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NYC restaurants face ‘devastating’ fate as new COVID-19 lockdowns loom

Alexis Christoforous
·4 min read

Thousands of restaurants are back on life-support as cities across the country implement new COVID-19 restrictions.

In New York City, restaurant owners are bracing for a brutal winter as indoor dining was paused again on Monday. Adding insult to injury, a winter storm is on track to blanket the city with up to a foot of snow this week forcing the shutdown of outdoor dining as well.

“This is a devastating milestone for New York City's independent restaurants,” Clare Reichenbach, CEO of the James Beard Foundation told Yahoo Finance Live. “These are small independent businesses that have been operating at 25% now for the last few months, doing all they can to be nimble and innovative, to bring revenues in from retail, from takeout, from outdoor dining, but this further restriction means that there are many already on the brink of survival, and what is needed is material direct federal relief.”

The New York State Restaurant Association said a recent survey of 6,000 restaurant owners in the state found that more than half said it’s unlikely their restaurants will still be open in six months without government relief. The survey also found 78% expected more layoffs over the next three months.

Photo by: zz/STRF/STAR MAX/IPx 2020 12/12/20 Outdoor dining with social distancing measures in Downtown Manhattan on December 12, 2020. Though certain restrictions were eased as part of the Phase 4 Reopening in New York City during the worldwide coronavirus pandemic, recent surges in cases of the virus have led restaurant owners and managers to create and design unique protective barriers to help keep their patrons safe and sheltered from inclement weather. Here, outdoor diners brave the cold temperatures of December in New York City. (NYC)
Outdoor diners brave the cold temperatures of December in New York City. (AP)

On the West Coast, California recently banned outdoor dining in several counties as COVID-19 cases spike in the state. Days later a Los Angeles judge tentatively ruled that the nation’s largest county acted “arbitrarily” when it banned outdoor dining. The judge issued an injunction overturning the LA county ban, but outdoor dining is still prohibited because of a regional stay-at-home order that also includes the mandate.

Chef Andrew Gruel has vowed to keep his LA restaurants Slapfish and Big Parm open. He recently told Yahoo Finance Live restaurants are being unfairly targeted by California's strict stay-at-home order.

“When you look at the regulations, I can’t have anybody eat outside but I can go to Walmart, I can go to Target. I can go to anyone of these big box retailers and stand in a line of a hundred people,” said Gruel.

Longtime Southern California eatery Rose in Venice recently closed its doors indefinitely. In a note posted to social media, reps for the restaurant said “the current state of draconian measures imposed on restaurants by the city of Los Angeles, Mayor Eric Garcetti, and Governor Gavin Newsom have made it infeasible for us to continue to operate during these trying times.”

FILE - In this Tuesday, Dec. 1, 2020, file photo, customers are served lunch at an outdoor seating space in Pasadena, Calif. The nation's largest county acted "arbitrarily" when it banned outdoor dining at restaurants during the coronavirus pandemic, a Los Angeles judge tentatively ruled Tuesday, Dec. 8, 2020, in a case that could have implications for other California businesses struggling during the state shutdown. (AP Photo/Marcio Jose Sanchez, File)
Dec. 1, 2020 Customers are served lunch at an outdoor seating space in Pasadena, Calif. (AP Photo/Marcio Jose Sanchez, File)

In a recent column, the Los Angeles Times called the lack of federal funding for restaurants a “national disgrace.”

We see this asymmetry between mandated closures without the counterpart of government support,” said Reichenbach, who is calling for the government to inject $120 billion in grants to 500,000 independent restaurants as part of a bipartisan measure called The Restaurants Act.

“There's a very compelling ROI to that,” she said. “Economists have determined that $120 billion [in grants] would deliver around $270 billion back to GDP. So from a taxpayer's perspective, it's a good return on their investment.”

Reichenbach said another round of Paycheck Protection Program loans (PPP) is simply not enough to keep the industry afloat.

“These small businesses can't take on more debt. Ten weeks of paychecks is insufficient to compensate for the months of revenue loss. We need to see a greater amount of relief and we need to see greater flexibility in how it can be spent,” she said. “It's hard to spend on payroll when your business is shuttered or mandated to be closed, and we need greater flexibility in terms of what is forgiven.”

Nationwide, approximately 110,000 restaurants have closed since the beginning of the pandemic. The restaurant industry directly employs about 13.5 million people in the U.S., and that doesn’t include the broader supply chain of farmers, fisherman, bakers, distributors, winemakers and florists.

“As much as 80% of restaurants are not coming back. We anticipate only one in five of your favorite local restaurants being here at the end of this,” warned Reichenbach. “And you can feel that very personally, in terms of the vibrancy of your neighborhood.”

Alexis Christoforous is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AlexisTVNews.

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