RESTAURANT OPERATORS ISSUES WITH THE CURRENT PPP
As we understand it, one of the many issues with the PPP is the timing of the loan. Many operators would prefer the flexibility to choose a different eight-week period during which to spend the money. Taking the money now, when the stores are still closed, could make the operator's financial burden worse. The idea behind the PPP is to help operators ease the financial burden of the pandemic and get people back to work. The timing of this is uncertain, so the loan should not be restricted to a period when operators can't open for business. If the current system remains in place and operators taking out loans in the next few weeks, it's unlikely many will be eligible for forgiveness on the loan
Another, even more, significant issue is how many employees are going o return to work for a salary, and tips with the enhanced unemployment benefits will pay them nearly $25/hour. The restaurant industry was among the first businesses that closed to keep everyone safe. Yet the PPP in its current form is not considering that.
BLACK BOX UPDATE
In March, same-store sales for restaurants dropped by 28.3%, and same-store traffic fell by 29.2%.
The hardest-hit regions with large metropolitan areas with high population density and during the final week of the month, the Southeast was the only region that experienced less than a 60% decline in year-over-year restaurant sales. Same-store sales for the industry dropped by more than 65% during the last two weeks of the month. The good news is sales may have reached bottom based on early April data.
According to Balck Box, “limited-service restaurants (those in quick service and fast-casual) had a sharp acceleration in their guest check growth, as consumers likely shifted to larger off-premise orders to feed multiple people at home. Meanwhile, guest checks dropped considerably for full-service restaurants, a drop that was fueled in large part by beverage sales being almost eliminated by the shift to off-premise only operations.”
As expected, fine dining and upscale casual were the worst-performing segments during March, and family dining was another segment that declined significantly. Quick service and fast-casual were the best performing segments based on sales growth during March. During the last week of March, full-service restaurants were seeing same-store declines of more than 70%; fast casual’s (i.e., CMG) decline was about 50%, and quick service lost only about 30% of its sales during the week.
Same-store sales dropped by more than 70% for New England, the Western region, New York-New Jersey, the Mid-Atlantic, and California during the last week of March.
A survey by Black Box Intelligence conducted in early April revealed that 22% of participating restaurant companies had to lay off employees, while the percentage that said they had to place some employees on leave was 67%
Howard Penney
Managing Director
