Innovating Food & Beverage Strategy for the Guest of the Future: A Discussion with MGM Resorts
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COVID-19’s impact on the hospitality industry has left no restaurant untouched. For those who've started to reopen their doors, the fight to survive is a daily uphill battle of navigating new operational procedures, city legislature, rent negotiations and more.
As of April 13, on average, restaurants had laid off 91% of their hourly employees and nearly 70% of their salaried workforce. Restaurants operators have been working around the clock to adapt their restaurants to social distancing and other health and safety measures. Still, most don't believe these changes can be sustained long term.
According to the James Beard Foundation's survey, restaurant owners reported their biggest cash challenges to reopening are:
The situation seems bleak, but it's not hopeless. Restaurant owners can overcome these COVID-19 challenges with a few strategic tactics. Below, we'll share ways restaurants can cope with each of these pressing cash concerns.
Rent and payroll are commonly two of the most expensive restaurant expenses, so it's no surprise they're causing cash headaches. With little-to-no income coming through the door, it's challenging to pay your most substantial bills on time month after month.
While you can use business financing (credit card, line of credit, COVID-19 loans for small businesses) to cover rent, attempt negotiations first.
Restaurant leases are complicated, and with everyone navigating this new reality, there's a chance your landlord will be willing to renegotiate your contract. After all, your landlord wants you to stay in business — that's how they make money. Here's how to handle the situation:
Before you start negotiations, make sure you know your rights. Rent situations and eviction moratoriums vary across states, counties, and cities. Check to see what COVID-19 protections are being offered to businesses in your area.
If negotiations fall through, another great option is a PPP (Paycheck Protection Program) loan. These loans can be used to cover payroll and payroll-related expenses (like rent and utilities). However, less than 40% of these loans can be used on non-payroll costs if you want to receive loan forgiveness.
Payroll is one of the most significant restaurant expenses. After all, your business can't function without hosts, waiters, chefs and bussers. If you don't have the cash to pay your employees on payday, don't panic — you have options.
The federal government offers PPP loans to help businesses pay for payroll and payroll-related expenses. If you use your PPP loan appropriately, then you could have 100% of the loan principal forgiven. These loans aren't difficult to qualify for, but they're a hot commodity right now, so there's no guarantee you'll receive one.
SBA 7(a) loans are relatively flexible loans that the SBA guarantees. With maximum loan amounts up to $5 million, low-interest rates, and lenient repayment terms, these are some of the most sought-after small business loans.
Global pandemic or not, a business line of credit is a fantastic financial resource to keep in your back pocket. You can use your credit line to cover payroll, pay the monthly bills, finance equipment, or just about any other business expense. Plus, it's revolving credit, meaning you won't need to reapply for the loan once you've used it and paid it off.
States, counties, and cities are offering their own financial relief programs to small businesses on top of the federal government's PPP and Economic Injury Disaster (EIDL) loans. These state and local governments are providing everything from microloans to grants to tax relief programs. Check Zenefits’ complete guide to find out what financial assistance is available near you.
While the IRS tax deadline was July 15, 2020, restaurants still need to get their ducks in a row to prepare for possible tax payments. Here are a few expert tactics for reducing your tax obligations:
Don't let taxes eat into your cash flow — you're going to need all the money you can find to maintain your reopening momentum.
These fixes don't entirely negate the cash challenges your business is facing, but they can alleviate some strain. If your business is struggling to pay rent, payroll, or taxes, give these strategies a try. Cash relief is out there — you just need to find it!
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