Garland owner Cheetie Kumar is wrestling with how to spend a payroll-focused federal loan while her Raleigh, N.C., restaurant and bar remains closed, and whether to bring back her workers when it reopens, given she doesn’t know if customers will return yet.
Photo: Juli LeonardRestaurants are ramping back up as coronavirus lockdowns lift in U.S. states. As they do, they are assessing both customers’ willingness to come back and how many workers they will need in kitchens and socially-distant dining rooms.
One of the toughest calculations is proving to be just how far to go in staffing back up. Restaurant owners say they have little sense of how many consumers will feel safe to eat out again, and under what circumstances. They are also contending with employee health and safety concerns about returning to work, and the reality that many who come back are likely to earn much less than they do now on boosted unemployment benefits.
The expanded unemployment benefit signed into law in March provides laid-off or furloughed workers an extra $600 a week through July 31. Combined with state unemployment, the money is more than what the majority of restaurant workers earned before the shutdowns. Nationally, median hourly pay in food-service occupations was $11.65 in 2019, or $466 for a 40-hour week.
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Some restaurant operators say they are reluctant to ask staff to return when paychecks might be lower than jobless benefits.
“It’s going to be a minefield, for sure,” said Cheetie Kumar, owner of the Garland restaurant, bar and venue in Raleigh, N.C., about asking her 42 employees to return to reduced operations when her area gets the green light to reopen. She said she hopes to start a meal-kit program this month, but doesn’t want to rehire workers only to fire them again if she can’t get dine-in service running soon.
Many restaurant owners say the requirements of federal small-business stimulus payments work at cross-purposes with the expanded unemployment benefits. To avoid repaying the loans, recipients have to tap them within eight weeks and spend the bulk of the funds on payroll costs equivalent to spending before the crisis.
Responding in part to restaurants’ concerns, the Treasury Department said this week that recipients won’t lose loan forgiveness if workers refuse to return.
Still, some restaurateurs say the enhanced unemployment benefit is another reason it makes little sense to spend the loans on keeping idled workers on the payroll when they have more pressing costs, such as rent. Only 25% of funding under the Paycheck Protection Program, known as the PPP, can be used for rent and other qualifying expenses outside of payroll.
Ms. Kumar said she can only use about 35% of her loan money on labor since her restaurant remains closed and North Carolina has yet to say when it will allow dine-in service to resume. She fears having to repay the loan with interest in two years, as currently stipulated for recipients who don’t meet the payroll terms.
“I feel like I’ve been begging for a ticking time bomb,” she said.
Some restaurants, realizing that they can’t bring workers back for some time, say they aren’t spending their stimulus money. On a typical night pre-pandemic, The Conga Room in Los Angeles served hundreds of diners and revelers. Co-owner Brad Gluckstein said he hasn’t tapped the hundreds of thousands of dollars he has received in small-business aid, since there was little point bringing back workers during the state lockdown.
Though California businesses are beginning to reopen in phases this week, he anticipates it could be months before The Conga Room does. “It was an ‘Oh my God’ moment,” said Mr. Gluckstein, who has furloughed or terminated close to 60 staff. “In all likelihood, we’ll just give it back.”
Workers who do come back face fewer hours and substantially lower tips, since many states are mandating restaurants operate with capacity limits when they do.
In Los Angeles, The Conga Room has received federal aid but may never spend it. Co-owner Brad Gluckstein says it doesn't make sense to bring workers back while it is closed.
Photo: Joseph Channell/The Conga RoomNeil Eaves, a 43-year-old bartender at a Dallas-area restaurant, said he is returning to work part-time this week, but is worried because of an underlying condition that makes him more vulnerable to Covid-19. He currently receives $850 weekly in state and federal unemployment benefits, compared with the roughly $700 he earned pre-pandemic. Texas has allowed part-time workers to receive a limited amount of unemployment benefits while working.
“There are very few choices and I’m trying to make what I think is the best one in the moment,” Mr. Eaves said.
Restaurant owners in many states are also wrestling with how hard to push workers to return.
Some McDonald’s Corp. franchisees in the Northeast have sent letters to employees to let them know they would need to justify their absence if they didn’t return to work when hours became available.
Ed Doherty, a franchisee of 146 Applebee’s and Panera Bread Co. locations across four states, said about 30% of the workers he has contacted have said they can’t return, often citing lack of child or elderly care, but he hasn’t reported them to unemployment agencies.
“That’s vindictive in my mind,” said Mr. Doherty, who has reopened about two dozen restaurants so far. “You have to think about the aftereffects of this.”
Tamra Kennedy, owner of nine Taco John’s International Inc. locations that employ 120 in the Midwest, said she has disputed the claims of about 10 workers who applied for unemployment when they remained on her payroll. She is seeking new employees to fill in for those who opted not to come back.
“We are running thin,” she said. “They are very aware of the opportunity to get $15 an hour in addition to what they may be eligible for in regular unemployment.”
Taco John’s franchisee Tamra Kennedy is trying to get her workers to return, but many of them are earning more on enhanced unemployment benefits.
Photo: Tamra KennedyChief executives of some of the biggest fast-food chains raised concerns about competing with enhanced unemployment pay in talks related to the Trump administration’s task force for reopening the economy, according to a person familiar with the conversations. Trade groups have also pushed for flexibility on how much restaurant aid must go to workers or toward overhead, and restaurant owners are lobbying Congress for restaurant-specific aid in future stimulus packages.
Some states are trying to address the issue themselves. Iowa has told employers to report employees who refuse offers to come back. Georgia recently adopted an emergency measure that would let people earn as much as $300 a week back at work and still receive unemployment. Kersha Cartwright, spokeswoman for Georgia’s Labor Department, said the state was mindful of the challenges facing food-service workers in particular.
“The industry has just been obliterated,” she said, “and those folks weren’t making super high wages in the first place.”
Write to Heather Haddon at heather.haddon@wsj.com and Te-Ping Chen at te-ping.chen@wsj.com
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