Financial Picture Turns Bleak For Vermont Restaurants Idled By COVID-19
Restaurant owners in Vermont say they’ll struggle to survive the coronavirus pandemic if the state or federal government doesn’t offer financial relief to companies that have been unable to avail themselves of previous aid packages.
Few businesses in Vermont have been more directly affected by COVID-19 than restaurants. The federal aid programs that were supposed to help struggling companies, however, have been of little help to the restaurant industry.
Restaurant owners say the Paycheck Protection Program doesn’t work for companies that aren’t allowed to re-start business operations. And with no timeline yet from Gov. Phil Scott on when the industry will be able to resume dine-in services, Eric Warnstedt, who owns four restaurants in Burlington, Waterbury and Stowe, said he and his colleagues are nearing the brink.
“I think people would maybe look at our group as one of the more successful in the state probably, and there’s no possible way we could open up all four restaurants without some other cash,” Warnstedt said.
"It's kind of a 'now' situation ... where we need some measures to address the urgency of it just so we can remain viable." — Sue Bette, Bluebird Barbecue
A commercial construction project underway in downtown Waterbury this week was the latest sign that Vermont’s economy is starting to reopen. But a quick glance into one of the village’s more popular restaurants provided a stark reminder of the ongoing economic toll of the governor's Stay Home order.
The chairs were on the tables in the empty dining room at Prohibition Pig. And like every other dine-in establishment in Vermont, this speakeasy-themed restaurant and brewery has been empty for the past seven weeks.
Warnstedt said there’s no guarantee that places like his will be able to reopen, even after the closure order lifts.
“We simply will need cash to reopen,” he said.
Restaurants’ revenues may have dropped off a cliff, but many of their fixed overhead costs, such as rent and utilities, have not.
The federal Paycheck Protection Program was designed to help small businesses weather the coronavirus pandemic, but it’s proven to be an ineffective tool for the restaurant industry. Businesses only have eight weeks to spend the PPP loan once they get it. And that loan can only be forgiven if they use the money to bring employees back to work.
Keith Paxman, owner of Cornerstone Pub & Kitchen in Barre, said those terms pose an impossible dilemma for restaurants.
“How is it possible that we can take these funds to get all of our employees back, when we’re not even allowed to be open, and we have an eight-week window to do it?” he said.
Warnstedt said most restaurants can’t afford to take on more debt, especially as they look ahead to a summer season that’ll likely involve limited seating capacity and soft tourism numbers. He's run the numbers to see what happens if he draws down $150,000 in PPP money, and then has to pay it back.
“That’s $8,000 a month to pay back,” he said. “There’s no possible way you could carry that kind of loan.”
Warnstedt and Paxman are part of an ad hoc group of restaurant owners, called the Vermont Hospitality Coalition, that’s begun advocating for state and federal relief. Paxman said the group recently conducted an informal survey of its peers.
“And it’s sounding like 30% of the restaurants probably are not going to make it through this, especially without some sort of assistance,” Paxman said. “But where’s the assistance coming from right now?”
Congressman Peter Welch said that assistance may arrive in the form of revised rules to the Paycheck Protection Program. He said PPP regulations crafted by the Small Business Administration have left restaurants in the lurch, and that he’ll be pushing for an extension of that eight-week drawdown window in Congress’ next COVID-19 relief bill.
“So we’ve got to give [restaurants] more time, and that’s why I’d like to have it be at least till the end of the summer, but preferably till the end of the year,” Welch said on Vermont Edition recently.
"[I]t's sounding like 30% of the restaurants probably are not going to make it through this, especially without some sort of assistance." — Keith Paxman, Cornerstone Pub & Kitchen owner
As for Gov. Phil Scott, he said he’s looking for ways to give restaurants some of the $1.25 billion in federal aid that Vermont has gotten for its coronavirus relief efforts.
But Secretary of Commerce Lindsay Kurrle said it’s unclear whether federal law will allow for that kind of direct assistance.
“We hope that there will be flexibility in doing grants to some extent, and … really low-interest loans,” Kurrle said during a press briefing this week. “But … we’re just trying to navigate what will be allowable in the CARES Act.”
Sue Bette, owner of Bluebird Barbecue in Burlington, said the fates of many restaurants in Vermont hinge on some form of new financial relief. And she said many businesses won’t be able to hang on for much longer.
“And that’s the urgency of it — it’s kind of a ‘now’ situation eight weeks in, where we need some measures to address the urgency of it just so we can remain viable,” Bette said.
Warnstedt said there’s little doubt what will happen if restaurants don’t get that relief.
“A lot of places not reopening, it’s that simple,” Warnstedt said. “The cash just isn’t there. The business model, whether good or bad, restaurants in America, 90% of what comes in goes out the door.”