Restaurants Are Like ‘a Boat With 15 Holes in It’
(Bloomberg Opinion) -- The passage of the recent $900 billion relief package was a bitter pill for the restaurant industry. Before the pandemic, restaurants employed more than 12 million people, according to the National Restaurant Association. Since March, however, the industry has been decimated, with tens of thousands of restaurants forced to shut their doors permanently. Many that have managed to remain open have had to lay off workers as well. Yet Congress and the administration, which have directed billions of dollars to the airline and the entertainment industries, have not seen fit to give any direct aid to restaurants.
Kevin Boehm is an independent restaurateur who was deeply involved in the effort to obtain some badly needed help for the industry. Boehm and his partner Rob Katz founded the Chicago-based Boka Restaurant Group in 2002; today they operate more than 20 high-end restaurants. I spoke to him recently about why that effort failed — and what it has been like to be in the restaurant business during the age of the Covid-19. (The conversation has been edited and condensed.)
You were one of the restaurant owners who started the Independent Restaurant Coalition as a response to the pandemic. How did that come about?
Kevin Boehm: Back in March, a few days after restaurants were closed in Illinois, I was on a phone call with a half-dozen other independent restaurant operators — myself, Danny Meyer, Tom Colicchio, Ashley Christensen and a few others. And we had a conversation about whether we had enough representation in Washington, D.C., given what was going on. That is when the restaurant coalition was formed. We raised money in about three days and hired an executive director and a lobbying firm to represent us.
What was the coalition trying to accomplish?
KB: In its infancy, it was all about making PPP [the Payroll Protection Program, which allocated $350 billion to small businesses] more restaurant friendly. It was clear after PPP passed that access was going to be an issue. Most banks prioritized applicants who had previous debt with them, and restaurants are rarely financed through banks. In the end, 8% of the PPP money went to restaurants, even though 25% of the unemployed had worked in restaurants.
But then the coalition helped write a bill called the Restaurants Act that was going to direct federal money specifically to the industry. You must have been ecstatic when it passed the House in October.
KB: We all were. This bill was going to help save restaurants. Back when they were arguing over a $2.2 trillion or a $1.8 trillion stimulus bill, the Restaurants Act sat in both of those bills. Then it got stuck in an awful political cage match, and we ended up left out in the cold despite bipartisan support. You hope that people lead with empathy and humanity, but it’s tough not to be a little cynical after all of this. I mean 125,000 restaurants have closed. There are only 500,000-something independent restaurants to begin with.
It’s maddening because I know the history of America bailing out specific companies and specific industries that were often culpable in their own demise. We bailed out Fannie Mae and Freddie Mac. We gave Chrysler $1.5 billion in the late 1970s so it could avoid bankruptcy. But somehow the disrespect that’s been given the restaurant business — it’s hard not to feel, every time a stimulus bill comes out, like we’re the last kids picked on the kickball team. There are 16.1 million people employed in the industry, if you include the entire supply chain. I talk to people every single day who are just barely hanging on.
What has it been like trying to run a group of restaurants during the pandemic?
KB: Back in the middle of March, right when Illinois was ordering restaurants to close, I went home to Springfield because my mother was dying of pancreatic cancer. When she died, we couldn’t have a funeral for her because of Covid.
I came back home to Chicago pretty battered emotionally. And the first thing we had to do was close down 20 restaurants. It wasn’t an easy task. Then my partner Rob Katz and I had to furlough 1,842 employees. We immediately set up weekly grocery giveaways for everyone, extended everyone’s health care through the summer, and Rob and I then put $100,000 in an employee fund to seed a GoFundMe campaign for our team. Then we tried to figure out what we were going to do from there.
I assume you started doing takeout.
KB: For a variety of reasons, not every restaurant is set up for takeout. We tried it at most of the restaurants with varying degrees of success. Even so, with the money we were spending on health insurance, rent and other expenses that couldn’t be deferred, we dug a hole almost $4 million deep in about three months.
When did restaurants reopen in Chicago?
KB: Around the second week in May. It was set at 25% occupancy. The degree to which that helped depended on the size and configuration of your dining room. So it helped more for some than for others. We have a restaurant where we pay $1 million a year in rent, so 25% occupancy is pretty untenable.
The larger issue was that every time the government introduced a new wrinkle, it was basically like having to open a whole new restaurant. We have a steakhouse called GT Prime. Steakhouses don’t always translate very well for takeout, so we decided to shift to an Italian menu. Then, when the state allowed 25% indoors, that didn’t get us a lot of seats inside, so we lobbied to get the street closed off. When we got the streets closed off, then we had to rent tents and get tables and so on. We had to change our Covid protocols. It was constantly shifting every week. The constant pivoting and uncertainty was pretty brutal.
What is the situation now?
KB: Toward the end of the summer, they took the 25% occupancy away. No state funding, no federal funding, no indoor dining, no mandatory rent deferral. They basically said, “Hey guys, here you go. Here’s a boat with 15 holes in it. We’re going to drop you in the middle of the ocean with no paddles. Good luck.” We’re still allowed to do outdoor dining, but it’s 17 degrees in Chicago. We were down between 40% and 50% in the summer. Since October, we have been down 90%. We are lucky that Boka Group has some resources. If Covid had happened even 10 years ago, it would have wiped us out. Even so, we still had to close a couple of restaurants. We can only take so many punches. There are so many others that are not that lucky. Just imagine if you opened your first place in 2019 or 2020.
Let me tell you a story. My very first day of owning a restaurant, I reached down to put a piece of bread in the oven, and the pilot light had gone out. The oven blew up in my face, and my hair caught on fire. I ended up spending the night in the hospital. And I remember thinking that the universe was sending me a message. It was saying, “Hey, kid, it’s not as easy as you think.” A lot of stuff has been thrown our way since then. But never in my wildest nightmares did I imagine what we’re going through right now.
Meyer is the CEO of the Union Square Hospitality Group and the chairman of Shake Shack Inc.
Colicchio is the chef and owner of Crafted Hospitality, which owns restaurants in New York, Los Angeles and Las Vegas.
Christensen is the chef and owner of AC Restaurants based in Raleigh, North Carolina.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."
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