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The Craft

The ultimate resource for alcohol beverage news, trends and reports for bars, distributors and suppliers.


On March 27, the US Government signed into action the Coronavirus Aid, Relief, and Economic Security (CARES) Act. At $2.2 trillion, the CARES Act is the single largest economic relief package in US history. The CARES Act includes $300 billion in direct payments to individuals earning less than $99,000 annually, up to $3,400 per family of four; $350 billion in loans for small businesses with loan forgiveness provisions; and $250 billion in enhanced unemployment insurance.

Through a grassroots movement with the National Restaurant Association, over 300,000 individuals aided to make sure the voice of the Food and Bev industry was heard in shaping the legislation. Despite all of this apparent progress, though, many in Food and Bev have said that the CARES Act comes up short for the hospitality industry. Today, we’re going to go through all you need to know about this massive piece of legislation, and we’ll also discuss some of the apparent issues with the act.

Note -- for a fully comprehensive overview of the CARES Act and its provisions, we suggest the NRA’s page on the matter.

Before we get into some of the industry’s problems with the CARES Act, let’s just get through the nitty-gritty. So, how does it work? That 2.2 Trillion number is getting thrown around a lot, but where is that money actually going?

So, the CARES plan is set to provide $349 billion in total cash flow assistance to small businesses like restaurants and bars. Under the CARES Act, any business with fewer than 500 employees will qualify as a ‘small business’. CARES Act loans are 100% federally guaranteed. The loan’s covered period will be from February 15 to June 30, 2020, which gives flexibility to furloughed and terminated employees. This means that restaurants can return to payrolls and bring laid-off workers back into employment. The forgiveness amount on the loans can be used for payroll costs, payments of interest on a mortgage obligation, rent obligations, and utility payments.

Meanwhile, the loan itself can pay for:

  • Employee compensation
  • Payment of cash tips
  • Payment for vacation, family, medical, parental, or sick leave
  • Allowance for dismissal
  • Group healthcare benefits
  • Retirement benefits
  • Payment of local or state tax

So, how much are these loans going to be? Well, the maximum loan available to your restaurant or bar must be less than two and a half months payroll. This is calculated by taking the average total monthly payments by the business for payroll costs incurred during the 1-year period before the date on which the loan is made. Now, for restaurants, where tips make up a significant part of the wage structure, that might leave restaurant and bar owners scratching their heads a bit.

And, that’s not the end of the CARE Act’s problems where F+B is concerned. For big food and bev cities across the country, the CARES Act seemed heaven-sent. Unfortunately, the act has some very blatant issues, many of which mean that the hospitality industry does not stand to benefit as much as other businesses do.

At the epicenter of the CARES Act is the Payroll Protection Program (the PPP). While the PPP is a loan, it can fairly painlessly be converted into a grant. Most restaurants and bars operate on debt-heavy models, so the last thing they need is more debt. However, to convert the PPP into a grant, a business’ employee headcount must be approximately the same two months after the loan, as it was before COVID-19 impacted the nation.

Around the country, many bars and restaurants were forced to close in March. So, they must retain or hire back employees at pre-March levels by the end of June. The issues with this seem clear: restaurants and bars simply do not know if they will even be permitted to re-open by June.

So, to have the loan debt forgiven, an employer must hire back virtually their entire staff, or take on another massive financial burden (which could take years to repay). That’s one more piece of debt in addition to all of the costs which a temporary closure has piled up on the establishment.

And even if restaurants and bars are permitted to fully reopen in June, the Food and Bev industry faces a unique set of challenges. For one, the economy of F+B is entirely dependent on consumer spending habits. It’s unlikely that sales would return immediately to pre-virus levels. Restaurants also aren’t exactly ‘turn-key’ -- reopening will have significant costs and procedures associated. But, millions of Americans are out of work and the disposable income that fuels F+B simply isn’t there right now. People will also be rightfully hesitant to gather in large groups.

So, even if restaurants and bars are able to re-open in June, it’s extremely unlikely that they will require pre-pandemic staffing levels. The reality is that restaurants and bars likely won’t be prepared to open (or even allowed to open) by June.

Restaurants or bars in metropolitan areas will also run into some issues with the PPP. Under the CARES Act, the PPP dictates that 75% of a business’s loan be used for labor costs in order for it to be turned into a grant. This leaves 25% for rent and utilities. In cities like New York, Chicago, and other metropolitan areas, this is not going to even begin to cover rent.

So, while the CARES Act is an effective step for many small businesses and workers around the nation, it may fall short where Food and Bev is concerned. If nothing else, though, the CARES Act is sure to help out millions, and is a major step in the right direction to turn the corner on COVID-19. For more information on the CARES Act and what it means for your restaurant, click here.

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