“I’m living the dream,” says Michel Baudouin with a wry laugh. These days, asking a restaurant owner how he or she is doing is a rhetorical question, so the Bouchon and RendezVous chef and owner clarifies: “You have to keep a sense of humor and positive attitude or you’ll jump off a bridge.” Instead of taking that leap, Baudouin has focused on keeping the RendezVous kitchen running, offering pickup and delivery five days a week.
Aimee and Hector Diaz own Salsa’s, Modesto and Bomba restaurants in downtown Asheville. Before the March 17 shutdown, Aimee spent most of her time running the business side, while chef Hector oversaw the kitchens. But since furloughing nearly 50 employees, both have been at Modesto, cooking and expediting takeout while Aimee also navigates negotiations with landlords and vendors and wades through Paycheck Protection Program loan applications, banking relationships and government red tape.
“I’ve never worked harder in my life,” says the mother of four boys. “It’s a full-time job working with agencies and trying to understand and work within the legalities and conditions of these programs.”
In the nearly six weeks since in-house dining was banned in North Carolina and across the nation, the restaurant industry has not only suffered historic financial losses and record unemployment, but owners have also had to school themselves on the terms and conditions of government aid as they try to salvage their businesses.
“It’s been pretty much panic mode since we had to close,” says Stephanie Barcelona, who opened Bonfire Barbecue in West Asheville with her husband, Jeff Barcelona, five years ago. “‘Save the business!’ is all we’ve thought about every day.” The Barcelonas’ passionate letter describing their plight was published by Mountain Xpress on April 14 and generated tens of thousands of views and an immediate surge in the takeout service they’re maintaining.
Joe Scully and Kevin Westmoreland, co-owners of Corner Kitchen in Biltmore Village and Chestnut on Biltmore Avenue downtown, were among many local restaurateurs who made the decision to shut down all operations. On March 16, they furloughed all but one employee, their bookkeeper.
“We looked at takeout, but we’re not really known as takeout places, so we decided to focus on other things,” says Westmoreland. “We have somewhere around $75,000 a month in fixed costs, which doesn’t include salaries.” He notes that he and Scully spent most of their time during the first couple of weeks of the shutdown calling vendors to make arrangements.
“Nearly all of our employees have made it through the system to get unemployment,” he adds. “And we applied for the PPP, but as it is written now, it is too narrowly focused and ties our hands. Every single restaurant owner I’ve talked to feels the same concerns.”
That includes not just restaurants in Asheville but those across the nation. The Independent Restaurant Coalition, formed by chefs and independent restaurant owners in an urgent response to the crisis, began lobbying Congress in mid-March to get help for the nation’s 500,000 independent restaurants and their 11 million employees.
Initially seen as a lifesaver, the PPP — a 100% guaranteed loan via the Small Business Administration — has instead become a lead weight around the necks of many independent restaurants due to terms that are onerous to this particular industry.
The amount of the loan is determined by prior average monthly payroll costs times 2.5, intended to cover eight weeks of payroll. Seventy-five percent of the total amount must be used to fund payroll costs and just 25% can be used for overhead, including rent, mortgage and utilities.
‘A giant mess’
The deal-breaker, says the IRC and Asheville restaurant owners, is the time frame. The clock on the loan starts the day the money is received and requires recipients to hire staff at nearly preshutdown levels — even if the business is not open — and expires in eight weeks. The amount of the loan that can be forgiven depends on the degree to which businesses fully employ their staff in that period; any part not forgiven must be repaid within two years. Full loan forgiveness is only available if 75% of the loan is spent on payroll costs and 25% is spent on other qualifying expenses like rent and utilities.
“We applied for PPP, but if you have to rehire everyone the day you receive the money, then what?” asks Baudouin. “If we are closed, we are paying people not to work. Then at the end of eight weeks, if we are still not open, we have to furlough everyone again, and they all file for unemployment again. The government is telling us they want us to be the unemployment office.”
“Simplistically, the clock should start when restaurants can reopen and allow a longer period of time to spend that money,” says Westmoreland. “When restaurants do reopen, no one is going to be at full staff for some time.”
The IRC is asking for two urgent changes to the PPP: that the origination date of the loan be pegged to the first day restaurants can legally open and that the time frame of the loan be changed from two months to three.
Aimee Diaz and others also say the 75-25 ratio should be changed to take into account ongoing fixed costs and what restaurants will have to spend in order to restock inventory before reopening. “I am counting on people responsible for the PPP as it applies to our industry to do some very simple math, extrapolate the data and come to a sensible resolution,” she says.
Unfortunately, as of April 16, the cupboards were bare, with all of the $349 billion in funds allocated and applications closed. On that same day, the James Beard Foundation and the IRC released the grim results of a survey of over 1,400 restaurant owners: Nearly 80% said the PPP as written will not allow restaurants to survive until normal operations resume, and that only 1-in-5 may reopen. Baudouin guesses 30%-50% of Asheville restaurants — or even more — may not come back.
“It’s a giant mess,” says Jane Anderson, executive director of the Asheville Independent Restaurants Association. “I’m aware of only a couple of our members who have been approved for PPP, but it’s not helpful as it stands now.”
“The only thing keeping any of us from making it until next year is money,” says Westmoreland. “All we need is to be able to pay our fixed costs, have some money to reopen, buy food and get along for a few months. We’ve got great restaurants here and great owners who work together, but the hard fact is, without some tweaking to this program and more funds, it could all go away.”
On April 24, President Donald Trump signed legislation providing $320 billion to revive the depleted loan program.
To support action to help, go to saverestaurants.com/take-action.
Editor’s note: This story was updated at 2:28 p.m. on April 30 to clarify the provisions of the PPP loan program.