For the June 2020 issue of The Bankruptcy Strategist from ALM’s Law Journal Newsletters, Amy Drushal and Gerald Davis outlined the far-reaching economic impact of COVID-19 on the restaurant industry, especially as restaurants are already known to survive on tight margins. The short-term affect of the virus has already been significant with 3% of all restaurants having already closed by the end of March 2020, and while the future is uncertain, food providers, their employees and the industries that support them will want to keep a close eye.
While many restaurants are holding on by securing relief funds, like the Paycheck Protection Program, but even despite the governmental assistance, restaurants still face an uphill battle, restrictions to reopening posit even more challenges to overcome. In addition to reduced customers due to government restrictions and public fears of visiting. On top of this reduced revenue, restaurants also have to content with new expenditures related to additional sanitation and PPE needs, among others.
Combined these threats with well-publicized threats to the food supply chain, restaurant stakeholders have plenty of cause for concern. This includes restaurant landlords and creditors who may not be able to collect rent or mortgage payments. Further, state and federal governments already under financial strain from stimulus spending may have concerns if they can no longer rely on sales tax, income tax and real estate taxes stemming from restaurant operations.
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