‘Risk of permanent closure.’ California restaurants won’t get quick help from Biden spending plan
Can your favorite local restaurant survive?
It’s proving to be tough, and so far Washington has not been inclined to provide much more new help.
There was some hope for money in the big spending and tax package President Joe Biden unveiled Thursday, but there was none. Biden’s American Rescue Plan in March provided $28.6 billion to aid the restaurants, but it wasn’t enough and generated legal controversies.
Without more funding, “Congress and the Biden administration are leaving nearly 200,000 businesses at risk of permanent closure,” said Erika Polmar, Independent Restaurant Coalition executive director.
The reopening of many restaurants in California was “only the very beginning of a long road to recovery. We expect that some of the restaurants who managed to survive the immediate impacts of COVID won’t survive the longer-term impacts they are experiencing right now,” said Sharokina Shams, California Restaurant Association vice president, public affairs.
Shams listed a host of problems: a shortage of workers that is forcing restaurants to limit their operating days and hours, a spike in costs of labor, food and supplies, as well as debt the business may have incurred during months when they closed.
Money from Washington?
“We thought September would be a return to normalcy,” said Chris Hillyard, who with his wife owns Farley’s Coffee in San Francisco’s Potrero Hill neighborhood and Farley’s East in downtown Oakland.
Instead, restaurants these days often struggle to survive. “We still don’t know when this thing (COVID) is going away,” said David Nayfeld, a San Francisco-based restaurant owner and member of the Independent Restaurant Coalition’s national advisory board.
The Hillyards, who run two California restaurants, feel the economy’s sting. They badly needed financial help to survive the COVID pandemic, so when applications for the federal relief money from the American Rescue Plan became available earlier this year, they applied within minutes.
Things looked good. They got priority because they are a woman-owned business, and within days were told they’d get a low six-figure grant.
Then weeks passed. Nothing. They checked with the Small Business Administration, which manages the programs. No need to worry, they were told.
They never got the money.
More than 2,900 restaurants that had been told they were getting money from the restaurant fund were cut off.
The program simply didn’t have enough to help everyone who sought funding. It got 278,000 applicants, who wanted a total of $72.2 billion. The program wound up giving the $28 billion to 101,000 applicants. The average grant was $283,000.
California had 36,379 eligible applicants for the fund, and 15,988, or 43.9%, received a grant.
Lawmakers are still trying to replenish the fund with $60 billion, possibly in other spending bills or separate legislation, as the economy has slowed.
Restaurant relief under fire
The March relief program had strong support from members of both parties. Restaurants, particularly those independently owned, are fixtures in every congressional district.
The fund sought to be of particular help to businesses owned by women, veterans, people who were “socially and economically disadvantaged,” and those who represented “multiple underserved communities.”
But tilting to underserved owners and communities triggered legal challenges.
The conservative America First Legal brought a case in Texas that led to a preliminary injunction telling SBA to look at claims without regard to race or sex.
Stephen Miller, a former Trump administration official who now serves as president of America First Legal, said at the time that the order was “another powerful strike against the Biden Administration’s unconstitutional decision to pick winners and losers based on the color of their skin.”
The Wisconsin Institute for Law & Liberty also challenged the law this spring on behalf of several restaurants around the county, saying the distribution policy was “illegal and unconstitutional. Race and sex discrimination are not permitted under the law.”
A federal appellate court agreed in a split decision. “Since the government failed to justify its discriminatory policy, the plaintiffs will win on the merits of their constitutional claim,” the court said.
The SBA made changes. On June 14, it hosted a call with thousands of small businesses approved for funds under the Restaurant Revitalization Fund that were suddenly unable to receive the money.
Christalyn Solomon, an SBA spokeswoman, said the call was meant “to express our frustration and to explain that we remain committed to doing everything we can to support disadvantaged businesses in getting the help they need to recover from this historic pandemic and restore livelihoods.”
Callers were told about other programs they could use if they qualified including Economic Injury Disaster Loans and other programs.
But to the Hillyards it meant their restaurants would not get the promised funding. They were told that officially in a June 23 email.
Can Biden help restaurants?
In late August, the California Restaurant Association joined other such groups around the country to tell congressional leaders their situation was growing more dire.
“Nineteen percent of adults have stopped going out to restaurants, while 9% canceled existing plans to go out to a restaurant in recent weeks. For an industry that requires a ‘full house’ every evening to make a profit, this is a dangerous trend,” the letter said.
Nayfeld put California restaurants’ situation in more stark terms: “We’re trying to walk a very scary tightrope.”
When COVID first hit last year, Hillyards’ restaurants shut down. Other COVID-related government aid helped, and the Hillyards began mass producing meals to those in need as well as front line workers. That allowed them to bring back their 40 employees.
Today, the San Francisco location, which roasts its own coffee and sells its own pastries and empanadas, still has no indoor seating, but there is a plan to add indoor tables soon. The Oakland cafe, which provides breakfast and lunch, now seats about half its 45-person capacity.
That location, because it’s downtown, relies more on office workers, but “no one went back to work,” said Hillyard.
Now, he said, “we’re saying all right, let’s assess the situation in January and February and see what the new business environment is gonna be like.
“We have some funding, so we can continue operating at a loss,” he said, “but we can’t operate at a loss forever.”
This story was originally published October 30, 2021 at 5:00 AM.
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