Omicron could be restaurant killer without more relief
The Omicron wave of COVID-19 wiped out business by more than half at many of the nation's restaurants in December, which is typically the most lucrative month of the year, according to an industry survey.
The poll shows that nearly 60% of eateries reported seeing some of the steepest declines in revenue thus far during the nearly three-year-long pandemic. The December data highlight how worn out many restaurant owners are, as this winter's wave of the highly contagious COVID-19 variant has extended and exacerbated their struggles to safely do business and turn a profit throughout the pandemic.
Aid from the $28.6 billion Restaurant Revitalization Fund, part of the Biden administration's $1.9 trillion American Rescue Plan Act, did not extend far enough to help every eatery operator that needed assistance. A large majority of establishments that came up empty say they are in danger of closing permanently if they don't see federal relief soon.
Eighty percent of the independent restaurants and bars in the U.S. that did not receive RRF grants said if Congress does not put up more relief, they could close for good, according to a January survey of 1,200 establishments from the Independent Restaurant Coalition (IRC), a trade group working to secure protections for the restaurant and bar industry and its workers.
One such business person is Tyler Akin, who once operated three thriving restaurants — two in Philadelphia and one in Wilmington, Delaware. He said he applied for relief funds but was left hanging.
"I applied for three entities and they all went unfunded. I struck out completely," Akin told CBS MoneyWatch. Both of his Philadelphia entities, Stock Fishtown and Res Ipsa Cafe, are currently closed.
"Whether we reopen is completely contingent on whether we receive RRF funding," he said.
A very bad December
This winter's COVID-19 wave could not have come at a worse time for restaurant owners: December's holiday festivities, including private-party bookings, typically buoy them during slower months for eating out.
"I can't overstate the importance of December for restaurants," Akin said. "It's what makes a lot of the slower months throughout the year, like January, possible to weather."
Nearly 60% of businesses said their sales decreased by more than half in December, according to the IRC survey. Indeed, the rapid spread of the Omicron variant of COVID-19 renewed consumers' fears around dining at restaurants. It also led to staff shortages, with the new variant sidelining restaurant workers left and right.
As a result, restaurants had to reduce their hours. They also incurred new costs, including paying for hard-to-come-by rapid COVID-19 tests to regularly screen their staffs.
Additionally, 84% of the restaurants surveyed said they have raised employee wages, given how hard it has been to attract staff during the ongoing public health crisis. Early on in the pandemic, many restaurant workers left the industry for better paying and less hazardous work.
"This has been a dynamic predating Omicron — that the supply-demand nexus and restaurants labor market shifted alongside the increased costs of goods due to food inflation. It has increased the cost of labor and compensating teams so that you can attract people to work in restaurants. It has changed dramatically," Akin said.
Haves and have nots
There is a clear distinction between restaurants that have benefitted from federal aid and those that have not.
Among restaurants whose applications were not funded, 28% either received or are anticipating an eviction notice, versus 10% of RRF-funded restaurants that report the same threat.
Additionally, 49% of unfunded restaurants say they were forced to lay off workers because of the Omicron surge, versus 33% of those that received government funds.
"It's incredibly frustrating to see how you can walk down a block in a city like Philly and see some restaurants able to make sound decisions around closures with outbreaks with staffs and others that can't afford to do it because some have been funded and some haven't," Akin said.
"Inequity among restaurants have been created by this unequal and inadequate distribution of funds," he said. "It's visible and palpable. You can literally see it if you know what to look for."