I recently asked my colleague here at Tax Credit Co. what he would have done if the restaurant he opened in the ‘90s was still operating today.
“Oh, man,” he answered, “We would have gone under for sure.”
I was somewhat shocked by his response. I know running a successful restaurant business is one of the hardest things to do, but he answered so quickly that it caught me off guard.
“We didn’t have a drive-through, we didn’t do any delivery,” he expanded. “It would have been a significant pivot that we would have had to make quickly.”
Unfortunately, many restaurants have not been able to weather the financial storm that the pandemic has brought. The restaurant industry took one of the hardest hits due to the pandemic, with the virus closing more than 100,000 facilities across the country.
When help is just another problem
My colleague offered an insight about the industry that might explain a lot of the closures: “You can’t really run a restaurant. It runs you.” Staying on top of demands such as recruiting, training and retaining employees, attracting customers and reducing costs is a full-time job, on its own.
Ironically, when stimulus funds became available to small businesses, restaurant owners quickly felt the weight of an additional “demand.” They now had to figure out how to navigate all the new options for financial assistance: Two rounds of PPP loans, national- and state-sponsored grants and multiple versions of the Employee Retention Credit (ERC).
According to the Small Business Administration (SBA), restaurants account for over 300,000 PPP loans, and that number is growing every day. That means hundreds of thousands of restaurant owners are grappling with how those loans interplay with the ERC on PPP forgiveness filings. Additionally, restaurant-industry grants are available both on a national level, and more locally in at least 32 states. Of course, those grants come with their own sets of eligibility requirements as well.
All of these financial assistance options were designed to help the food-service industry. But it’s not easy to assess which programs will bear the most fruit, especially now. Business owners aren’t afforded the free time to consider the timing of PPP funds, the interplay with ERC, the regulatory and legislative compliance, the deadlines and all the possible future implications connected with each program.
As a restaurant owner in this pandemic, the daily list of added demands (e.g., more cleanings, temperature checks, health declarations, closing off certain sections, installing plexiglass, getting creative with outdoor dining, dealing with last-minute child-care issues) is only worsening the problem. These activities are becoming unmanageable and are making it even harder to make decisions about help restaurant operators could utilize.
Accounting and tax professionals are falling short, as restaurant operators flounder
Even when restauranteurs turn to their trusted financial advisors, they often find that their bookkeepers and CPAs lack the background or bandwidth to advise comprehensively on these stimulus fund opportunities. Naturally, those advisors know how to research the legislation and regulations, but they typically don’t have the single-minded focus that’s really required to unlock the full value of each of these funds, especially during tax season. Without full-time government relations professionals and ex-IRS controversy experts on their staff, these advisors are also unprepared to provide a truly “hands-off” experience and/or handle an audit down the road.
With better support, the restaurant industry is bouncing back
As restauranteurs continue to deal with the pandemic, the stakes are high. To survive, and grow, owners need more time. to cope with the everyday and additional virus-specific responsibilities they face. Knowledgeable, specialized financial advisors can play a huge role in addressing the increased demands facing the industry. By partnering with these specialists, CPAs and bookkeepers can shoulder the accounting and tax activities on behalf of restaurant owners, while ensuring that the owners understand and maximize their tax and financial support options. With these main supports in place, restaurant operators can stabilize their companies, enjoy less stress, and better serve the public.