Cash flow for local restaurants has hit a grinding halt following the Wolf administration’s statewide closure of business operations to discourage people from meeting in groups where they could potentially spread the coronavirus.
Local restaurants are transitioning out of a dine-in model to take-out and delivery service model en masse and piloting promotional discount offerings. However, business owners — who have had to lay off more than 100,000 employees in the last week — say they doubt delivery and take out will make up revenue shortfalls with Pennsylvanians stocking up on grocery items.
“I think if you’re going to be realistic, there’s so much unknown that you’d be a fool to say what’s going to happen,” said Dosie Dough owner Amy Lloyd, based in Lititz. “One of the things that’s scary for me as a business owner is you want to have a successful business but at the same time you don’t want to look back and say there was something we should have done differently.”
Last week, Gov. Wolf joined many other state governments by ordering non-essential businesses to close until people can congregate in groups without potentially spreading COVID-19.
In just a few days, restaurants ceased dine-in services and converted to take-out and delivery options instead. It’s been easier for some than for others, depending how much of their workforce they can retain and how built-in their delivery- and take-out services were before the onset of the pandemic.
“Most small businesses aren’t prepared to handle this kind of timeline for closure,” said Jessica Ayala, owner of Revival Social Club in York and Home 231 in Harrisburg. Between the two businesses, Ayala employs 35 workers. But last week she had to cease operations and lay off most of the workforce except for herself and her husband, co-owner Rob Ayala, who works on-site while she delivers food.
The Pennsylvania Restaurant and Lodging Association (PRLA) told members on a conference call the day after the governor’s announcement that they were in talks with lawmakers to enact measures that would soften the economic fallout of mandated closures and urged them to do the same.
“There is a long list of things our industry will need to get out of this,” said PRLA Vice President of Government Affairs Melissa Bova. “We are focusing right now on items that need to be done immediately to help our industry.”
Bova said the trade group’s top concern was the March 20 sales tax payment deadline.
“We are all cognizant that cash flow is nonexistent in our industry and we want to preserve cash flow as much as possible, so we are asking for a delay on that March 20 deadline,” Bova told PRLA members on the Wednesday conference, which was posted to YouTube.
State Revenue Department officials listened to the trade group’s pleas, announcing on Friday the penalties for missing the deadline for Accelerated Sales Tax prepayments would be waived. As for April sales tax payments, the department said it would waive the requirement of meeting the prepayment deadline, instead asking businesses to remit the sales tax they would have collected in March.
Staff-wide layoffs have been a consistent detail restaurant owners have cited in interviews, contributing to the 120,000 people who submitted claims for unemployment benefits by Tuesday last week following Wolf’s shutdown order.
Jordan Pfautz, owner of ROOST Uncommon Kitchen in York, said he’s doing everything possible to “stop outgoing cash so when this ends I have enough to get food and restart.” He had to furlough the front-of-house staff and two chefs and convert to carryout-only using DoorDash and GrubHub.
Pfautz, also a co-owner of York City Pretzel Company, said he had to lay off the eight-person staff of the soft pretzel distributor, temporarily suspending operations.
“We stopped buying new food at least until we know more about what this is going to happen,” he said. “That’s the hardest part, is that I really don’t know.”
Takeout via third-party delivery services accounts for approximately 25-30% of sales before the coronavirus took a toll on his business, Pfautz said. He’s hopeful revenue from take-out services will continue to bring in as much revenue, but the surge of consumers into grocery stores to stock up on food items for social distancing actions makes him unsure.
“Without the government helping in some way, a lot of small business just won’t be able to get through this,” Pfautz said.
Many restauranteurs like Amy Lloyd, owner of Dosie Dough in Lititz, are building off of an existing in-house delivery and take-out service.
“We already are a take-out restaurant, but we are upping that another notch,” she said. “We are encouraging everyone to call ahead and we opened up an online order service.”
As part of due diligence, Lloyd asks customers to wait outside the establishment for their orders and reduce their contact with each other and her staff. And she requires constant sanitation procedures throughout the facility. Protocols are tough on a small-town favorite like Dosie Dough with a loyal customer base who come to her restaurant looking for community, Lloyd said.
“We are limiting that atmosphere which is a little bit challenging because a lot of people want community and I think one of the things people want right now is community and that’s the one thing you’re not supposed to do,” Lloyd said.
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Benjamin C. Dunlap, Jr. is managing partner at Nauman Smith, a Harrisburg-based law firm, and concentrates his practice on business and employment law.