New $2.2 Trillion Stimulus Promises $120 Billion for Restaurants

This article was written by Danny Klein with FSR Magazine

A second major coronavirus stimulus act has been stuck in neutral. But House Democrats took another crack at a proposal Monday with an updated “Heroes Act” that would run $2.2 trillion, or $1.2 trillion less than the $3.4 trillion May Heroes Act. Notably, this updated version hangs a direct lifeline for restaurants.

If signed into law, Division O Section 607 of the new COVID-19 relief plan would establish a $120 billion grant program for restaurants and bars to cover costs such as payroll, rent, supplies, and PPE, and be run by the U.S. Treasury. It’s the RESTAURANTS Act operators clamored for in recent months, which, as of Tuesday, boasted more than 200 House cosponsors and sizable support in the Senate, with 13 senators signing on in the past 30 days to bring the total to 40.

“Congress must quickly pass this COVID-19 relief proposal and give America’s 500,000 independent restaurants a fighting chance to survive,” the Independent Restaurant Coalition said in a statement. “By including the RESTAURANTS Act, the revised version of the Heroes Act is the best plan Congress has put forward to protect the livelihoods of the 11 million people employed by independent restaurants across the country.”

National Restaurant Association Executive Vice President of Public Affairs Sean Kennedy Tuesday called the $120 billion fund “imperative” in a statement. Yet there are gaps in which sector it addresses. “The House version of the RESTAURANTS Act is a tremendous step in the right direction, and we applaud Speaker Pelosi for her efforts,” he said. “Unfortunately, the House proposal denies federal support for small regional chain restaurants, as well as individual owners of small franchise restaurants. After six months of a pandemic that has brought our industry to its knees, policymakers cannot pick restaurant winners and losers for federal relief. Even more restaurants and jobs will be saved if the House adopts the Senate version of the RESTAURANTS Act. Led by Sens. Roger Wicker [R-MS] and Kyrsten Sinema [D-AZ], it takes a balanced approach to providing federal support to all restaurants that are suffering. We urge congressional leaders to embrace this approach.

“Restaurants from revered independents, to beloved regional chains, to the smallest corner diner are shutting down daily across the country,” Kennedy added.

Monday’s Heroes Act proposal also includes a second round of application eligibility for the Paycheck Protection Program and expansion of the Employee Retention Tax Credit—the first of which thousands of operators have dipped into already, although not without some hiccups.

Kennedy said, even without a stimulus, these efforts need to remain on the table.

“If Congress is unable to reach an agreement on a long-term comprehensive recovery plan before leaving Washington, Congress must move to renew access to these fundamental short-term tools to help thousands of restaurants that will otherwise close as outdoor dining becomes less viable,” he said. “Restaurants around the country are making business decisions for October and November based on the actions of Congress this week. The fate of thousands of restaurants and their employees is truly in the balance. The time for political posturing is long gone. Our industry implores the House of Representatives, the Senate and the White House to reach an agreement on behalf of America’s restaurants.”

In addition to the restaurant-focused aid, the updated act includes $1,200 stimulus checks for Americans ($500 per dependent as well).

The most significant budget item is $436 billion for states and cities to alleviate COVID-19 setbacks. Democrats originally called for more than $900 billion in the first version of the Heroes Act.

One provision that could challenge restaurants, however, is a proposed restart of the $600 in weekly extra federal unemployment pay, which expired at the end of July. The boost would last until January 2021. Per a one-page release by House Democrats Monday, this would “provide a vital safety net for the record number of Americans who are unemployment, including those connected to the gig-economy.”

The challenge for low-wage businesses, like restaurants, the first go-around, came from the simple reality workers earned more on unemployment than on the job.

The $600 figure is essentially a replacement rate that took the national average unemployment payment—$371.88 per week at the end of 2019—and infused $600 to bring the coverage from 38 percent of typical bring-home to nearly 100 percent. The basic premise being $600 is what Congress estimated it would take for the average American worker receiving unemployment to get to 100 percent of their income pre-COVID-19.

Past unemployment benefits were intended, in principle, to keep people afloat but still encourage them to go look for a job. Some challenged the $600 cover did the opposite, especially in low-wage arenas.

Putting minimum-wage workers into the equation, UI benefits with $600 tacked on come in at minimum 160 percent of typical wage, and as much as 270 percent in some states. Here’s more on that dilemma. Also for restaurants, turnover rates typically average triple-digits, meaning dangling long-term security as a lure isn’t as effective as some industries. COVID-19 concerns need to be factored in now as well. So does the cyclical and seasonal nature of restaurant hiring and the fact about 40 percent of employees in restaurants and bars work part time, which is more than twice the proportion for all other industries.

The last expanded UI program allowed part-time and self-employed workers (not normally able to collect unemployment benefits) to receive funds.

But the positive spin for restaurants would be January 2021 isn’t that far a target to contend with. And it’s nothing they haven’t dealt with for months as brands find ways to operate with lower staffing levels and revenue flowing through different channels, like curbside and delivery.

Also, Forbes called the $600 inclusion “a negotiating stance” for Democrats. It might not happen anywhere near this ballpark.

Unemployment dropped to 8.4 percent in recent reports. Jason Furman, former chair of President Obama’s Council of Economic Advisors, told Forbes the $600 setup “might have made sense when the unemployment rate was 15 percent. Coming down to something like President Trump’s number of $400 a week … I’d like to see Democrats say, ‘At 8.4 percent unemployment, we can do that.”

In other updates:

The original Heroes Act also included $190 billion in hazard pay for front-line healthcare workers and others in risky jobs. It promised an incremental $13 per hour for essential workers up to $10,000 per employee. Monday’s revised proposal scraps the provision to save $190 billion.

The Heroes Act plans for $25 billion in funding to help avoid airline worker layoffs and another $2 billion for contractors who service passenger airlines. The Payroll Support Program, previously offering funding for the sector, was set to expire at the end of September.

Monday’s update features $225 billion for education as well as $57 billion for family child care.

Additionally, there’s funding for election security, the U.S. Postal Service, worker safety, food security, and COVID-19 testing, tracing, and treatment.

For restaurants, the funding will be based on the difference between the businesses’ 2019 revenues and estimated 2020 revenues for each quarter. They’ll need to be used by June 30 of next year.

“Independent restaurants are out of options, and by providing flexible grants based on revenue losses to independent restaurants who need them, Congress can ensure many businesses have a shot at surviving colder weather and getting through the pandemic,” the Coalition said.

According to a new survey released Monday by Verizon Business, called “Small Business Recovery Survey,” 57 percent of restaurants and bars believe they can stay open for more than six months if conditions continue.

The Association asked operators a similar question and found 40 percent think it’s unlikely their restaurant will still be in business six months from now if there are no additional relief packages from the federal government. The Association expects 100,000 closures this year.

Eligible establishments for the $120 billion relief in Monday’s proposal include restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, and bars.

In the first two weeks of operations, grants would be prioritized for establishments owned by members of marginalized and underrepresented communities, with a focus on women and minority-owned and operated entities. Priority would also be given to venues with annual revenues of less than $1.5 million.

Treasury Secretary Steven Mnuchin told a Senate panel last week Congress must consider “additional funds that are highly targeted” for “the restaurant and broader hospitality industries.”

CNBC reported Pelosi and Mnuchin were set to talk further Tuesday morning about the stimulus plan, although “it is unclear if they moved any closer to a compromise.” 

The Association has plead its case to Congress throughout the pandemic. Recently, it sent a letter that provided short-term, basic solutions with bipartisan support that have already been approved by one chamber of Congress, it said.

Authorize a second round of PPP, with greater flexibility for both operating expenses and payroll outlays.

Ensure that expenses paid with PPP loans are deductible from federal taxes.

Expand the Employee Retention Tax Credit (ERTC) to help restaurants get support after a PPP loan has run out.

Provide restaurants with tax credits to help allay the significant costs restaurants are incurring for equipment, supplies, and training to mitigate employee and customer exposure to COVID-19.

“I suspect that each of you have learned of restaurant closures in your community that break your hearts—from revered local independents to popular regional chains to the favorite corner diner,” Kennedy wrote in a letter at the time. “These closures occurred during spring and summer months when people longed to enjoy a meal out. As fall and winter approach, restaurants that are still open will face even greater challenges as customer traffic declines. We simply cannot wait for the perfect solution from Congress—particularly in the final month before you return to your home states. The time for action—in any form—is now.”

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