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Confronted with growing losses from the pandemic, restaurant owners face personal ruin
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Earlier this month, Washington Gov. Jay Inslee announced a four-phase approach to reopening our state’s economy. For restaurants in Seattle, this means a couple more weeks of to-go and delivery only, followed by an undetermined number of weeks at 50 percent capacity, then 75 percent capacity, and so on until full service is allowed.
Similar announcements are being made throughout the country. While we can debate their logic and safety, what isn’t being addressed is what will happen for the number of small, independent restaurants that won’t be able to make it that long or have already closed permanently. These closures will not only shape the culture and community of the cities they inhabited, but also the lives of their owners, who could face personal financial devastation as a result of closing their businesses.
This isn’t fair.
When I started hearing about a potential global pandemic and began to see mandatory restaurant closures in China and Italy, I knew exactly what many of these restaurant owners must be feeling. As a two-time (now ex-) restaurant owner, I can still feel the visceral dread in my stomach of what one weekend’s lost sales would mean for our bank account — to say nothing of being closed for weeks, or even months. As I watched the situation unfold, I felt an immense amount of guilt for how grateful I was to no longer own a restaurant, but I was resolute in my commitment to help owners get support in any way that I could. In addition to brainstorming solutions for the restaurant group I now work for, I was thankful to be asked to join the advisory board for Seattle Restaurants United, a coalition of small, independent restaurants in the Seattle Area.
But it wasn’t until I was on a Zoom call for that advisory board, discussing how we could help restaurants pay (or avoid paying) their bills in the upcoming weeks and months so that they won’t have to close forever, that a board member pointed out what should have been obvious to me much earlier on: Some of these restaurants owners want to close, but can’t. Tired of living on razor-thin profit margins for years, they simply cannot accept being thrown into further debt that they could possibly never escape. They don’t want to pivot to delivery or takeout or whatever model we agree is the best. Some of them cannot reconcile reopening their restaurants with the knowledge that they could be putting themselves or their employees at risk. They want out.
The problem is, it’s not that simple. What very few people realize is that when restaurant owners open their businesses, many of them forfeit their exit plan. They collateralize anything they have to get a little more cash. Margins are so thin that they end up putting up their houses, their cars, anything for a lease or a loan, and sign personal guarantees for all contracts. In some cases, walking away can mean personal financial ruin.
And so right now, in this time of chaos and terror, our local, state, and federal governments must do what is right and pass legislation releasing these small business owners from their business liabilities, namely their commercial leases, SBA business loans, and any past-due sales or business taxes.
I say this having lived through something similar myself, twice. Having narrowly avoided the same issues so many restaurants face right now, I am in the unique position of knowing not only how much they truly need our government’s help, but also why.
Over the past decade I opened, operated, and sold two successful restaurants with my husband. When people ask about it, I usually give them the nice version: We had a beautiful dream that we made happen with equal parts hard work, perseverance, and faith, and then eventually our priorities changed, we decided to sell, and we’ve lived happily ever after. It’s what people generally want to hear and it’s much easier than telling the truth.
Telling the truth would mean talking about the pit that lived full time in my stomach, churning over how we would pay for this week’s payroll, or this month’s sales tax, or rent, or a broken sink. It would mean talking about how I cried in my office after an employee called me a bitch for requiring that he know our wine list, screaming profanities at me as he left the building. It would mean talking about how I felt like I never got to see my kid.
My feelings sound like complaints, because they are, and I can tell you from experience that no one wants to hear a restaurant owner complain. There is a special disdain reserved for dreamers who complain about their dream. Restaurateurs are seen as cowboy entrepreneurs with glimmers in our eyes who have no one to blame but ourselves when we fail. After all, this was my choice, and everyone knows restaurants are hard. I knew that going in, didn’t I?
Even now, writing this, I feel shame for admitting how much I struggled. The fear I felt constantly is a secret that we restaurant owners keep hidden. In public, we share it with each other through subtle glances and knowing smirks. In private, we text each other that we don’t know how much longer we can keep it up. We all know better than to say it out loud and potentially invite the ire of the public or even worse, somehow give the words the power and make it all worse (restaurant owners can be very superstitious).
Let me be clear: Restaurant owners love what they do. There is no other reason to do it; they certainly don’t do it for the money. Their restaurants are most likely the loves of their lives, and fear and anxiety simply come with the job. If anything, the fact that they live with so much discomfort and yet still wake up and go to work every day is a testament to how much they love their restaurants.
But sometimes, love isn’t enough. About a year into opening our second restaurant, Mean Sandwich, I found myself sitting on my couch at home in the middle of a beautiful day, having what I thought was a heart attack. It was our one day off, the day we were supposed to use to relax and spend time with our 3-year-old daughter, doing crafts and going on walks. Instead, as I felt my chest get tighter, I laid down and yelled to my husband, “Babe, it’s happening again. It feels like I’m going to die.”
It was a panic attack, one of many I had during that year. I felt trapped in our restaurant, which wasn’t making enough money to support our family despite its outward success, and on whose income we relied to pay the mountain of debt we had signed on for in order to open it. We had maxed out all of our personal credit cards because we still couldn’t afford to pay both of our salaries, as well as our business cards to pay for improvements to our little restaurant’s backyard. Our business lease was iron tight and personally guaranteed by both of us. We had taken out an SBA loan to open the restaurant, and the monthly payments were nearly as much as our rent. We had no savings whatsoever, so closing the restaurant almost definitely meant having to declare bankruptcy and immediately move in with my parents. It had also taken a toll on our personal life; sometimes it felt like the only things holding our marriage together were inertia and denial. I could feel the noose around my neck tightening every day, and the tighter it got, the less energy I had to find a solution. So I drank and cried and panicked.
My story has a good ending: Eventually, like we had with our first restaurant, Thirty Acres, we put Mean Sandwich up for sale and found a buyer, through a friend, who wanted to keep it alive. I cried when we finally sold it, but they were tears of pure relief and gratitude. We had escaped by the skin of our teeth, neither unscathed nor debt-free, but we got out, and I could barely believe it. Although I still grapple with how to move beyond the shame of the mistakes I made, we are better every single day.
But while I may relate to what restaurant owners are experiencing during this nightmare, I also recognize the ways that we are different. You see, I got myself in my predicament with our restaurant. I chose to open it and I chose when I was done, and thankfully, it worked out for me.
These restaurants aren’t closed because their owners fucked up. Most of them were doing everything right; they were working harder and under more pressure than any of us can possibly imagine. Before they saw their sales start to dwindle and were told to shut down by the state, they were paying their bills and their employees, often providing health care and sick pay, creating places for their communities to congregate, and everything in between. They do not deserve to go bankrupt over this, and trust me when I say that faced with that as their only option, some will choose a more dire one. We can’t let that happen.
Instead, these restaurant owners deserve to be told this wasn’t their fault. And then, if they want one, they should be given a way out.
What would that look like? First, restaurant owners must be released from being held personally liable for their commercial leases if they have been impacted by COVID-19. While these leases represent private contracts in which the local government does not usually have the authority to intervene, this pandemic clearly represents an abnormal circumstance for which exceptions must be made. We’re already seeing this in the form of proposed bills such as New York City’s 1932-2020 (which the city council passed last Wednesday) and California’s SB 939. Both bills prevent landlords from holding commercial tenants personally liable in the event that they have to close due to COVID-19’s economic impact. They are a good start, and we need to see this type of legislation nationwide.
Small-restaurant owners cannot be expected to pay for these leases for the entirety of their terms or even until the landlord is able find another tenant, whenever that is. Even those owners fortunate (or wise) enough to have “good guy guarantees,” which release them from having to pay out the entire lease term as long as certain conditions are met, are still usually beholden to paying landlords a minimum of three to six months of rent in addition to any rent they are behind on.
Second, in addition to their current offer to defer loan and interest payments for six months, the Small Business Administration must forgive all existing business debt for restaurants that decide to close. There is no reason a restaurant owner should face bankruptcy when those loans are supposed to be secured by the SBA.
And last, federal grants should be provided to restaurants that are unable to open — without concern for how likely they are to reopen — so that they can pay any employees they have been unable to pay for past work as well as pay for any unpaid sales or business taxes. To naysayers who might say this is too far-reaching, I would point out that just as it is unfair that restaurants were told to close indefinitely without any imposed fixed expense relief, it would also be unfair to let restaurants close without ensuring support for the rest of the ecosystem that relies on them. Now is the time to consider holistic approaches to the problem, rather than solutions that simply shift the problem onto others.
These restaurant owners haven’t done anything wrong. They stepped up and closed their doors for the safety of their communities and it ruined them. It isn’t fair that we leave them to deal with cleaning up the mess on their own. But they don’t need a handout, or your pity. What they need instead is a large-scale solution tailored to the restaurant industry. They are hard-working and creative entrepreneurs; give them an inch, they will make it into a mile.
But for those who are done, who don’t have any energy left to pivot, who are facing down months of bills and debt while they wait for a workable solution that may never come, we need to offer an escape hatch. Trust me: They will figure out what to do next.
Alex Pemoulié is a Seattle-based writer and the director of finance for Sea Creatures restaurant group. She previously owned and operated two restaurants, Thirty Acres and Mean Sandwich, with her husband.
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