The Restaurant Industry Doesn’t Need Another Bailout

Many diners are returning to pre-pandemic eating habits. But many restaurant owners themselves—still feeling the lingering effects of the pandemic and government-ordered closures—are demanding another round of federal support for their industry.

Last week, the Democrat-controlled House passed the Restaurant Revitalization Fund Replenishment Act on a mostly party-line 223–203 vote. Another $42 million would be spent on grants to compensate for losses in bars and restaurants that were affected by the pandemic.

American Rescue Plan legislation, which was passed in March 2021, created the federal government’s Restaurant Revitalization Fund.. It had spent $28 Billion in grants to restaurants and bars three months after the pandemic. According to the Small Business Administration, which manages the program, approximately 100,000 people had applied for grants at an average of $283,000 by June 2021.

SBA has received total 278,304 applications for grants from restaurants and bars requesting $72 million in COVID relief grants. Restaurant industry members argue that another round is needed to provide funding to the people who were not eligible for the initial handout.

Independent Restaurant Coalition (IRC), in a survey, discovered that nearly half of those restaurants which had not received SBA grants for their operations predicted closing within six months. About 20% of the restaurateurs who received relief grants from SBA said that they planned to close their doors within six months.

Erika Polimar, executive director of the Independent Restaurant Coalition, stated that “after two years of missing rent, supplier and utility payments and navigating astronomical foods costs and multiple COVID-19 spikes that brought businesses to an abrupt halt, independent restaurant and bar owners are out of options, time and money.” There is one way out of this financial crisis. Give these companies the financial support that they require before it’s too late.

Contrast this with data points that show a recovering restaurant industry after the dark days of COVID-19.

OpenTable’s most recent State of the Industry data shows that nearly 95 percent of the restaurants which opened in 2019 accept reservations. Remarkably, reservations have increased to 2019 levels.

The trend for upwards in the restaurant industry is slower.

Preliminary data from the Bureau of Labor Statistics (BLS) shows that some 11 million people were working in bars and restaurants nationwide in March 2022—about 5 percent below the number of people working in the industry in March 2019. BLS data shows that the number of restaurants has surpassed levels pre-pandemic as of the 3rd quarter 2021.

This is in line with the surprising finding that there are now more small businesses than ever before the pandemic.

Government restrictions and orders imposed on restaurants and bars throughout the pandemic were a major burden. Many states ordered them to shut down their restaurants for several months.

When they were allowed to reopen, it was often at significantly reduced capacity—a real imposition for a tight margin business. Some customers remained away from the business even after all vestiges were gone of lockdowns due to mandates regarding vaccine and mask use.

These government directives could be argued to give businesses the right to claim compensation.

Oliver Dunford of the Pacific Legal Foundation stated that if the government closes only specific businesses because they are areas that can spread the pandemic more rapidly, then that is an action the bar owner takes on behalf the public. This is the Reason Back in July 2020. “Arguably it should be paid for by the public.”

Congress passed the Restaurant Relief Act. It would reimburse businesses for revenue lost regardless of whether it was due to government mandates, or simply a customer’s inability to eat out. This proposal also comes at a moment when virtually no pandemic restrictions in place in the country.

Additional relief funding supporters aren’t overly concerned about whether the aid will cover government-imposed losses or help out restaurants generally.

“The Restaurant Revitalization Fund was designed to help restaurants deal with the consequences of the COVID-19 pandemic as well as challenges to the supply chain and workforce,” said Rep. Earl Blumenauer (D–Ore.Last week, the Restaurant Revitalization Fund Replenishment Act was authored by.

Polmar, IRC’s director of policy and planning, cites COVID-19 as well rising prices and “consumer hesitancy”, to justify more federal aid for restaurants.

Restaurant bailouts are no longer justified because of the need to save them from the current pandemic, but rather to alleviate the industry from ongoing challenges that have little to do with COVID-19.

It’s difficult to believe that this is possible when the sector is already on a path to recovery and where federal spending drives inflation to new heights.