Tom Colicchio, founder of Crafted Hospitality and celebrity chef, joins Yahoo Finance Live to discuss the impact of COVID-19 on the restaurant industry, how the government should respond, and his newly formed Independent Restaurant Coalition.
MYLES UDLAND: All right, welcome back to Yahoo Finance live. Myles Udland with you here in New York.
We are joined now by Tom Colicchio. He is a chef, restaurateur, founder of Crafted Hospitality, among many other places. And, Tom, I think the restaurant industry right now is the, I think, pain point in the economy right now. They were the first to really feel the big effects of the coronavirus-related shutdown. So I would just start with, you know, what you've done with your group so far and what you think needs to be done right now to save a lot of restaurants that are going to be challenged, I think, to make it three months to the other side-- three months-- three weeks to the other side of this.
TOM COLICCHIO: Sure. You know, we were-- we started seeing the effects of this about three weeks ago. So far the estimates are between 5 to 7 million restaurant workers have been laid off already. As a-- the restaurant industry, we are uniquely situated right now to actually take government stimulus and the stimulus package that's being debated right now and inject that into as many people as possible because, outside of the federal government, we employ more people than any other industry. It's about 15 million people who work in the restaurant industry.
And so what we're asking for is direct income replacement, OK? Now for that, we hire back all the people that were laid off 100%. We also pay all of our suppliers. We pay our rent. So our suppliers, in turn, pay their suppliers, which are fishermen and farmers and ranchers, you know, people that are growing vegetables for us. Plus we're paying-- we're also paying our utilities. And so if we get a direct replacement, we can actually start funneling that through all the other different industries that we touch, even our rent so our landlords don't have to renegotiate their credit facilities as well.
The other thing is we're not looking for a bailout. What we're looking for is we want the government to put us back to work because if we get these restaurants squared away, so many of these restaurants can actually open up and start feeding our community. And if we have direct income replacement, we could do this for free. And so, yeah, we're hard hit, but we can make a huge impact right here.
And so we started with-- a group of us started the Independent Restaurant Coalition. And we have representation who-- we're being represented in these conversations in Washington, and we're making our voice heard. You know, we like to say we're too small and we're too many to fail.
JEN ROGERS: So if you get what you want, are you confident that 100% of restaurants can go back to business as usual and will survive?
TOM COLICCHIO: Well, what we're looking for-- because we're looking for direct revenue replacement over probably a six-month period-- and we could start with four months. What will happen, because we're not purchasing food anymore, so we can start actually accumulating some capital. So when we open up, we'll have some runway-- number one, get the restaurants open, and also to survive that period before we're actually, you know, at full-- at full capacity.
DAN ROBERTS: Hey, Chef, Dan Roberts here. Let me just ask you anecdotally. Right now amid this time, so many restaurants, they're closed to diners. Obviously they can't do dining service, but many, many, many of them in many cities are allowed to do takeout and delivery, which is good. That's positive to see, and, you know, many of us have been trying to give that business to our favorite local restaurants. But I'm just curious if you can tell us on average, you know, you being the expert here, that obviously still isn't nearly enough business for them. You know, for small restaurants, being open to takeout right now, if they're usually a restaurant that can take diners in person, I imagine that even if they're getting a good number of takeout orders, that still doesn't make up nearly for the amount of business they do. I mean, what percentage or sliver of business is that really providing for them?
TOM COLICCHIO: No, they're losing money every night they stay open. The fixed costs are way too high on that. You're right. Most people that I'm talking to, they're doing at most $5,000 in business a night. I've heard some other restaurants doing more than that.
But you got to keep in mind that what they're doing is they're putting their employees in danger. You know, we're telling people to stay home. And so unless you're essential, you should stay home. Especially in New York City, we're asking our employees to come, you know, take public transportation to come to the restaurants. I don't think that's a great idea.
But the restaurants are doing this because they're struggling. I understand the intention. I understand-- you know, I had the same sort of desire to make sure my staff is kept whole, but it's just-- it's not a good thing to do right now.
I think what we need to do to do is stay [INAUDIBLE] the street,because so much of this money-- 90% of the money that we receive in terms of revenue goes out the door in terms of payroll, our suppliers, rent, utilities. And so if you want to create stimulus, the best way to do it is put cash into the hands of people that will spend it, and the best way to do it is to funnel that through small businesses, especially restaurants.
AKIKO FUJITA: Tom, I want to follow up on a comment you just made earlier about having some capital reserves. Essentially you're not buying up all the resources that you need-- that you normally need to run the restaurant. How much-- how long is that runway? How much room do you have?
TOM COLICCHIO: Well, we don't right now. If we had the replacement, and we figure if this will go on for four months, we can probably build up enough runway maybe for an additional two months. We'll have some income coming in, and I'm sure that at some point we'll start renegotiating leases and things like that. But we'll need a couple months of runway to make sure this works.
Plus part of this this package includes low-interest or interest-free loans, and we want to make sure that they're amortized over a 10-year schedule. Then we could actually pack-- we don't need to, [? like, ?] get on to restaurants right now. But I think if we can get a few months and then if we have to borrow for a few months-- again, if it's borrowed at low or no interest rates and with a long amortization rate, we can get by.
MYLES UDLAND: Andy Serwer, a question to you.
ANDY SERWER: A question to me. Sorry about that. Tom, this sort of follows up on what Dan Roberts was talking about, which is staying open or closing and making that kind of decision, you know, across the country. And we know Danny Meyer closed Union Square Hospitality Group early on and kind of shocked people. But is it better just to fold the tent, or should you make that $5,000 a night? I mean, what makes sense?
TOM COLICCHIO: Again, I spoke-- I spoke to Danny the morning when he announced, and I announced soon after he did. And we both agreed that the determination was to close the restaurants down to keep our staff safe, which is also important. Obviously it's important to pay them. But even if you're running an operation where you're doing a few meals to go, you're really only employing at that point four or five people. So it's not-- I mean, I laid off 300 people. Danny laid off 2,000.
So this is the other thing that's important. Right now in the negotiations in the Senate bill, Mitch McConnell's bill, there was numbers of about a thousand employees that you couldn't tap into some pools of money after the employers-- if the company had over a thousand employees. It doesn't really make a whole lot of sense when you think about it because, you know, in Danny's case, he has 2,000 employees, but it's spread over 18 restaurants. So I think the real number is if you have that many restaurants, I don't think putting a number of a thousand for the enterprise is a good idea. I think you've got to drill down to the individual LLCs or the individual restaurants to make that work.
MYLES UDLAND: And, you know, Tom, we'll get you out of here on this. You mentioned the Independent Restaurant Coalition that you formed, and you've talked to lawmakers about your proposals. Can you just give us a sense of what your conversations have been like and if you feel like you're getting through to the people who are going to be in a position to make sure that this industry gets what it needs so that when we do get to the other side of this, when July does come we have a restaurant industry to go back to?
TOM COLICCHIO: Yeah. So we're making a difference. You know, besides running restaurants, I co-founded an organizational called Food Policy Action. It was based in Washington. We created a scorecard. We graded Congress on how they voted around various food issues.
I spent a lot of time up on the Hill, so I have a lot of contacts up there, and they're listening. They want to hear from their constituents, especially when you look at the amount of restaurants that are out there. You're talking hundreds of thousands of individual restaurants.
And we're not only talking about celebrity chefs like me. We're talking about the mom-and-pop, the little Mexican restaurant on the corner, you know, recent people who have their green cards and decided to get into business. You know, they're struggling too, and that's who we're fighting for. But they're listening.
And also they want to hear-- they don't understand how our business works. And so when you explain to them that, again, 90% of the revenue that we take in goes out the door and we can keep that entire ecosystem going, it really speaks to their wanting to know how they can affect as many people as possible. So they're listening.
MYLES UDLAND: All right, Tom Colicchio, we really appreciate the time, really appreciate the work you're doing on this issue, and hopefully we can talk to you soon.
TOM COLICCHIO: Thank you. Any time.