Coronavirus (COVID 19) and NY Restaurants
The new coronavirus disease that was first identified in Wuhan has received an official name from the World Health Organization: “COVID-19.” “COVI” comes from coronavirus. The “D” stands for disease. The 19 represents 2019, the year the virus was first identified, in December.
COVID 19 has commenced its destruction on the NY restaurant, bar, and nightclub industry and hospitality and foodservice owners are now trying to figure out their next steps.
Restaurants and bars in New York are ordered to close to anything but take-out and delivery business (although grocery stores can stay open for now). This shut down will be the largest disruption hospitality industry far eclipsing the shut down resulting from the September 11 terrorist attacks, the 2008 financial crisis, and Hurricane Sandy.
The NYSLA is now permitting businesses with on-premises liquor licenses to sell alcohol to customers off-premises (must be accompanied by food). However, the revenue generated from off-premise liquor sales along with take-out and delivery will be a small fraction of the revenue typically generated. That revenue will most likely not even be enough to cover the necessary operational costs of the establishment.
The harsh reality is that a large number of NY restaurants will not be able to wait out this viral storm and will be forced to permanently shut their doors as a result. The restaurant industry is hoping for some type of government “bail-out” but any such financial help (other than low or no interest loans) seems unlikely in the immediate future. Additionally, while NY is suspending evictions indefinitely, all that unpaid rent will be accumulating and will need to paid at some point in the future.
As such, restaurants need to carefully evaluate their options and plan ahead accordingly. Just because you can legally stay open for delivery and take out purposes doesn’t mean that it makes financial sense for you to do so. At this time, restaurant and bar owners should have their leases carefully reviewed by qualified legal counsel. Your lease may have clauses in it – such as a force majeure clause – which may provide you with some options and negotiation leverage to get you through the tough times ahead. Additionally, now is also the time to pull out that insurance policy to have that reviewed to determine if you have coverage for this type of business interruption or ingress / egress disruption. Further, all restaurateurs should be actively monitoring the actions that government is taking to help our industry as you will want to take advantage of the programs they may have offer – such as interest free loans which are presently being offered. Some of my restaurant clients have (i) implemented a program of selling discounted gift cards for their establishments similar to a bond (eg, buy a $100 gift card for $75 now which may be redeemed no sooner than 3 months from date of purchase), (ii) offered various creative delivery specials (eg, a few appetizers offered for a $1 each with purchase of entree; free bottle of wine with order over $60.00, etc); and (iii) offered a daily delivery of a day’s worth of prepackaged meals.
In conclusion, we all know we are looking at uncertain and tough times ahead but taking the right actions now and in the immediate future may just make the difference between a restaurant that survives COVID 19 and one that permanently goes under as a result.
Most importantly, stay safe and healthy.