As states begin to reopen and adjust to the new normal, we thought it would be helpful to share our insight on some of the options available as owners move from taking things one week at a time to thinking more long term on what the future may hold for their businesses.
According to OpenTable, restaurant reservations across the United States are still down 60% over this time last year, and almost half of restaurants have not yet even begun retaking reservations. Takeout orders are up 70%, and deliveries are up 62% versus pre-Covid-19 averages. Customers are spending more time in the kitchen too; surveys in the U.S. show cooking at home has increased 17% over the same period.
As their businesses reopen, owners increasingly find themselves in a competitive environment alien to the one they may have succeeded at in the past. Restaurant customers have shifted ordering preferences and regulations have made in-location dining difficult. Adjusting to this new environment means business owners need to innovate on what they know best. Options vary; for restaurants, takeout and delivery has gone from being a side business for their dining rooms to the only source of revenue. Growing this, whether it be through implementing online delivery service options like Grubhub, or growing an already existing service through marketing, can help tide over restaurants as customers gradually become more comfortable eating indoors. Owners looking to reopen their dining rooms should continue to follow their local regulations, as many locales are still not allowing indoor dining yet.
Redesigning menus and packaging to be more take-out friendly and reducing food cost can help as well; no one cares about the best steak in town if it is cold by the time your customer gets it home. In some cases, adopting a “take and bake” or cook at home model can be an option for the type of food that might not travel well. Ultimately, each business owner will have to experiment to find what works in their unique situation, but it continues to be apparent that businesses must adjust to operating in the new normal in a post-Covid world.
With restaurants redesigning their business model and menus, now is a great time to reevaluate business costs. Changing delivery order sizes to reduce waste, delaying upfront costs, and saving on controllable expenses are all steps that businesses can take right now without making large changes to help make sure every dollar that customers spend with the business is used wisely. Even something as simple as a restaurant comparing supplier prices on take-out supplies and sanitizing equipment can save money on its bottom line. More broadly, restaurants can take the downtime caused by Covid-19 to reassess their business practices and refocus on legal compliance. Now is a good time to create a safety plan, something required by the New York State Department of Health, that covers distancing and disinfecting procedures for guests and staff. Taking the time to make sure employee handbooks are up to date and complying with legal regulations while a company is closed will ensure that once the business reopens again, sales will pick up where they left off and owners can avoid the headaches caused by costly lawsuits.
While Covid-19 may have forced many companies to change their business models and adjust, the same can be said for the business lenders and lessors that businesses borrow and rent from. Lease renegotiations have spiked in the months following shutdowns, as businesses look to lower their largest costs and lenders are more amicable than ever to renegotiating debt given the circumstances. Even if a contract seems unbreakable, many have force majeure exemptions which allow a party to break it without penalty under an extraordinary circumstance, which may include the ongoing pandemic. Business interruption insurance is another option to consider, a type of insurance which can help small businesses recover from certain losses tied to circumstances that prevent them from operating as usual. If needed, businesses can also look for the protections afforded to every business owner under bankruptcy, which allows for certain dischargeable debt to be forgiven and relief from creditors while a business looks to reorganize. While bankruptcy may seem like the nuclear option, proper legal counseling makes it a helpful tool for business reorganization. K&I Law Group can provide a variety of assistance surrounding all these options, including lease re-negotiations, discussing bankruptcy options, renegotiating contract obligations with vendors and distributors, and more.
The Federal Government has also been providing businesses some support. Congress has renewed the Paycheck Protection Program (PPP) into August, which provides forgivable loans to small businesses that keep their workers on the payroll if the loan amount is spent on qualifying expenses within 24 weeks. Another relief option available is the Employee Retention Credit (ERC). If a company suspended operations anytime during 2020 or saw a decline of more than 50% in gross receipts as compared to the same quarter last year, they may be eligible for a payroll tax credit towards 50% of qualified wages paid to employees. Economic Injury Disaster Loans (EIDLs) are yet another option; Qualifying businesses may be eligible for up to $2 million in loan proceeds with interest rates ranging from 2.75-3.75% and a term of 30 years. Some states are also assisting, such as the New York Forward Loan Fund (NYFLF), which offers loans to small businesses that were unable to qualify for PPP or EIDL loans in the Empire State.
At Koutsoudakis & Iakovou Law Group PLLC, we are committed to helping restaurants and businesses navigate this difficult time. Our attorneys have proudly represented members of New York’s business community for over a decade. While laws are changing rapidly, with our expertise and experience, we are confident that our clients are in good hands. Our mission is always to advise our clients towards their respective goals. Whether it’s filing for bankruptcy or finding other creative solutions to ensure our clients’ successes, we will continue to guide our clients to make the best decision for their businesses.