Decimated By the COVID-19 Crisis, The Restaurant Industry Needs a Bailout. Now.

Restaurant industry leaders share what the state of Wisconsin and the federal government can do to help while their doors are closed and their employees are out of work.

The Recombobulation Area is a weekly opinion column by veteran Milwaukee journalist Dan Shafer. Learn more about it here.

Small Pie cafe in Bay View is adjusting to the new reality where going to a restaurant is a public health threat. Photo by Andrew Menchal.


As orders to close restaurants and bars for dine-in service came from city and state government on Monday, Paul Zerkel, chef and part owner of Goodkind, started to cook. But instead of cooking for people filling the tables at the renowned Bay View restaurant, he was cooking for his employees.

“(We) just spent the last three days cooking all of our perishables off soup kitchen style for our staff to fill their fridges,” he said Wednesday. “It's the only benefit we can afford to give them right now. My partner (Jessica Seidel, part owner) described it as: (we) gotta put our oxygen mask on first.”

The restaurant industry had little time to brace for impact once the COVID-19 crisis hit. As restaurants put on their own oxygen masks and find ways to support their employees, the ground continues to shift underneath them. And at Goodkind, that means 46 people are now out of work. 

Like so many of us, people in the restaurant industry have been adapting as best they can to the effects of the crippling global pandemic. The big difference for chefs and servers and bartenders and everyone else in the restaurant industry is that their livelihoods depend on places that, when open for business, are now a threat to public health. 

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Restaurants are entering a situation — entirely outside of their own making, it should be noted — in which they are forced to completely change the way they do business by having delivery or take-out as their only options to serve customers. They’ve had no time to prepare for this, and none of us know when this national quarantine will end.

“Our teams are terrified,” said Valeri Lucks, founder and CEO of Pie Inc., the restaurant group that includes Honeypie Cafe, Honeypie Bakeshop, Palomino and SmallPie. “Most of the people who work for us live paycheck to paycheck, and if you talk to most restaurateurs, they live paycheck to paycheck, or their businesses do, in the same sense,” as most restaurants operate on especially slim margins, making this situation all the more urgent. 

Lucks said they have about 100 employees who are “instantly” out of a job this week. In Madison, restaurant group Food Fight furloughed about 750 employees on Tuesday. The number of people who are going to be out of a job in the restaurant industry in Wisconsin alone is going to be well into the thousands by the end of the week. 

The restaurant industry needs a bailout. Now.

“12 years ago, I was more than happy for my tax dollars to go to bail out the banking industry,” said Lucks. “And now I hope the banking industry is going to return the favor, and that the government is going to find a way to bail out the small businesses that build up such an enormous part of our economy and our cities.”

The restaurant industry plays a bigger role in the economy than you might think. As Derek Thompson notes in The Atlantic, “Restaurants are the new factories, and without them state and local economies across the country would fall to pieces.” Nationally, there are now about as many jobs in the food-service industry as there are in manufacturing. 

Well, there were. Restaurant employees are going to need help, and fast. In the age of coronavirus, we need a government that’s going to act quickly, and nimbly address the problems people are facing. And while the federal government and the Trump administration have stumbled to address the coronavirus crisis, with testing still lagging far behind the rest of the world, it’s been state and local leaders of both parties who have been rising to the challenge. 

So as the federal response lags, what can our state and local leaders in Wisconsin do to address the grave situation in its restaurant industry? What does a bailout of the restaurant industry look like?

In 2019, nine percent of employment in Wisconsin was in the restaurant and food service industry. Those workforce estimates were shared with the leaders of the Wisconsin State Legislature Tuesday in a letter from 40 Milwaukee area establishments calling for immediate action to help, saying “We need the support of state leaders now.”

John Revord, owner of Milwaukee restaurants Boone & Crockett, Snack Boys and Horned Hare, shared a copy of that letter with The Recombobulation Area. You can read here in full here:

March 17, 2020

Dear Speaker Vos and Majority Leader Fitzgerald,

We write to you as representatives of restaurants and bars in Milwaukee. Our small businesses are anchors in our neighborhoods, providing much more to our communities than food and drink. The current COVID-19 health crisis has proved an enormous challenge to our industry. As restaurant leaders, we are committed to taking care of our employees’ immediate safety and financial needs while also honoring public safety recommendations. Current federal guidelines for unemployment benefits fail to account for the urgency of a pandemic situation (https://dwd.wisconsin.gov/dwd/publications/ui/ucd-18771-p.pdf). We need the support of state leaders now.

The National Restaurant Association estimates that restaurants and food service jobs accounted for 9% of employment in Wisconsin in 2019, and that estimated sales in wisconsin restaurants in 2018 topped $10 billion. We represent a vital economic industry and employ a significant portion of Wisconsin workers. As such, we deserve your attention, and we call on you to provide us relief during this unprecedented crisis. Financial relief now will give this industry a chance to bounce back when regular life resumes.

After witnessing the hardships that our staff and businesses are currently experiencing, we have identified the following actions as critical:

  • Support emergency unemployment benefits for all affected restaurant and bar workers, hourly and salaried;

  • Suspend payroll taxes and sales and use taxes immediately;

  • Enact rent, mortgage, utility bill and loan abatement for restaurant and bar workers; and

  • Enact rent freeze and mortgage abatement for restaurants and bars

Thank you in advance for taking swift action on our behalf. At this point in time, the support of the Wisconsin legislature is absolutely critical to the survival of these small businesses and the well-being of our workers.

Signed,

Strange Town, Cloud Red, Snack Boys, Lost Whale, Voyager, Cactus Club, This Is It!, Boone & Crockett, Tandem, Fat Daddy’s, BelAir, Fuel, Comet, Balzac, High Hat/Garage, Finks, DanDan, Ardent, Red Light Ramen, Laughing Taco, Amilinda, Rice n Roll Bistro, KIN by Rice n Roll, Company Brewing, Mothership, Vanguard, The Riverwest Cooperative Grocery and Cafe, Interval, Alem Ethiopian Village, The DIplomat, Thief Wine, Dream Lab, Jazz Estate, Bryant’s, At Random, Classic Slice, High Dive, X-Ray Arcade, Anodyne Coffee Roasting Company, Good City Brewing

This comes days following a message to Gov. Tony Evers that originated with a Madison-based group that includes Francesca Hong, chef and co-owner of Morris Ramen, Tory Miller of DEJA food group, and Molly Maciejewski of Madison Sourdough Company, who shared a letter via Morris Ramen’s Facebook page. That letter was updated Thursday, March 19, co-signed by more than 50 restaurant industry leaders in Madison. Read the full letter here:

March 19, 2020 

Governor Evers, Speaker Vos, Senator Fitzgerald, Mayor Rhodes-Conway; 

We are a group of independent restaurant owners, chefs, farmers, hospitality professionals, and entertainment industry who make the city of Madison and the state of Wisconsin one of the greatest dining and visiting destinations in the U.S. 

Currently, our staff, who is our family, and our businesses are at tremendous personal risk. There are few workers in the state of Wisconsin who are as vulnerable and as valuable as the artists, artisans, and creative forces that fuel our businesses. We are calling for your administration to take action immediately to help our industry. 

There are too many unknowns for us to make informed, heavy, and maybe devastating decisions of staying open or closing. If we knew there was real aid available for our teams we could help salvage what we believe to be an integral part of the Wisconsin identity-communities coming together over food. 

We demand the following actions take place: 

  1. Immediately support emergency unemployment benefits to all hourly and salaried workers furloughed during this crisis.

  2. Eliminate Sales and Use Tax & Payroll Tax immediately.

  3. Call for rent and loan abatement for workers and employers. 

We in the hospitality industry are at a loss when we are not able to serve others. We are asking you and trusting you, the Governor, to help guide us and take action as soon as possible. 

Sincerely, 

The Chefs, Restaurant Owners, and Hospitality Professionals of Wisconsin

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After putting out an open call to find out what people in the restaurant industry are looking for from their government, more people shared ways the government could help the industry.

From Revord:

  • Immediate wage compensation for our employees (specifically part time and largely tip based not eligible for greater unemployment benefits)

  • Fast track unemployment for laid off employees

  • Fast track health benefits for the uninsured

  • A 90-day moratorium on mortgages for those that own their buildings 

  • A rent freeze with tax credits (or other significant compensatory benefit) made available to owners that participate

  • A change in insurance policy language that will let us file claims under National Disaster status. (It's shit, but not surprising, that the safety net we already pay for is refusing to step up)

  • State and or Federal stimulus dollars for both small business owners and their employees. Both now and at the end of this. 

Gil Amador, executive chef at The Waterlin in Menomonee Falls and Delta by Marriott Milwaukee Northwest, said “We need our laid-off staff to get cash, tax breaks after (the) crisis is over and free medical coverage, like, immediately. We also would need to freeze utilities/rent/mortgage pay for a little bit, or some sort of subsidy.”

Amador also said mental health was a real concern for laid off workers in the industry.

“Not to sound pessimistic, but mental health is a big issue in this industry, taboos are finally going away, but this will likely enhance/trigger some symptoms,” he said. “Some virtual help could help...We'll have to deal with some severe physiological reaction. It's rough.”

Ryan Clancy, owner and operator of Bounce Milwaukee, candidate for Milwaukee County Supervisor and the founder and legislative liaison of of PRAWN (Progressive Restaurants and Activists of Wisconsin Network), was “elated” to hear about Gov. Evers submitting a request to the U.S. Small Business Administration (SBA) for Economic Injury Disaster Loan assistance. 

Before that request, Clancy said “We need a declaration of disaster, so that small businesses can access the SBA loans already in place. Businesses are having to choose between paying employees and having enough on-hand to reopen their doors. Until a disaster is declared, we can’t access those loans.”

So, that request is one of a number of things the Evers administration has done this week. On Wednesday evening, Evers issued an Emergency Order “waiving work search requirements and modifying the availability requirements for unemployment insurance (UI) benefits for workers impacted by COVID-19.” And the state-run Wisconsin Economic Development Corporation announced that it would be issuing targeted grants to small businesses that :suffer losses related to the crisis. 

“This is a program targeted at some of the ‘smallest of the small’ businesses that are vital to their communities. Many of these businesses, especially retailers, restaurants and small service providers, typically operate on the narrowest of margins,” Missy Hughes, WEDC secretary and CEO, said in the release. “Many don’t have the cash reserves needed to survive a substantial loss of revenue, which can happen with a prolonged emergency. SB20/20 will help put cash in the pockets of these businesses and their employees when they need it most.”

The state legislature, however, is yet to propose any legislation, and — because of the current danger of congregating in large groups — is yet to meet. The Assembly has already wrapped up its work for the year and the Senate had just one date remaining on its entire 2020 calendar (yes, really). Fitzgerald and Vos have postponed that session for safety reasons, and in the meantime, these Republican leaders have been in contact with Evers, moving toward a “potential aid package.”

But talk of anything more specifically targeted at helping the restaurant industry at this crucial time is still forthcoming from the state government. And that’s the case nationally, too, where federal help is riding on Congress’ ability to act.

President Trump spoke with CEOs of fast-food chains on Tuesday, and the National Restaurant Association sent a letter to the president saying “we are anticipating sales to decline by $225 billion during the next three months, which will prompt the loss of between five and seven million jobs.” The restaurant owners’ request is for a $325 billion bailout, which breaks down as one $145 billion recovery fund to meet immediate needs, $100 billion in federally-backed insurance, $35 billion for community block grants for businesses typically used in situations of a natural disaster, and $45 billion in federal loans.

Revord said there is a lot riding on the federal response.

“As far as I've witnessed, everything keeps getting pushed up the ladder,” he said. “At the very least, Congress needs to act now.”

Said Lucks, “That’s what's scary for all of us who are standing in this stream together is we don’t know if this hingest more on the federal government or the state legislature. We’re not getting clear answers, it’s changing so fast, we’re building business plans in hours trying to adjust and readjust, so I don’t think any of us know. I think we’re all just drinking from a firehose right now. At this point, I think we’re just looking for anything that anybody can do.”

The end goal for these restaurants is simply to be able to survive this crisis and come out the other side able to hire back their employees, open their doors, and once again welcome guests. 

“We have to find a way to help this industry,” said Lucks. “This industry is so critical to the fabric of cities. The ripple effects of this are so huge if this industry doesn’t come out of this.”

The economic importance of an industry that makes up nine percent of the state’s workforce is undeniable, but there’s more we stand to lose if these restaurants disappear. Food is culture, and the cultural importance of the restaurants and bars that make up the backbone of our neighborhoods can not be overstated.

More than big projects like the Bucks arena or the Northwestern Mutual tower, it’s been the restaurant and entertainment industry that’s been responsible for the rebirth of Milwaukee’s downtown and the making of Milwaukee as a city on the rise.

“I feel like restaurants and bars have made this state a food destination, including being part of getting the DNC,” said Zerkel. “The lawmakers have to see that and understand we need help.”

Whatever we can do to bail out this industry now -- and I mean, right now -- we need to do it. An industry can not exist through GoFundMe pages and gift card drives. It needs the help of the federal government, and it needs the help of state and local government, and there is no time to waste. Restaurant workers are living paycheck to paycheck, and waiting for unemployment benefits to kick in or for loans to go through is not enough.

Restaurants are being clear in their message to state government about what they need to survive. We need our government to listen to them, and to save this vital industry that provides so much to all of us. We can’t calculate how much we might lose if this vital part of our city and state are not able to weather this storm. The enormous importance they have to our economy and to our culture makes them too big to fail. We cannot let them fail. 

Bail out the restaurants, now. 


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