Restaurant owners are forecasting massive closures. What would they need to survive?

Picture Midtown Village a year ago, maybe around happy hour: It would have been teeming with people going to El Vez, Barbuzzo, Sampan, Tiki, and another of the 15 or so bars and restaurants clustered along South 13th Street. The same could be said of several stretches of Walnut Street and Germantown Avenue, of East Passyunk Avenue and South Street, Lancaster Avenue in Ardmore, Haddon Avenue in Collingswood, State Street in Media, and Gay Street in West Chester.

Now imagine those same streets in a post-pandemic world, with less than half the restaurants that have helped define them.

“The sentiment among restaurant operators is that only 20% of us are going to survive,” said Philly chef Tyler Akin, citing a James Beard Foundation survey of 1,500 restaurateurs, of which 80% indicated they were uncertain if delivery and takeout would sustain them. In places where restaurants were forced to close, nearly 75% thought they would be unable to reopen after 2 months.

Akin owns Res Ipsa Cafe and Stock Restaurant in Fishtown and Rittenhouse, and is chef-partner at the Hotel Du Pont’s forthcoming new restaurant, Le Cavalier. But for the past two months, he has been preoccupied working on the leadership committee for the Independent Restaurant Coalition, an advocacy group that formed shortly after restaurants were shuttered by the pandemic.

We asked Akin about the IRC’s work — including the multibillion-dollar stabilization fund they’re proposing to legislators — as well as the impact of the Paycheck Protection Program (PPP) and when we might learn which restaurants will survive and which will close.

This transcript has been edited and condensed for clarity.

For decades now, the NRA — the other NRA [National Restaurant Association] — has kind of been the main channel for lobbying advocacy on behalf of the restaurant industry. They’re well-entrenched and they have full-time lobbyists and deep relationships on the Hill. [But] there was a sense as this crisis began to unfold that there would need to be a counterpoint protecting the interests of all these kindred places around the country that don’t have the lobbying muscle that the McDonald’s and the Applebee’s of the world do.

There was a group of people — José Andrés, Tom Colicchio, Kevin Boehm in Chicago, Andrew Zimmern, Naomi Pomeroy — who came together to form the IRC, and basically started inviting people in to be part of what they call the leadership committee, so that’s a group of people who are on a Zoom call that’s at least an hour every day.

In the past couple weeks, the organization has begun to be more formalized. Committees are forming and legal status and fund-raising efforts are being addressed. We were underwritten by American Express and Resy, which gave us the ability to retain lobbyists and hire a communications firm that specializes in the political space. Day by day, it’s becoming more of a buttoned-up organization that stands to survive this pandemic.

We’re literally in the process of defining this. Really it’s just an incredibly diverse coalition of people from around the country — people from different ethnic backgrounds and a variety of ages. There are single-unit operators with half a million dollars in sales, and there are people with 10 or 15 restaurants with anywhere between $50 to $100 million in revenue. But I think what we share is an ethos of treating food with care, treating our employees with care, and being part of the community in a way that I think a lot of national restaurants aren’t always.

The early conversations were about how can we try to shape the PPP as it relates to the restaurant industry, and then once PPP was passed, how do we interpret that program and disseminate an understanding of how to use it. And as it continues to be revised, how can we help the Small Business Administration and the Department of Treasury understand that — while it’s a great program for a lot of industries and we appreciate the underlying support of small business that prompted PPP — it really just does not work for us at all in the restaurant industry.

The PPP gives some light support to help restaurants reopen, but really it’s like an eight-week Band-Aid on what we see is a 12- or 18-month problem. One of the provisions of PPP is that you have to reestablish your full-time [employee] headcount from before the pandemic by June 30. We’re looking at 20 or 30% of revenue under this regime where we can only do delivery and curbside. And even if we’re in a position by the end of the summer where we can see 25% of our seats, I don’t think that gets us anywhere close to necessitating 100% of our old workforce.

For businesses like ours that require socialization and guests coming into the restaurant, it’s kind of an unworkable plan. So we’re hoping to extend that eight-week [deadline to use the funds past June 30] and allow more than 25% of the funds to be used for rent and utilities.

What we proposed was a $120 billion independent restaurant stabilization fund that would be only accessible to nonpublic companies with 20 or fewer locations. That money essentially replaces a percentage of our 2019 revenue. The intention is to account for the fact that we’re not going to be anywhere near our historical sales anytime soon, yet we still have to make the same rent payments, the same utility payments. And if we’re not able to do that, we’re facing eviction and bankruptcy, and we won’t be able to provide jobs.

We sent a letter to congressional leadership on this topic about a week and a half ago. And really it’s been a grassroots effort since then to put chefs in front of their local legislators and tell them our stories: Tell them about the day in March when they had to lay off 90% or 100% of their staff; tell them about how the PPP is not working; how drastically our sales have declined, even when we are operating curbside and delivery operations. And remind them that we have, I think, the weakest safety net because we operate on such slim margins, we don’t have access to capital in the public markets, and in a lot of cases we don’t really even have borrowing relationships with our banks — because that is the posture financial institutions have taken with respect to restaurants for a long time, that we are not always worthy recipients of loans.

I think it’s a cause that appeals to both Democrats and Republicans because it saves jobs. We disproportionately contribute to sales tax revenue in our local jurisdictions. We are in a lot of ways like a primary driver of the national economy. Even though as individual units we’re small, when you put us all together we’re 4% of the GDP.

Yeah, one point that isn’t being discussed a lot is the systemic nature of how we fit into the commercial real estate market. When you drive around Center City Philadelphia, for instance, you can see just how much restaurants have filled the void of retail moving online. We are the primary tenants for commercial landlords. If we all are in a position of closing, I think that it becomes a much more systemic issue that is going to be a lot more expensive to fix than spending on this restructuring that we’re proposing.

The other thing I wanted to mention is how devastating this has been for all of our suppliers, whether it’s wine purveyors or whether it’s farmers who aren’t able to sell their stuff in Acme and Whole Foods. I think you’re going to see a massive number of bankruptcies among fisheries and farms around the country, which is just really unfortunate.

We are going to relaunch Stock and Res Ipsa in the next five or 10 days. We thought it was in the best interests of our guests and our staff’s safety to keep the lights off until things started to slow down a bit, and we’ve seen that slowing down a bit. Does it feel 100% right? No. But is it 100% necessary to avoid closing outright? Yeah, it is.

I think that barring the passage of a stabilization fund that is targeted to us, or some more generalized funds for small businesses that we have access to, you’re going to see a lot of really unfortunate announcements this summer, when the eight-week PPP lifeline expires for people.

We were already a low-margin business, and we’re in a position now of having to generate revenues through delivery partnerships where we lose this huge piece of that money coming in. The only reason it’s working right now is because labor is subsidized through this PPP money. As soon as that money expires or is spent, I think that baseline of revenue at 30%, 40% or less, [takeout and delivery-only] becomes completely impracticable.

There are several restaurants around the country that just decided to pull the plug instead of playing this game at all. And I don’t blame them. What I’m bracing for is just a really long and sad summer if we don’t get this thing passed.

I’d recommend they go to saverestaurants.com and sign up for our email list. We also have some really easy ways to generate support letters for our efforts that target the legislators in your own jurisdiction. If people can find the generosity to contribute a little bit of money to IRC, it would be greatly appreciated. But really the best thing to do right now is just in any way possible remind legislators, how much we mean to you.