Staff reductions, operational adjustments and rent negotiations are plaguing local restaurateurs as they have faced a time-consuming loan application process for the federal Paycheck Protection Program (PPP).
For PPP loans to be forgiven, 75 percent of each loan granted must be used to pay employees while the remaining 25 percent can be used to pay rent, taxes and utilities. If this ratio is not kept, and verified by a paper trail, the loan will need to be repaid in full – with modest interest.
Ric Gruber, owner of Billy Bricks Wood Fired Pizza, 128 N. Oak Park Ave., is fighting for the survival of his Oak Park location — one of eight Billy Bricks establishments in the western suburbs. Gruber notes, even prior to COVID-19, his Oak Park location has consistently been the most expensive to operate.
“Our Oak Park location has the highest taxes and rent of any store; we’ve even had to raise our prices here to offset the added expenses, but that doesn’t really work because our prices can only get pushed so high.”
Business has slowed at Billy Bricks in the face of COVID-19, but rent payments are still coming due. Gruber was able to negotiate a 50 percent rent reduction through a broker for April, but the second half of his rent would not be forgiven. Gruber has not spoken directly to his landlord but hopes for an in-person meeting to discuss the potential for back rental forgiveness due to the extreme revenue limitations COVID-19 has caused.
“Our landlord is under no legal obligation to negotiate with us,” said Gruber. “But I would like to see some flexibility. I’d like to temporarily adjust our rent based on the square footage of the restaurant we are currently able to use.”
To complicate matters Billy Bricks has yet to receive a PPP loan.
“We sent our bank, Fifth Third, all of our paperwork on March 30 and they didn’t “process” it before the money ran out,” said Gruber. “I guess they were too busy with their bigger customers.”
A second wave of PPP loan applications are expected to be considered as additional federal funds are made available this week. Billy Bricks has all their paperwork in and Gruber is crossing his fingers their application will be approved at several stores.
“Even if portions of the money end up going to other things, a one percent loan isn’t a bad deal to get us through,” said Gruber. “We have kept all full-time staff on at all stores so helping us cover those salaries and wages while sales have been down will be a huge help.”
In the meantime, Billy Bricks’ “Feed the Front Line” efforts have been helping generate revenue at his stores. Next week Billy Bricks is providing lunch and dinner to the Oak Park Police Department with Senator Don Harmon. Harmon has graciously donated lunch and Gruber has matched his donation by providing the department dinner.
Patrick O’Brien of Scratch Restaurant Group is adjusting operations and trying to protect his trio of local restaurants. Scratch Kitchen in Forest Park has been shuttered since the shelter-in-place order went into effect but will re-open for curbside pick-up and deliveries at some point next week. Scratch on Lake has been operating as the hub for all three restaurants, although O’Brien reopened District Kitchen and Tap (DKT) on Harrison Street to serve a limited carry-out pizza menu in response to customer demand.
O’Brien, whose Lake Street restaurant space shares a landlord with Billy Bricks, reached out proactively before the government closed restaurant dining rooms, indicating he anticipated having trouble meeting his rental agreement because of the looming COVID-19 crisis.
“All of my communication with my landlord is done through a property manager and I was told because they ‘had their own bills to pay’ I was expected to pay in full,” said O’Brien.
O’Brien indicated he is also behind on rent and utility payments at his DKT and Scratch Kitchen properties but those landlords have been understanding and willing to negotiate during this unprecedented time. Concerned for his financial security, O’Brien paid half of the rent due on his Lake Street restaurant on April 1 and said he would pay what he could as the month unfolded.
“The landlord seemed to understand, but indicated he still expected the second half of the rent in April,” said O’Brien. “I do not get a negative vibe from him. He knows if I can pay, I will pay.”
And it turns out O’Brien was able to pay his Lake Street rent in full for April. In fact, the Scratch on Lake has seen almost no decline in business in the midst of COVID-19.
“I am blown away. As long as business is good at Scratch on Lake, I am able to pay my rent on that property,” said O’Brien. “But another month of this will be tough. I might be able to make it through May.”
Scratch Restaurant Group also received a PPP loan and expects to receive the money in the coming days. O’Brien credits his nine-year relationship with Forest Park Bank and their close relationship with the Small Business Administration for his success in securing the loan.
O’Brien is grateful for the infusion of cash but worries about how spending rules could impact the health of his businesses. Many of Scratch Restaurant Group employees have been laid off, but the PPP loan will require O’Brien to hire them back to properly utilize the PPP funds.
“I am taking on a loan while I am already in debt. It’s a ridiculous thing,” said O’Brien. “I am going deeper and deeper into the red with insurance and taxes and rent payments and I can’t use this money to help with those debts.”
O’Brien said he will need to “get creative” when it comes to spending the PPP money, but also has legitimate fears about reopening when the time comes.
Social distancing practices will inevitably force restaurant owners to space tables farther apart diminishing their seating capacity by 25 to 50 percent. O’Brien also expressed concern about the expense associated with restocking his shuttered restaurants.
“I am looking at needing thousands of dollars to reopen each place,” said O’Brien. “I am starting to wonder if things will ever be the same.”