‘Restaurant extinction event’ expected as federal loan money runs out

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Bay Area restaurants struggling to survive multiple crises – including low customer attendance due to a smoky sky and limited indoor dining options due to the pandemic – have yet another obstacle to overcome: the reduction of federal aid when it is most needed.

At the center of the looming disaster is funding for the Paycheck Protection Program, which restaurants will have completely depleted by November, with no further federal help on the horizon. Federal loans are meant to help businesses keep workers on their payrolls, and thousands of besieged Bay Area restaurants used them to survive initial pandemic shutdown orders, but now almost have them. exhausted. According to a local restaurateur, the situation could present “an extinction event for restaurants” if more restaurant-specific assistance does not arrive soon.

Pim Techamuanvivit tries to make the math work when it comes to using her P3 loan to keep her San Francisco restaurant Nari open, but it’s a struggle and she feels like time is running out.

Techamuanvivit spent around 70% of its PPP funding a few weeks after receiving it this summer. This helped her make ends meet for a brief period and allowed dozens of her employees to maintain health insurance. But now more bills are looming on the horizon, no new income is coming in and there is no clear timeline for operations to return to normal in Nari.

The circumstances are dire but familiar in the Bay Area. Back then, loans were a silver lining. But for many that money is gone, and now the industry appears to be returning to the precarious position it was in in March and April, when the local food scene was rapidly collapsing.

Restaurateurs and industry advocates say businesses will likely close this fall until there is more government funding or the pandemic ends. Some closures will be temporary, but other restaurants will likely never reopen.

“Nothing has improved,” said restaurateur Laurie Thomas of the Golden Gate Restaurant Association, an organization that advocates for restaurants in San Francisco. “Honestly, it’s about to get worse.

Pim Techamuanvivit, chef and owner of the Nari restaurant, in the dining room of the restaurant. San Francisco, California, Tuesday January 21, 2020.Kimberley Hasselbrink / Special for The Chronicle

Most of the local restaurants that applied for a PPP immediately received their loans at the end of April, which means they will be sold out in November.

The vast majority of these loans were small loans – $ 150,000 or less. The agreements stipulated that the money would mainly be used for payroll and various other expenses within 24 weeks if restaurants wanted 100% of the loan to be forgiven. The $ 349 billion program began in March and ended in two weeks. Additional funding of $ 310 billion was approved in April, and when it stopped accepting new applications on August 8, there was about $ 130 million left, money that has yet to be reallocated.

For Nari, Techamuanvivit received $ 220,000 in PPP funding. She paid about $ 14,000 a month in health insurance costs for her employees, most of whom had already been laid off or on leave due to the pandemic. Add in some operational costs and Techamuanvivit said it currently has less than $ 30,000 left – just enough to keep paying staff health insurance a little longer.

Mission District restaurant, Prubechu, will soon run out of federal loan dollars, and co-owner Shawn Camacho is pondering what to do. November marks the onset of cold and rainy weather, which could make alfresco dining – another saving grace for Prubechu – impossible. Camacho said he was trying to find a solution for the humid nights on the patio; otherwise, the combination of no alfresco dining and no federal assistance could be disastrous.

“Once that’s okay, the bucket starts leaking again,” Camacho said of the PPP funds. “If we go through another lockdown or if business doesn’t pick up, we’re either stalling or sinking. “

Techamuanvivit’s flagship restaurant, Kin Khao in San Francisco, is temporarily closed. It is located near Union Square, where during the pandemic, she said, there was little foot traffic. Techamuanvivit plans to open a fast-paced, laid-back version of Kin Khao in the more bustling Dogpatch neighborhood, hoping to generate enough income to sustain his mini-empire long enough to survive the pandemic.

Quince owner and restaurateur Lindsay Tusk is advocating for the Congress-pending federal restaurant law that would provide $ 120 billion in aid to independent restaurants, but it’s unclear if the bill will even get a vote.

“In the fall, if we don’t get this restaurant law in place quickly, I don’t see how the majority of restaurants will be able to stay open much longer,” said Michael Tusk, who, along with his wife Lindsay, owns of the Quince of San Francisco. , Cotogna and Verjus. “It’s going to be very brutal.”

The future outlook for the restaurant industry has been bleak for months. In July, restaurant review site Yelp released data showing that more than 2,000 businesses in the San Francisco-Oakland-Hayward area had already closed permanently during the pandemic. More than 300 of these businesses have been categorized as restaurants, and the numbers have since increased.

Meanwhile, the PPP program has been a flawed solution for restaurants from the start. Some ran out of funds a long time ago and had to make cuts.

San Francisco Mexican restaurant The Little Chihuahua was one of the few locals to receive the first-round loan in early April, when businesses had to use up all funds within eight weeks. The loan allowed the restaurant group, which operated four establishments at the time, to reopen and get the staff back to work, but that ultimately wasn’t enough to keep all of the restaurants alive. The Mission District location closed permanently in August.

For others, the communication around the use of the loan was so confusing that they did not spend it. Funky Elephant, a small Thai restaurant in Berkeley run by husband and wife team of chef Supasit Puttikaew and Nanchaphon Laptanachai, got a loan in May but waited until July to start using it, in part because all those with whom they spoke at the bank gave them different information.

Even though restaurants can use 40% of PPP on non-payroll expenses, such as rent and utilities, Laptanachai fears the rules will change again or act on bad information, possibly forcing Funky Elephant to repay part of the loan. It’s not worth the risk, so she’s only using the loan for payroll, which isn’t much at this point.

Many of her employees don’t want to work because of their health, she said. Instead of re-hiring everyone, she and her husband mostly work alone. She sometimes brings a dishwasher or a line cook to help out on busy nights.

Other restaurants never got a loan because of the confusion. San Francisco’s Chicken as Cluck restaurant, which applied for PPP funding early on, was told it had already applied to the US Small Business Administration. According to owner Bua Vanitsthian, a company with a similar name also applied for a loan and confusion ultimately prevented it from obtaining financing.

Berkeley Fish & Bird’s Japanese restaurant Sousaku Izakaya was told in June that it had been approved for the money, but the lender requested more documents, then more documents, and went weeks without responding to e- mails, according to owner Yoshika Hedberg. Then, on August 13, Hedberg received an email stating that the deadline had passed and the lender would not be able to secure a PPP loan for Fish & Bird unless Congress approved another round of funding.

Hedberg was counting on this loan as the restaurant gets busier and more busy but currently can only afford to have two people on the payroll. “We are in limbo, waiting for the government to get its act together,” she said. “We would really like to recruit staff, but we can’t do it at the moment. “

As Techamuanvivit continues to coordinate the opening of her quick and laid-back version of Kin Khao, she said she is keeping a close eye on her financial situation, although there is not much she can do about it. this subject. The future catering business could be a boon to businesses, but setting up and running costs money. And underneath it all is her concern for her staff, whom she hopes to rehire in full after the pandemic, finding herself without jobs or healthcare if she runs out of money.

“None of us expected it to last this long, and now there just isn’t enough money to see how we can stay open,” Techamuanvivit said. “Nobody really knows what to do next.”

Janelle Bitker and Justin Phillips are the editors of the San Francisco Chronicle. Email: [email protected] and [email protected]

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