The Corner

Regulatory Policy

Keeping Restaurants Alive

On the public-policy front, I have no concrete details to offer and no assurance that this will come to pass, but I spoke to two senior White House people over the weekend, and believe that there is a growing possibility that the next support package (I have long called it Stimulus 4.0 but since I think much of it will not be stimulative at all I am growing weary of that name) will include a special support package for restaurants, outside of PPP, due to the unique issues going on there. Allow me to unpack a little.

The PPP program was geared (for good reason) towards keeping employees on payrolls. With restaurants, they could get PPP money, keep their payroll together, and then get loan forgiveness, but that wouldn’t help them with rent (usually their biggest expense) if the restaurant was closed down for 3, 4, or 6 months. . . . And keeping people on payroll who could have gotten unemployment just to re-open to a 25 to 50 percent unprofitable capacity didn’t (and doesn’t) make a lot of sense. Well, you could tell restaurants, “You don’t have to pay rent” (I assure you most of them are not), but then what does the landlord do? And you could tell the landlord, “You don’t have to pay your mortgage,” but then what does the bank do? And you could tell the bank, “You don’t have to pay the investor pools,” but . . . you could get the point. Someone is going to be left holding the bag, and the restaurants will still close down.

So, what I believe they are working on is some form of carve-out facility that will provide capital for rent, try to leave the viability of the business in place, and get landlords paid. We already know of the proposed Restaurants Act of 2020, supported by the National Restaurant Association and co-sponsored by a Republican and Democrat senator. The bill has a $120 billion price tag and is not completely lined up with what (from my understanding) the administration wants to do, but it is close.

Challenges remain, including what conditions to put on the facility, how to define eligibility, and how far out to expand this beyond restaurants without it being a free-for-all.

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