percent of restaurants open in 2019 are back to accepting reservations. The number of people making reservations has also returned to 2019 levels.

Restaurant industry employment has been slower to rebound, but the trend is still upward.

Preliminary data from the Bureau of Labor Statistics (BLS) shows that some 11 million people were working in bars and restaurants nationwide in March 2022—about 5 percent below the number of people working in the industry in March 2019. BLS data also shows that as of the third quarter of 2021, the total number of restaurants had surpassed pre-pandemic levels.

That tracks with the surprise finding that, in general, there are more small businesses open today than existed before the pandemic.

Restaurants, bars, and other entertainment and hospitality businesses bore the brunt of government mandates and restrictions throughout the pandemic. In many states, they were ordered to close their dining rooms for months at a time.

When they were allowed to reopen, it was often at significantly reduced capacity—a real imposition for a tight margin business. Vaccine and mask mandates kept some customers away long after the last vestiges of lockdowns had disappeared.

One could argue that these government impositions entitle affected businesses to compensation.

"If the government shuts down only certain businesses on the grounds that they're areas where the pandemic can be spread more quickly, that's an action that the bar owner then is taking on behalf of the public," said Oliver Dunford, an attorney with the Pacific Legal Foundation to Reason back in July 2020. "Arguably the public should have to pay for it."

The trouble with the restaurant relief bill moving through Congress is that it would compensate businesses for lost revenue regardless of whether those losses were a result of government mandates or a voluntary unwillingness among customers to dine out. The proposal is also coming at a time when almost no pandemic restrictions are still in effect anywhere in the country.

Proponents of additional relief funding certainly aren't too hung up on whether aid covers government-imposed losses during the pandemic or just helps out restaurants in general.

"The Restaurant Revitalization Fund was designed to help restaurants deal with the consequences of the COVID-19 pandemic as well as challenges to the supply chain and workforce," said Rep. Earl Blumenauer (D–Ore.), the author of the Restaurant Revitalization Fund Replenishment Act, last week.

The IRC's Polmar likewise cites not just COVID-19 but also rising prices and "consumer hesitancy" as justification for more government aid to restaurants.

The argument for bailing out restaurants is thus morphing from a need to save the industry during the pandemic to a desire to relieve it from persistent challenges that have less and less to do with COVID-19.

That's hard to justify when the industry itself is on a steady track toward recovery, and federal spending is driving inflation to record levels.

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  1. "One could argue that these government impositions entitle affected businesses to compensation."

    Reparations, if it's good for family of past slaves then it's good for restaurant owners, I guess.

    1. The on,y bailout this country needs is the removal of all democrats from political office, appointed positions, and the civil service. The ensuing changes would cause the US economy to take off like a rocket.

      1. You mean remove Democrat Authoritarianism and replace it with Republican Authoritarianism?

  2. We're all in this together.

    1. Hell?

      1. It snowed in Michigan today, so not hell. Definitely purgatory.

  3. An additional thing: a lot of the COVID relief acts already passed haven't been disbursed yet.
    https://www.covidmoneytracker.org/

    I tried to find a reliable number on how much had even been spent yet, but we can see from this that well over 45 billion hasn't even been committed to yet. Just take it from there. Use the money we've already wasted.

  4. Also, be honest Britschgi, did you write this article BECAUSE you stumbled upon the perfect headline image for it? You can tell us. This is a safe space.

    1. And according to the inflation calculator, a one hundred dollar bill (i.e., a Benjamin) today is equivalent to $3.44 in 1913. At least the Federal Reserve stabilized the currency and avoided major economic downturns, right?

    2. Of all the things I would call the reason comment section, safe space is not one of them

  5. We'll ALL need a bailout soon. That's what happens when the government ruins the currency and fosters dependence on their handouts.

  6. Around here, several of the restaurants I used to go to for lunch went broke, thanks to the unnecessary lockdowns. Now they are reopened by new guys with more money. So why do they need bailouts?

  7. Our restaurants have been open since May 2020 so we only lost a few.

  8. There is only one solution to this crisis: all restaurants will be Taco Bell.

  9. Here in the People's Republic of NJ, Phailing Phil Murphy our progressive idiot governor managed to kill off roughly one-quarter of small businesses along with thousands of elderly nursing home patients. I'm sure he'll blather on about how this would be good for NJ.

    I feel like saying to him, "We wouldn't even be talking bailouts had you not completely screwed the pooch on the pandemic, mega-douche."

    Restaurants just need government to get out of the way.

  10. Rather than money, reinstitute the draft, for all genders, and assign the recruits as servers and dishwashers.
    That's all the local managers I know say they need; actual people that show up on time and work a full shift.

    1. I know say they need; actual people that show up on time and work a full shift.

      Racist.

  11. Will this make my omelet cheaper?

  12. Existing restaurants complain they cannot hire staff, and it shows for the patrons.
    The restaurant industry is not essential to the feeding of the population. No one went hungry solely because their local eatery was closed.
    Huge infusions of cash will only further distort the marketplace for restaurant dining, food service workers, food suppliers, and restaurant businesses. Let the market sort itself out; it mostly has already.

    1. Was it the market that shut down the restaurant industry nationwide for over a year, over 2 years in most states, permanently bankrupting tens of thousands of business owners? Would compensating those people far short of actually making them whole for their lost revenue and lost businesses be a greater or lesser market distortion than shutting them down in the first place?

      1. Compensation for government takings would differ in the implementation, and calculation of amount to be compensated. And why is the restaurant business different than hair salons, pet grooming, piano lessons, and a thousand other personal services type businesses that were thrown under the bus.
        As it was, almost everyone suffered a mandated taking of some sort or other. When everyone is harmed, and compensation comes from everyone (who contributes to the tax base), then at the end of the day the only one richer is the guy charged with moving the money around, because he (the government worker or contractor) gets a percentage.

  13. Of all the shit to get inflamed about, handing government money to the restaurants that were forced closed for two years, most of which went out of business leaving their owners and staff without an income would be pretty close to the very bottom of my list.

  14. I as a citizen and mom of mom and pop restaurant have contributed to local, state and federal taxes throughout the whole covid experience. (Keeping 75% of my staff) Before covid our restaurant was thriving and we were turning them away. Who ever wrote this is only a Wallstreet numbers person. Usually market crashes start with the broke people before the rich cats feel the pain. The thing about the RRF was that only a third of the restaurants received the money. Dunkin donuts and subway to name a few. We have been in the red since the very beginning. If the numbers guy only knew about restaurant profit margins i could respect this article. Have fun eating your mystery meat sandwich
    My homemade biscuits and plum spiced scones to be replaced by n airfield dunkin .

    1. Air filled dunkin

  15. Dear Christian

    Your article is lacking . Your facts are a bit hollow. You also sound opinionated and privileged. If you want to write your big boy story dont stand on the back of the "backbone of America." Interview me ill give you the actual restaurateur story. If you dont you will NEVER understand. This needed RRF will not pass the senate and then you will see the whole picture come into fruition. Slowly we will drop like Flys.

    1. I would have to reed the bill first. Most Bills put through congress are Trojan horses and are not what they are sold as.

    2. Dear Christian
      I agree with this previous comment. When RRF was originally funded you know who got funded most? It was Dunkin’ Donuts, subways, golden corrals, but I heard silence from you about that. Nothing about how Pelosi restaurants Piatti got 9.2M. You know when you are complaining is when the 177,000 nobodies like me are asking for the same chance to survive. I own a 50 year old concession business, I do fairs, concerts, nascar, etc. it belonged to my father before me. Mass gatherings in the western US were closed for 18 months. I used my savings, my equity in my home to survive and took on massive debt that will now take me 12 years to get out of and then I can start all over again to save for retirement. I am who didn’t get the RRF and I am the one your advocating against helping. Do you think I want to or chose to be in this position? If the government had let the market decide the whole time instead of the interference it created with mandates and closures I be with you, but that wasn’t what happened. This fund was rigged the first time so the little guy got left out, your really ok with that? If your really against bailouts where your article about the USPS getting another $50B recently? During a time when every other mail delivery service is making profits and has been thru out pandemic. Do u have an article on that? Maybe as the person before me suggested your research should have included talking to someone left out of RRF to find out why it is needed, but then again us regular people aren’t important right? That is certainly what our government told us.

  16. There should not be bailouts, there should be lawsuits against those that imposed the lock-downs and restrictions and protections put in place to prevent it in the future.

    "The trouble with the restaurant relief bill moving through Congress is that it would compensate businesses for lost revenue regardless of whether those losses were a result of government mandates or a voluntary unwillingness among customers to dine out."

    This is a straw man argument. Willingness under coercion is not free will. Was the business forced or coerced to close or not? This should play a role in compensation, but that compensation should come from those who imposed the lock-downs, not the general tax pool.

  17. Oh, yeah.
    Ronald McDoanld needs a bailout like America needs to get involved in another war.

  18. I find the reason backing Reason articles are growing less and less reasonable.

    "One could argue that these government impositions entitle affected businesses to compensation."

    Not only could one argue, that IS the primary justification for more relief. Not only that, but they had to spend a bunch of cash on PPE equipment and infrastructure to move their business outside while also being forced to stay open at much reduced capacity.

    "The trouble with the restaurant relief bill moving through Congress is that it would compensate businesses for lost revenue regardless of whether those losses were a result of government mandates or a voluntary unwillingness among customers to dine out."

    So effing what? It was the government and mainstream media (the same) that baked unfounded fear in people that they would get the virus from a restaurant but not a grocery store.

  19. If you don't own a restaurant you don't know the pain. Get out of the way. We need help and we need it now! Most restaurants are in debt now.

    1. Nope.
      As someone financially involved, what we need is for the government to fuck off entirely, especially cutting the benefits for workers to not work.
      Our major current problem is attracting staff at wages which don't shove our menu prices into the stratisphere.
      Planned economies DO NOT WORK, period. Get the government out of our hair.

  20. What the writer of this article is not understanding, and is misinforming the readers in this article, is that, yes restaurants are reporting higher income but that is strictly due to the necessity of attempting to keep up with the highly increased costs of food, beverages, equipment, well, everything. Therefore, profits, if any, are minimized. The idea that gross income is the reason not to pass the Restaurant Revitalization Fund, is totally absurd. It's not the gross that should be considered, its the net that hopefully the Senate will look at.

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