The past two years have been a disaster to restaurant owners in Massachusetts. The pandemic led to lockdowns and bans on indoor dining, causing a significant loss to the restaurant. And even though government assistance has arrived, the industry still faces great challenges, according to Massachusetts Restaurant Association.
Data from the MRA showed that since March 16, 2020, when indoor dining was banned, nearly 16,000 restaurants have closed. Although outdoor dining and limited indoor dining was reinstated in June 2020, more than 3,200 of them never reopened.
MRA vice president Steve Clark, said that aside from restaurants that were permanently closed, many others were barely surviving, and the outlook of the restaurant industry in the state was “gloomy.”
“The restaurants in Massachusetts faced too many challenges,” he said. “Even after the indoor dining ban was lifted, other restrictions were still stifling them.”
He pointed out that the restaurants largely rely on the local population and tourism, but during the pandemic, the former had limited access to restaurants and its number reduced, and the latter basically disappeared.
He used the Boston area as an example.
“A lot of the restaurants in Boston and other towns nearby rely on schools and businesses,” he said. “When many people choose to work remotely, some of the restaurants could lose 50-60% of their income. And many seasonal restaurants that hosted tourists had to shut down, because of the long winter, and we got no tourists at all.”
“Now some students have come back, which is good news. They could patronize the restaurants. But tourism and many businesses were still not back yet,” he added.
Inflation has shaken the restaurant industry as well. The annual inflation rate of the U.S. surged to 6.8% in November, the highest since November 1990, according to data from U.S. Department of Labor. Meanwhile, energy and food cost both rose significantly, troubling the restaurant owners even further.
“These were not all the challenges, unfortunately,” Clark said. “The delta virus, the eviction orders, the increasing transportation cost … they could all impact restaurants.”
Recognizing the difficulties that restaurants were facing, the U.S. government initiated many programs supporting small businesses, among which the biggest ones were the Paycheck Protection Program and the Restaurant Revitalization Fund.
The former allowed restaurant owners who have started business prior to Feb. 15, 2020, to apply for loans, and the latter mainly targeted restaurants, allowing the owners to apply even if they started businesses during the pandemic and received the PPP loan.
According to the Small Business Administration, the funds have been handed out to eligible applicants in Massachusetts under its supervision.
However, although PPP and RRF altogether granted more than 10,000 loans to restaurant owners, it was a drop in the ocean compared to the industry’s huge losses.
The MRA estimated that only one third of the applicants received PPP or RRF funds, and the rest spent their time waiting for a response, until the PPP announced its closure on May 31. Although the RRF lasted two more months, the $993 million allocated in Massachusetts was a peanut.
“The funding did help some restaurants, but it was not enough,” said Clark, who has been keeping eyes on the financial assistance, “because the money ran out fast, and we are not sure if there will be additional funding. Those who did not get money were still constantly struggling.”
Certain restaurant owners, particularly those who failed to acquire any subsidies from the federal level, acknowledge Clark’s statements.
Bill Zheng, manager of the Poke Boys, a restaurant serving cold rice and seafood bowls, said that his business was under constant threats of shutting down, because he did not get any subsidies, and insufficient funds stopped him from hiring and improving quality.
The Poke Boys at Allston’s Super 88 food hall opened at a time of difficulties. Zheng’s friend took over the restaurant in March, was disqualified for PPP applications, and the RRF was hardly accessible to him because of his inexperience to dealing government paperwork.
“I never thought that it could be this hard,” said Zheng. “My goal was to begin making profits by September, but still losing money every month. I tried to get the RRF, but when I finally find out how to do that, they told me the application has closed.”
Zheng added that the Chinese sample (both traditional and simplified) of the RRF application form has a translation error that was misleading. On page 4, when question 4 asks “is the Applicant currently in bankruptcy”, the first box is “no”, and the following explanation in the parentheses says, “Applicant is eligible” in the English version, whereas in the Chinese version, the phrase in the parentheses says, “Applicant is not eligible”.
“It’s very misleading to applicants whose preferred language is Chinese,” said Zheng.
Temporarily, Zheng could skew Poke Boy’s numbers from students’ orders, but when the holidays come and students leave town, he might suffer from even greater deficits and be down for the count.
For those owners who did not receive PPP or RRF, experts in business and hospitality suggested that certain things should be prioritized to better cope with the tough situation.
Seth Gerber, an instructor at Boston University’s Hospitality Administration School and partner of MIDA, said improving fundamentals are essential to helping restaurants survive, including quality services and products.
Gerber, who has been working in the industry for 11 years, said, “It can be difficult, but the best strategy for those restaurants without subsidies was to get better food and service. People still want to go out and eat, so the restaurants should just try their best to give them what they want.”
He pointed out that the management of restaurants should pay attention to staff’s mental well-being, and avoid putting too much pressure on them to providing better services.
Michael S. Kaufman, a senior lecturer of Business Administration at Harvard University Business School, pointed out that individual restaurants, with or without subsidies, ought to manage their cost properly during the revitalization phase.
He said that restaurant owners should prioritize negotiating with landlords for better terms, and searching for suppliers with more economical deals.
“If the owners can cut the cost well, they have a greater chance to get through this,” Kaufman said.
Both of them said that waiting for additional funding from the federal government would not be wise.
“It could take months or years to pass federal funds,” Gerber said. “Each restaurant should focus on their own plans to revitalize now. There’s still a long way to go.”
Mutian Qiao writes for the Athol Daily News from the Boston University Statehouse Program.