One Month into Mandated Hospitality Closures Situation is Dire
Tuesday April 21, 2020, Des Moines, IA– On the heels of the National Restaurant Association’s Monday announcement that two of every three restaurant employees across the country have been laid off or furloughed, 40% of restaurants have at least temporarily closed their doors, and that the industry will lose $240 billion before the end of this year, the Iowa Restaurant Association today released state numbers that are equally grim.
“Iowa’s hospitality industry is on the precipice of collapse,” said Jessica Dunker, President and CEO of the Iowa Restaurant Association. “We desperately need to find a path to responsibly open our doors, even if it’s a graduated, rolling re-open strategy that includes social distancing measures. The longer these on-premise service suspensions are extended, the more operators we will permanently lose.”
The national and state associations conducted independent studies last week, one month into Iowa’s mandated suspension of on-premise restaurant and bar service due to COVID-19. The Iowa study included 650 hospitality operators, or 10% of establishments, from across the state. It reveals that it could take years for Iowa’s hospitality industry to recover from the temporary mandated service closures.
“It’s hard to say which indicator is most distressing,” said Dunker. “Sales declines, job losses, waning prospects of re-open and re-hire, or how little help the various relief programs have provided. You just can’t put a bandage on a hemorrhage this big.”
Economic Realities for Iowa’s Restaurant Industry
The Iowa and National Restaurant Association studies of Iowa operators found the following:
- 95% of Iowa restaurant operators report their total dollar sales volume is down from this time last year
- On average, restaurant operators reported a 75% decline in sales from last year to this year.
- Bar owners fared far worse, 92% are completely closed, resulting in a 89% decline in bar sales over the same period in 2019.
- When compared to 2019, survey results indicate that Iowa’s restaurant and foodservice industry will lose more than $310 million in sales in April alone.
- 87% of Iowa’s restaurants and bars have laid off, furloughed or terminated employees in the past 30 days.
- Once they are able to re-open, only 45% of Iowa’s restaurants and bars project being able to re-hire all of the employees they released due to COVID-19 shut downs.
- While just under 40,000 Iowa hospitality industry employees have filed for unemployment, the industry estimates that more than 66,000 have been laid off or furloughed since the beginning of the coronavirus outbreak in March.
- The Iowa study found that 58% of restaurants, bars and other hospitality venues that offer food are trying to use carryout, drive thru and delivery. However, for most it’s not profitable, simply covering the costs of maintaining a small number of employees and paying rent.
- 48% of restaurants and bars that are offering food, are taking advantage of the temporarily relaxed alcohol rules in the state. Breweries, golf courses and other hospitality venues have also been able to operate on a limited basis using the temporarily relaxed rules.
- The majority of bars (77%) have not attempted to take advantage of the relaxed rules, citing reasons ranging from “unable to compete with retail prices” to “can’t sell enough mixed drinks to make it profitable.”
Regarding the INABILITY to re-open if on-premise service suspensions are extended, the Iowa Study found:
- May 1, 10% of Iowa Operators will not be able to re-open
- June 1, 18% will not be able to re-open
- July 1, 26% will not be able to re-open
Business Disruption Insurance
- About 70% of Iowa’s restaurants and bars have business disruption insurance policies, however, 99% of those with policies have not yet received any claims benefit.
- 46% have been told by their agents that even though they have a business disruption policy, they should not file a claim because it will be denied.
- 36% have filed a claim and its been denied.
- 15% have filed claims and are awaiting word from their insurance company.
- 1% have filed a claim and received a benefit payout.
Economic Relief Measures and Strategies
- Nationally, over 60% of restaurant owners say that existing federal relief programs – including the CARES Act—are not making it possible for them to keep employees on payroll throughout the downturn.
- In Iowa, 17% of operators have applied for and received funds from the Federal CARES Act Paycheck Protection Program (PPP).
- Another 26% of have been approved for the PPP dollars but have not yet received them.
- Another 24% have applied for PPP and are awaiting word of approval or denial.
- 49% of restaurant owners/operators have asked for and received some amount of relief from their landlord and/or mortgage lender in the form of forbearance or other deferral.
Hospitality Industry Still Needs Federal and State Help
The Iowa Restaurant Association along with the National Restaurant Association has called for significant federal assistance including the creation of the “Restaurant and Foodservice Industry Recovery Fund” which would allow any restaurant that has experienced a 25% or more decrease in revenue due to COVID-19 to access funds.
The Federal Fund would:
- Compensate restaurants for government ordered closures
- Provide reopening “start-up” capital to meet massive challenges of reorienting the restaurant space, restocking inventory, and supplying the workplace with new safety equipment
- Help with the rehiring and retraining of workforce
“The state of Iowa has taken a number of steps to try help us – from relaxing rules to granting tax deferrals and small grants,” said Dunker. “We will work with the state to try to extend and expand those programs where possible, but ultimately, it’s going to take the type of Federal-level bail-out afforded to huge industries like the airlines, to save small restaurants and bars. We just hope it comes before it’s too late.”