Can the Food Service Industry Survive Coronavirus? - YouTube

They say diseases don’t discriminate, but that’s not really true. Some people will

be more impacted by the coronavirus than others, medically and financially. And the same is

true of businesses.

Giant corporations might see their stock prices sag, but they probably have enough cash on

hand to weather the storm. Grocery stores and personal health suppliers have seen a

surge in sales. And even some small businesses are doing okay, like bike shops and farmer’s

markets, as people look for ways to recreate and shop away from crowds and enclosed spaces.

But those are the exceptions. According to the Census Bureau, retail sales fell a mind-blowing

8.7 percent in March--that’s 3 times worse than the previous biggest drop on record.

And unlike Amazon or Target, small businesses typically have very little margin for disaster.

According to one study, the “vast majority” of small businesses don’t have enough cash

on hand to pay for two months of expenses without revenue, and the median can’t go

two weeks!

This leaves a lot of owners in tight spots with limited options. We spoke with some

about how their businesses have been impacted by the pandemic….

Well, I'm a long-time entrepreneur. I've started businesses my entire adult life. 13 years

ago I started Fresh N' Local Foods with a real passion for trying to improve the quality

of food that our kids are eating. And we serve schools, small rural schools districts, charter

schools, boys and girls clubs, headstarts, anywhere kids eat, basically.

Wow, and normally, pre-COVID, how many people did you have on staff? How many schools were

you serving?

Yeah, we had 38 people. We had production people, delivery drivers, and we served tens

of thousands of meals throughout Oregon and Washington. Obviously, as soon as they closed

schools, it basically was like the rug was pulled out from under us. We went to, y'know,

that level of volume to essentially zero overnight.

Wow.

Initially, we were being told, "Oh, this is just a slightly longer spring break." So we

thought, okay, we can keep people employed for that time. And then the date was the end

of March, and then it was the end of April, and then it was May... Y'know, we kept on

those employees through that period. Because of that, we burned through a lot more cash

in a lot shorter amount of time than we had thought. Eventually, we did just have to let

everybody go, which was pretty devastating.

With the mandatory closing of “non-essential” venues where people congregate, food service

became one of the first and hardest hit sectors. According to the National Restaurant Association,

the industry has laid off or furloughed 8 million employees, and will lose over $50

billion in sales in April alone. Some restaurants are attempting to change their business model,

like selling meals to go, or even groceries, but it’s difficult to make even a fraction

of one’s previous revenue that way. People don’t go to restaurants for the food alone.

They go for the experience. The atmosphere, the service, the company. I miss company.

I've been cooking professionally for like 17 years. I think it took me a decade to get

to where I felt like taking on a restaurant of my own. And Olamaie's been operating for

six years.

So, how has coronavirus impacted your business?

I closed the restaurant on March 16th. And I chose to completely close the restaurant.

Leading up to that, I did some math. Many restaurants, the strategy they've chosen to

employ is pivot their model. So, they're going to a takeaway or delivery system. I did the

math and for me, to go to a takeaway and delivery system, I would have continued to lose money,

and in addition, I would have been in a position to compensate the team that works with me

at a lower rate. Y'know, I expect to be operating at some point in the future. But we chose

to let everybody go and put them on unemployment, because they would be making more money than

if I had to gone to takeaway or delivery. So, at this moment, everyone's on unemployment,

and I have continued to pay their health insurance.

To make even a modest profit margin, a small business must be a finely tuned financial

engine: balancing expenses and revenue, predicting supply and demand, knowing your customers

inside and out. Changing one’s business model can feel like taking apart a car and

trying to build an airplane out of the same parts.

Although mandatory closings are responsible for much of the lost sales, recent figures

show that the downturn has spread to retailers that could theoretically still be open for

business: electronics, sporting goods, books, furniture, cars, clothing--almost everybody’s

feeling the pain. Which isn’t surprising. With so much unemployment and uncertainty,

people are (understandably) cutting back wherever they can. Who’s going to buy a new car if

they don’t know when they’ll have a commute again?

To extend a lifeline to small businesses, Congress created a $349 billion loan fund

called the Paycheck Protection Program. It offers super-low-interest loans to companies

with fewer than 500 employees, which can be partially or totally forgiven, if the business

uses the money to keep their employees on the payroll.

What has come through for you as it relates to the stimulus bill that went through? What's

been your interaction and experience with that so far?

Yeah, so we did apply for the SBA disaster loan, gosh, three weeks ago now, and have

not heard anything back. As far as the PPP is concerned, I was really lucky enough to

have a banker through Bank of America who called me Tuesday night at like 9 o'clock

at night and said, "Okay, the link's gonna be live tomorrow." My banker had given me

a heads up as far as what type of reports and documents that were going to be required.

So I was ready to go as soon as that link was live. And then just got another call from

her last night saying that the PPP loan for Fresh N' Local is in underwriting now. So

I'm hoping that funding occurs within days.

Applying for PPP has been a struggle for a lot of people. A crush of applicants means

long wait times, and you have to apply through established banks and lenders. Since these

institutions tend to give priority to their existing customers, if you don’t already

have an account with one of them, you’re sent to the back of the line, and guess what?

All $349 billion is already spoken for. Congress is finalizing a bill this week to add more

money to the fund, but the sooner you can get your application in, the better.

We fortunately applied and received our Payroll Protection Plan loan. But I have chosen not

to spend any of that money--the money hit our account three days ago--but I'm not gonna

spend a dime of it until I understand how much of that loan will be forgiven, as well

as kind of, what the right strategy is for our team.

We've talked about just kind of sitting on it and waiting to use it until our natural

cycle and our school year comes back. We've talked about y'know, utilizing it for other

things that are really important right now and then just not asking for forgiveness,

and just kind of terming that out down the road. But, now that we have this new potential

operation that we're gonna be setting up in the next week to help supplement the Meals

on Wheels program regionally... if that all works out, we'll be able to bring back some

employees, then certainly I will utilize it for them.

Confusion about eligibility for loan forgiveness is widespread. According to U.S. Treasury

guidelines, any money you spend on rent, utilities, mortgage and payroll will be forgiven if you

don’t lay off any employees and use 75% of the loan on payroll. This is meant to encourage

businesses to keep their employees, but here’s the catch: you have to spend all of the money

within 8 weeks of receiving it. If you own a business that you know won’t be open in

that timeframe--like bars and restaurants--that puts you in a strange predicament. Do you

apply for the loan and use it to pay your employees to stay home? Or do you lay them

off so they can collect unemployment benefits that might be even better than what you can

pay them?

I'm involved in several calls across the country; we have Zoom calls with operators from both

coasts. I'm involved with the James Beard Foundation, who's been incredible. They've

pivoted and provided resources. Even though I'm lucky enough to be in those phone calls

and in those virtual rooms, I still don't have a clear understanding. The government

hasn't given us any other idea what further assistance we have. And the PPP is a drop

in the bucket in relation to what this industry's gonna need.

Uncertainty is like kryptonite for businesses, large and small, and this crisis is so unprecedented,

there are countless unanswered questions. Is this a recession or a depression? What

further government assistance will there be? Will the economy be open this summer? This

year? Entrepreneurs are expected to be resourceful and adaptable, but you at least have to be

confident that your industry still exists.

The challenge right now, I believe, for us as businesses, is that there are multiple

narratives from multiple places. Managing the narrative in a way that helps a huge portion

of our economy understand what's around the corner... would be really helpful.

The hard truth is that we are still in the early stages of this crisis. As economist

Paul Krugman puts it, the economy is in a kind of “medically-induced coma.” It’s

not until the infection is licked that we can wake the patient back up and see how much

damage has been done.

I'm curious how optimistic you are about the survival of Olamaie as it stands today.

I'm super confident. Olamaie's gonna be back. We're gonna be doing things differently. We

may be offering like a meal pack for four that you pick up at 5 o'clock, and then running

our standard dinner service but taking less reservations, so that we can make sure that

people are spread out.

I definitely am encouraged with some of the new partnerships that we've got with the food

share and I'm feeling very hopeful now that we can figure it out. We can be innovative.

Y'know, we've done it before, so we can do it again.

So far, the thing that I've learned through this process the most is that our community

is everything. Trying to find ways to help each other has been, I think, the most helpful

thing and what I would continue to push everyone to try to do.

Relationships and communication are key. Whether you have a staff of a hundred, or are an independent

contractor, find others in your same situation and start comparing notes. You could discover

resources and strategies you hadn’t considered, or learn from others’ mistakes. And solid

relationships with banks and financial planners will make it more likely that you’ll get

to take advantage of any government assistance down the road.

And if you have to make the tough decision to close up shop, you might find out how to

do it while limiting the financial damage.

Remember, this will pass. Things will return to a state of normalcy, and the more information

and relationships you have, the better your chance of rebuilding your business.

And that’s our two cents.

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