A grandfather’s prized silver dime collection, lovingly set aside in the hopes of passing it on to future generations. A family home in Nevada. A string of struggling restaurant locations put on the market by an operator at the end of his rope, only to be snapped up by larger, more monied franchises.
These are just a few examples of what one year without the Restaurant Revitalization Fund has cost restaurants fighting to survive, Erika Polmar, executive director of the Independent Restaurant Coalition, said.
The $28.6 billion federal grant fund ran dry in just three weeks, closing on May 24, 2021. Last week, a bill that would refill RRF with $40 billion — legislation the IRC and countless operators were “belligerently optimistic” about — failed to pass the Senate. Now, it seems that nearly 200,000 RRF applicants who were approved for grants but didn’t receive them may never see that money.
“When Congress offered these restaurants the RRF lifeline, restaurant owners and operators made business decisions based on those commitments. Restaurants that are still trying to make up for what was lost in the pandemic today are struggling with workforce shortages, record-high inflation, and supply chain constraint,” Michelle Korsmo, president and CEO of the National Restaurant Association, said in a statement last week. “[The Senate’s] vote will further exacerbate those challenges and result in more economic hardships for the families and communities across the country that rely on the restaurant and foodservice industry.”
The disappearance of RRF’s safety net plunged many struggling restaurants deeper into financial danger over the past 12 months, but it has also wreaked havoc on operators emotionally, Polmar said.
Polmar continued, “It's been two years of not knowing how you're going to survive and how you're going to keep your people employed. … It's been awful.”
That fear has been compounded by the uneven playing field left in RRF’s wake. Restaurants that received grants have a leg up over operators still struggling to crawl out from under debt accrued during the peak of the pandemic, which has amassed like layers of “compounding grief,” Polmar said. This grant money has helped the lucky few raise wages to attract and retain better talent, or invest in remodels or expansion.
“There’s [been] aggregation of assets through the entire pandemic. The rich got richer, the poor didn’t. And I think you see that in this industry as well,” Polmar said.
Without a refill, she doesn’t see how the industry can reach true recovery.
“We heard Senator Schumer say [the first round of RRF] would be a down payment. And none of us thought that a year later, we would be still talking about that damn down payment and needing the rest of it,” Polmar said.
Beyond current monetary strain, RRF’s absence is also sapping the industry of future potential, she said.
“You can't think creatively. You can't pivot your business. … These folks are beyond exhausted. They're weary,”she said. “Right now all they're doing is thinking about the present and how they're going to make it through the next day.”
We took a look at several market performance indicators over the past year to get a sense of how the absence of RRF impacted U.S. restaurants. And while it’s impossible to know both how far the ripple effects of RRF’s closure reaches — or to what degree the closure exacerbated pain points like inflation and labor shortages — it’s clear the past year was challenging. And some restaurants fear there are more dire consequences ahead.
By the numbers
The restaurant is down roughly 800,000 jobs since the start of the pandemic, according to the U.S. Bureau of Labor Statistics reported by the National Restaurant Association.
Tipping across full-service restaurants has held steady at an average of 19.9% between Q1 2021 and Q1 2022, Toast research finds. Tipping at quick-service chains has remained at about 17% during that period.
Restaurants that didn’t receive RRF grants reported cutting their employees by 30% since February 2020, according to January IRC data. By contrast, businesses that did receive the grants only reduced their staff by 21%.
Between April 2021 and April 2022, employers in the restaurants and accommodations sector hired more than 1 million people monthly on average, but an average of 897,000 people left their jobs each month, with 746,000 quitting alongside 127,000 that were let go and 24,000 who left due to other circumstances, according to Job Openings and Labor Turnover (JOLTS) data from BLS.
Eighty-three percent of restaurants reported that an RRF grant would allow them to increase their wages, according to IRC data.
Eighty-six percent of restaurants reported that an RRF grant would allow them to hire more workers, according to IRC data.
Openings and closures
By the numbers
Independent restaurants grew by 1%, or 2,893 units, in late 2021, according to The NPD Group. This is an improvement over the segment’s 5% decline in 2020. Independent restaurants still make up 53% of total restaurants in the U.S. Independent operators are growing in large urban markets including Los Angeles, Dallas-Fort Worth and Seattle-Tacoma, per The NPD Group.
Restaurant and food new business openings in Q1 2022 (17,690) dipped 2% from Q1 2021 (18,090). However, these openings exceed Q1 2020 openings by 5%, according to a Q1 Yelp report.
Twenty-four percent of businesses that didn’t receive RRF are in danger of closing in up to three months compared to 13% of businesses that received grants, a recent IRC survey finds.
Twenty-eight percent of businesses that didn’t receive RRF are in danger of closing in four to six months compared to 11% of businesses that received grants, per IRC survey results.
Seventy-two percent of small restaurant operators fear rising costs due to inflation could force them to close in the next six months, according to May Alignable data.This is the highest percentage recorded across 12 business sectors.
Restaurants in the West have experienced the strongest sales growth between Q1 2021 and Q1 2022 at 38%, Toast finds. Comparatively, Northeastern restaurants’ sales increased 37%, while the Midwest and the South improved 24% and 21%, respectively.
Sixty-three percent of restaurants didn’t experience a complete sales recovery to pre-pandemic levels as of January, according to an NRA survey. Only 25% of restaurants reported same-store sales rose between 2019 and 2021.
Debt and bankruptcies
By the numbers
Sixty-two percent of operators report their restaurants accumulated additional debt since the beginning of the pandemic, and 57% said their restaurants have fallen behind on expenses.
Forty-one percent of restaurants that didn’t receive RRF grants reported taking out new personal loans to support their businesses since February 2020, according to January IRC data.This is only the case for 19% of restaurants that received an RRF grant.
Forty-eight percent of restaurants that didn’t receive RRF grants report they are in danger of defaulting on a loan compared to 22% of businesses that received RRF funding, per IRC survey data.
Forty percent of restaurants that didn’t receive RRF grants report they are in danger of filing for bankruptcy, compared to 25% of businesses that received RRF funding, per IRC survey data.
Twenty-eight percent of restaurants that didn’t receive RRF grants report they are in danger of being evicted compared to 20% of businesses that received RRF, per IRC survey data.