Company News | | Mar 20, 2020
If nothing else, the coronavirus, or COVID-19 has made clear just how socially engaged Americans are, human-to-human, despite the purported dominance of the “virtual life” on social media. Americans love to congregate in bars and restaurants, to have their libations served to them and to eat their meals out. In fact, we now spend more at restaurants than we do at grocery stores. That never happened before 2015.
And now, suddenly with the virus crisis, being anti-social, or “self-isolating,” in the current parlance, has transformed from a personality disorder to a survival technique. Now, we very social Americans in cities nationwide are being denied real-life contact in places like restaurants and bars. The result: Not only does it fray the social and possibly economic fabric of the country, it all but pulls the plug on one of the cornerstones of American small business with sales of more than $800 billion just last year.
So, if you own a bar and/or restaurant and are feeling a little, or should we say a lot skittish about your future, it is totally understandable. But what can you do? More importantly, what should you do. Since Prager Metis is a firm with clients both big and small in these businesses, we thought it appropriate to offer some counsel and information on how to minimize the impact of this never-before-seen phenomenon. Let’s begin with the owners themselves, you…
DON’T PANIC (OR ‘GO IT ALONE’)
You haven’t heard that from anyone before, right? But as the saying goes, cooler heads will prevail. And this may be little comfort, but remember that unlike the financial crisis of 2008, the current crisis occurred not because of some built in weakness in the economy, it came from outside the economy. COVID-19 is a literal force of nature that, if it follows past virus behavior, does have an end date.
And while you may be in a business where last week’s receipts pay this week’s wages, if the underpinnings of your business model were/are solid, to keep them that way, there are preparations you can make for the post-virus economy. Fear can be paralyzing, we understand, but you need to act.
And while being an entrepreneur means you are made of some pretty tough stuff, and can “take a punch,” don’t do this alone. You do have a team, people who watch your legal back and keep your accounts straight. Use them, lean on them. You’ve been paying them, right? Let them earn their keep and help you. Not to mention, you can reach out to our firm, or firms like ours who know the ins-and-outs, the ups-and-downs of your business and can help. But, the first thing you need to do is…
PLAN, PLAN, PLAN
In general, I break down planning into three parts: Short Term (a week), Mid-Term (a month) and Long Term (a year). For the current situation, owners of bars/restaurants can still use this three-part process, but modified to reflect heightened urgency. So, Short Term becomes a day, Midterm a week and Long Term a month.
Short-Term Plan (a day)
Today, after you read this piece, you and/or your accountant should immediately get in touch with anyone to whom you owe money. Anyone. Whether it is a bank, a vendor, or a utility, get in touch with them immediately and see what flexibility they are willing to offer in the face of this global crisis.
- Will the bank grant a 90-hiatus on a bank loan?
- Will a landlord forego rent for X-number of months until you start serving patrons food and drink again (or is there a new statute requiring them to)?
- Do utilities have a virus-delayed-payment plan for customers?
- Also, your vendors. How flexible can they be? Can contractual agreements go on hiatus until the crisis passes? Can they take back non-perishable items—liquor, beer, non-alcoholic beverages—and give you a credit?
The key here is communication. An overused word, perhaps, but getting a dialog going with these people, the people who really do hope you survive because if you do, they start getting their money again. Not to mention, your proactivity also has the effect of reassuring them. It sends a message that you plan to do everything necessary to get through this, that you are aggressively assessing your options, that you are not planning for failure, but survival.
And, as the saying goes, there are only two answers to all of these questions. But you need to ask those questions ASAP, so you get a fix on your obligations during the next week, or month(s) at least.
One last thing on Day One: Check with your insurance agent (another member of your “team”) to see if you have “business interruption insurance,” and if so, review the policy to see exactly what your coverage includes.
Midterm Plan (a week)
Now that you have spent a day getting a fix on your financial obligations and establishing dialogs, you should spend the next six days doing three things: 1. Explore government programs; 2. Get solid with your staff, and 3. Explore interim options.
Explore Government Programs:
There are bailout schemes in place and being proposed at the city, state and federal level. If you are a very small operation, this may fall on you, but whatever your size, if you have an onboard attorney and/or accountant, it is his or her job to prospect and find every available government option that can prop up your business for the moment and possibly well into the post-virus future.
Federal—Stimulus Package(s): At this writing, in the works are several versions of a federal stimulus package with the Treasury Department proposal including $300 billion to help small businesses with loans, many of which will not require repayment. For the moment, no need to inquire since details are “being hammered out,” as the saying goes. But federal aid is coming, so keep current with developments, and when Congress does pass the stimulus package, you and your accountant/attorney should immediately see if you qualify.
Federal—Small Business Administration (SBA) Programs
According to the SBA website, it is working “directly with state Governors to provide targeted, low-interest loans to small businesses and non-profits that have been severely impacted by the Coronavirus (COVID-19). The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.”
As of this writing, small business owners in the following designated states are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19): California, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Indiana, Maine, Massachusetts, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Rhode Island, Utah, and Washington. For more information go to https://disasterloan.sba.gov/ela/ If you own a bar or restaurant in one of these states, probably worth a look.
And, if you operate a bar or restaurant in New York City, see if you qualify for one or both options available now. If you employ fewer than five people, you can apply for a grant to cover 40 percent of your payroll costs for two months. And, if you employ fewer than 100 employees and have seen sales decrease of 25% or more, you should be eligible for a zero-interest loan of up to $75,000. For details on both programs, go to this website: https://www1.nyc.gov/site/sbs/businesses/covid19-business-financial-assistance.page
Although New York City restaurants and bars employ over 250,000 people, you may operate in another large U.S. city. If so, google your city’s website for COVID-19 and/or coronavirus relief programs to see what might be offered.
Get Solid with Employees:
While employees come and go probably more in your business than just about any other, all businesses have “keepers,” loyal employees who give a day’s work for a day’s pay. Meet with them, maybe one-on-one (virtually if possible), and let them know the minute the business is back, you want them back. Perhaps offer some guidance on things like unemployment, and if you offer healthcare, programs like COBRA to extend their benefits. In short, let them know you care. And not just your “keepers,” but all your employees.
Meet with them, commiserate with them, use words like “furlough” to give the situation a sense of being “temporary.” Businesses, particularly small local ones are built on reputations. Former employees treated humanely, can help your reputation, but if poorly treated, hurt it.
Explore Interim Options—Innovate!
Get started this first week exploring your options. They say adversity is the mother of innovation, so innovate. Get together with some of those “keepers” and brainstorm.
- Do you really have to close completely?
- You never had take-out, didn’t fit the image. That was pre-virus crisis. Can you create a take-out strategy?
- You never delivered before either, but can you? Should you? Maybe your waiters and waitresses could do it and earn at least some money.
- While third party delivery services—Grubhub, Uber Eats, etc.—seem to be making gestures of help during the virus crisis, they seem to get mixed reviews. Not to mention, they may take say a 30% commission, and you wait weeks to get paid. But maybe it is worth exploring.
In short, if there is a way to keep a relationship with your customers that makes contact and at least some economic sense, it is worth looking at. Speaking of which…
Long Term Plan (a month(s)—Innovate Some More!
The bad news: during the hiatus—and start thinking of it as that, a hiatus—you will have a lot of time on your hands to think. The good news: you will have a lot of time on your hands to think, and to take a hard look at your business. And be honest. What really worked, and what didn’t. What was missing, or something you could have done more of. It is also a time to do anything you can to keep contact with your customers.
Do you have a database of customer email addresses? Work it. But have a reason to reach out. Announcing your new pick-up service: “Same fine food, but safe for all of us.” Same with delivery.
Do you have a website? Do not let it go dark. Refresh it, again, with relevant information. Maybe you let customers know about new creations you are working on that they will taste before anyone else. Etc. Look alive. Look like you value their patronage.
Because, like employees, when treated right, customers can help your reputation. Make it even stronger. And when the virus crisis comes to an end, they will return. Maybe more often than ever. But they can only return if you are there. Make that happen. And keep in mind what David Chang tweeted recently, as quoted in The New York Times:
“Restaurants are too small to fail”