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Staying Alive: Restaurateurs Trim & Retool

3 min read

Sometimes, the best a reporter can do is just listen.

The coronavirus pandemic is hitting most business sectors hard, but few have been hit harder than the restaurant industry. A disease best fought by isolating people is antithetical to a business model based on breaking bread together.

On March 25, the National Restaurant Association reported that 3% of restaurant operators had permanently closed their restaurants, 44% have temporarily closed their restaurants, and 11% say they anticipate they will permanently close within the next 30 days.

An association survey of more than 5,000 restaurant owners and operators found that:

  • Nationwide, sales were down 47% from March 1 to March 22.
  • 54% of restaurant operators have switched to off-premises service only.
  • Seven in 10 operators have had to lay off employees and reduce the number of hours worked.

Technomic, a food service consulting company based in Chicago, predicted last week that restaurant industry revenue would decline this year between 14.5% and 29.3% in inflation-adjusted terms compared with 2019.

Technomic noted that “the timing and scope of the pandemic will be highly localized because of fragmented government actions and variable social distancing practices by location. This will likely lead to a geography-dependent economic recovery timeline, with early adopter states experiencing a potentially quicker return to normal compared to later adopters.”

“Anyone that was on the edge before this started, it’s going to be really hard to come back,” said Montine McNulty, executive director of the Arkansas Hospitality Association. “It’s going to be hard to come back even for those that were well-situated.”

But Arkansas restaurateurs are a flinty bunch, and they’re not surrendering to despair as they retool to survive in a radically different environment, one in which their dining rooms have been closed by order of Gov. Asa Hutchinson.

They’re helped by the federal and state governments as well as trade associations, nonprofits and individuals that have stepped up to offer financial and other assistance. One of the biggest forms of relief is the federal Paycheck Protection Program, part of the $2.2 trillion Coronavirus Aid, Relief & Economic Security Act approved by Congress last month. The $349 billion PPP provides federally guaranteed loans to small businesses in an effort to help them keep employees on their payrolls. If they use at least 75% of the loan for payroll, the loans are forgiven.

David Stobaugh, owner of Stoby’s, the 40-year-old institution with locations in Conway and Russellville, said last week that he had applied for the PPP loan, a Small Business Administration Economic Injury Disaster Loan and for a loan from the Quick Action Loan Guaranty Program, which is administered by the Arkansas Economic Development Commission.

Stobaugh had laid off about 50 employees from both locations, primarily servers and dishwashers. But his drive-through business in Conway was strong before the pandemic, comprising about 40% of his sales. Now, with the dining room closed, sales are about 50% of their pre-pandemic total.

He thinks that restaurateurs who don’t take advantage of federal and state aid, particularly the PPP, “are at extraordinarily high risk of going out of business.”

Stobaugh is a member of a texting group of Conway restaurant owners that serves as a support group, and he recommended RestaurantOwner.com as a good resource for restaurateurs.

Stobaugh has faced down a business disaster before. Fire heavily damaged the Conway Stoby’s in 2016. Stobaugh razed the building and built a new, improved one at the same location. The restaurant reopened in 2017, and business had been brisk.

Trio’s in Little Rock also chose to remain open and shift completely to pickup and delivery. That has meant a sales decline of about 40%, according to Brent Peterson, a co-owner along with Capi Peck. Trio’s does a lot of catering and, at 34 years old, it’s well-established. Those factors have helped it in its transition to the current business model, Peck said. The restaurant also numbered its parking spots so customers picking up orders know where to park, helping eliminate potential confusion.

The restaurant has had to lay off about 16 workers, Peterson said.

Trio’s has asked to borrow $187,500 through the Paycheck Protection Program, Peterson said.

Until the pandemic hit, Trio’s had been on track to match its sales in 2006 and 2007, before the Great Recession, he noted. “It’s taken us this long to get back up there, and now this.”

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