Concern is mounting over whether Iowa’s more than 6,000 restaurants and bars will be able to successfully weather dramatic declines in revenue due to customers staying home to slow the spread of the highly contagious coronavirus.
“The profit margins in the restaurant industry are small – 5% net profit in good times,” said Jessica Dunker, president and CEO of the Iowa Restaurant Association. “We’re very worried about the potential catastrophic effect on independent restaurant owners that have less ability to absorb these declines in traffic and business.
“We’re very worried that this will cause permanent closures.”
Today, the White House encouraged U.S. residents to avoid social gatherings of 10 or more people. It also encouraged people to avoid eating and drinking at bars, restaurants and food courts. Instead, the White House recommended that people who want restaurant or bar food use drive-thru, pickup or delivery options.
Several states have taken additional steps by mandating the closure of restaurants and bars or by limiting restaurant sales to takeout only.
On Sunday, the governors of Ohio and Illinois ordered bars and restaurants closed. Today, Connecticut, New York and New Jersey governors said movie theaters, fitness centers and casinos were being shut down temporarily and bars and restaurants could only offer takeout. Massachusetts is banning gatherings of more than 25 people and beginning Tuesday through April 17, allowing only takeout at restaurants. Washington and Michigan have similar restrictions and California is strongly recommending the temporary closures.
And while Iowa officials haven’t mandated that establishments be closed, some owners are taking the step anyway.
Smash Park, the popular West Des Moines “eatertainment” venue is closing its doors to the public for four weeks. Prairie Meadows Casino, Racetrack and Hotel is closing indefinitely at 5 p.m. today.
Other restaurants are taking creative approaches to helping slow the spread of COVID-19 while still providing services to the public and generating revenue.
Exile Brewing Co. announced on its website that beginning Tuesday it would only offer to-go orders or curbside pickup. No dine-in service would be allowed. Gusto Pizza Co., for the first time in its nine-year history, is offering 14-inch frozen pizzas to go.
West Hill Brewing Co., which opened in November in Indianola, on Tuesday will offer curbside growler service.
“We wanted to take some preemptive precautions,” owner Doug Gaumer said. “We value the people in our community and if we can remove one place that people congregate, it might help slow the thing.”
West Hill has six part-time employees, only one of which will continue to work. “Most of the shifts have been canceled,” he said.
Gaumer said he’s worried about how his workers will fare financially. He’s also concerned about his business in general.
“The inventory will last three to five months,” he said. “Losing customers and possibly our employees, those are our concerns right now.”
The restaurant association is encouraging members to offer takeout, curb service and delivery, Dunker said.
Fifty-one percent of the money spent on food is spent in the restaurant industry, she said. “If we close down altogether — which right now does not sound like we’re going to do — are we really ready on our own food supply to find new places for the 51% of the dollar?
“If restaurants are able to continue to do carry out and delivery, people need to pick up the phone and place pickup orders.”
The restaurant business employs about 155,000 Iowa workers, a large portion of which are part time and hourly. “If we close places and start sending people into the unemployment lines at massive levels, it will be detrimental,” Dunker said.
She said there are several unknowns for restaurant owners, including whether business disruption insurance will cover pandemics. The insurance typically covers instances when power goes out or damage is caused by severe weather, but a rapidly spreading virus is new territory, she said.
In addition, many independent restaurant owners want to know if – and when — they will receive any financial help from the federal government. Last week, President Donald Trump said small business “disaster” loans would be made available.
However, the loans aren’t yet available in Iowa, said Jayne Armstrong, district director of the U.S. Small Business Administration’s Iowa office.
“Each governor has to make a request for a disaster declaration that comes through to the SBA,” Armstrong said. “That is what we’re waiting on right now. I know the governor and her staff are collecting the data to show the economic impact.”
Armstrong suggested restaurant owners and other small business owners reach out to their county emergency management teams with information about how the crisis is affecting their businesses. She also suggested owners keep records of canceled events, declines in revenue and other data on how their businesses are economically impacted by the crisis.
“They need to keep track over everything to show the economic impact this has had on them,” she said. “Until we have that data and get everything finalized, we’re in a holding pattern.”