Tom Colicchio on Where the Stimulus Falls Short for Restaurants

In March, 417,000 hospitality workers lost their jobs. Millions more are expected to file for unemployment this month and next. To battle this stark reality, Congress passed the CARES Act, providing stimulus payments, expansions upon unemployment benefits, and loans and grants to small businesses. But will it be enough to help independent restaurants get through the pandemic?

Tom Colicchio, the restaurateur, chef, and television personality who, with his network of friends, hired a lobbyist to push the interests of small restaurant owners, came on Eater’s Digest to discuss what the bill gets right, what still needs to be done, and how dire the situation really is out there for restaurant workers and owners.

Highlights:

• He calls September 1 a “realistic date” for restaurants to open up.
• He worries tax payers will see GoFundMe campaigns and takeout and delivery operations and not support bigger government initiatives.
• He expects 40 - 50 percent of restaurants will not reopen at the end of this.

After Colicchio’s conversation, we talk about the biggest stories of the week, including the shift away from delivery, Alinea’s takeout offering, and the latest scheme from Grubhub.

Listen and subscribe to Eater’s Digest on Apple Podcasts:

The full conversation:

Amanda Kludt: First I want to establish how many restaurants you have, what the state of your restaurant group is. Is everything closed? How many people did you have to lay off? Just to lay the groundwork there?

Tom Colicchio: I laid off probably about 350 in the restaurants. And then separately, Wichcraft laid off about 75, 80 people as well. It’s a separate business. But so yeah, it’s a bunch of people. And we’re not operating, none of our restaurants were open. I chose not to do delivery. I chose to keep my employees safe.

AK: Was that a tough decision for you, or was it pretty straightforward?

TC: No, a very simple decision to... I closed before we were forced to close. I’m a bit of a news junkie and was watching what was happening in China. And probably three weeks before we closed, I got my staff together, my senior staff together and said, “I don’t like what I’m seeing. If this gets here, there’s going to be some major disruptions.” And so we had a little bit of a plan. A week later, it was clearly getting worse. Stopped buying wine. Stopped buying any non-essentials. So we were really down to food, labor, office supplies and things like that. And we initiated a 10% cut pay cut on the senior management team. And then two days later, it was clear it was getting worse. And at that point, I remember I did two events in a row. One was the Cochon 555. We came very close to canceling that. And then we had a fundraiser for Food And Finance High.

I left halfway through. I just started feeling like, “This is not a good place to be, with all these people.” And the next day I pretty much made a decision that if I wasn’t going to go out in public and socialize, I can’t ask my staff to do it. And we closed that Sunday night. But it’s tough because, I know how tight people are in the restaurant industry, and not knowing how long it was going to take. I had a pretty good idea of where the first stimulus was going, and knew that unemployment was going to be pretty robust. I told everybody to quickly sign up, because the longer you wait the harder it can be to get through. They were really great about it and they were like, “Hey, we understand.”

Daniel Geneen: So, how did you transition into getting involved with this politically?

TC: Well, I got to say I credit my wife’s film, A Place at the Table, because that was that first got me around to the idea of hunger. The thesis of our film was that charity is all great to manage hunger, but it’s not going to end hunger. And if we’re serious about ending hunger in this country, we need a bigger government response than we’re getting right now. And then if you take that pivoting to food policy action, where a lot of the work that I was doing was on the Hill, meeting with members of Congress and stating, lobbying for the various things that we were fighting for.

It was a dress rehearsal for this moment. And a friend of mine, Andrew Chason, who’s an agent at CAA called me up and said, “Listen, we’ve got a foundation at CAA and we want to help.” And I brushed him off a little bit and said, “Listen, this is enormous. It’s not going to help.” We need a stimulus that’s going to help the restaurant. And after I got off the phone with him, a buddy of mine who I’d lobbied with the Food Policy in Action called me up about something completely separate. And after talking to him about 10 minutes later, I sent him a text and said, “I think the independent restaurant community needs a lobbyist.” And he was like, “Okay, let’s do it.” And so I called Andrew back, and I said, “Andrew, okay, here’s how you can help.”

Within two days we had the money, we had lobbyists hired, we had a comms director hired. And we also found, and so very quickly pulled together these constituencies and started the Independent Restaurant Coalition, which is now over a thousand members strong, we’re managing this. And so we were instrumental in two things for the restaurant industry. One, there was a limit to 500 employees that can participate in the small business act SB7A. And we had to explain that yes, a restaurant may have 2000 employees, maybe spread over 18 restaurants. And so we lobbied to look at the individual restaurant numbers, as opposed to the whole enterprise.

And they actually put that in there for restaurants. And we also pushed really hard to get the date pushed back at February 15th, because that’s when the restaurant industry started feeling pain, not March 1st, which is going to be helpful. And we’re continuing to work with the rules on it, even though the bill was passed, there’re still rules that need to be instituted and that’s a separate process. And so we’re still working to try to understand the mechanics of the bill and we’re also at the table trying to craft a forum about what that’s going to look like.

AK: So can you get into the bill a little bit into the CARES Act and what it gets right? And then we can talk a little bit about what still needs to be done.

TC: Well, what I think it gets right on a small business portion of it, the SB7A. I think what it gets right is it’s focusing on the employees. And there is some focus on the businesses as well. And obviously, I think employees need to be taken care of for a lot of reasons. One, need a peace of mind that you’re going to get a paycheck, that there’s money coming through that they can pay the bills they have. Plus, I think it’s really important that people with children stay home. Especially now the kids aren’t in school. There’s no such thing as a daycare at this point. People who work and have young children at home, maybe they have an aunt or an uncle who comes in, a grandmother who comes in, we don’t want to do that right now. Grandparents stay home.

People will stay in their house. And so peace of mind knowing that you’re going to have money come into your pay your bills, that gets people to stay at home. The only way we’re going to actually stop this disease is by people staying home. So number two, it does take care of rent. There’s additional money that you can use for various things that won’t be forgiven, but it will be a loan. Right now, early on the bill, it was a 10 year amortization schedule on a portion that was a loan, that got changed to two years at .50 interest rate. I’d rather have .50 in 10 years to pay that loan back. And then it makes sense for the restaurant industry two year amortization schedule for restaurants doesn’t really help that much. But also I think the mechanics of 250% of payroll. So it roughly gives us two and a half to three months maybe to pay payroll.

I think that needs to be at least five months. I don’t see us opening up in June. I think that there needs to be additional funding that could either be a longterm loan, or additional grant money, so restaurants could capitalize, get reopened because we have to buy inventory. Most likely we’d have to pay our suppliers at some point, or they’re going to put us on COD and we’re not going to get product.

DG: Okay, what does that stand for?

TC: Cash on delivery. So we’d have to pay cash for deliveries, but it’s like right now, most of us are on 30 to 45 days. The money we’re making today is paying bills from 45 days ago, or 30 days ago. So we’d have to actually write them a check when they deliver food, which is difficult to do. And the other thing is, we were lobbying really hard that we wanted money to pay our bills now because I thought it was really important to keep the supply chains open.

And so if you look at independent restaurants, we employ about 11 million people. If you take into consideration the entire orbit of various industries that we support, whether it’s fishermen, farmers, cheese makers, wine grower, linen, florists, we’re probably talking about 20 million people. And so we thought it was important that the money flow through the restaurants also pay those bills. Plus, really important when we open up, those of us that will open up, I still don’t think this will ensure that all restaurants open up, it’s not going to be busy.

And if the restaurant’s not running at 80% occupancy, you’re not making money. And so what we don’t want to do is have restaurants open up, pick a date, September 1st. Which I think is a realistic date. We’re not going to be busy. And you don’t want those restaurants opening up for two months and going out of business. Because then, everybody’s going to be out of work again.

And so I think the federal government needs to backstop these restaurants and figure out a mechanism to do that until we get to a certain level of business, where we can stand on our own. So I think the CARE Act is a good start. I just don’t think it was far enough.

DG: So when you started looking at the bill, who was actually writing it and what did it look like when you first got there?

TC: On the Senate side, Marco Rubio, because he’s the head of the small business community. A lot of it was coming out of his office on the Senate side. It’s Velazquez on the House side, who was the Democrat who runs the SGA committee, who was also been diagnosed with COVID-19 so she’s now on the sidelines. So those who are writing it, the staffers that are writing it. And there’s a lot of different people that are weighing in on it.

DG: A lot of major restaurant chains had some influence over it.

TC: So, yeah, and we actually had a conference call with the NRA [National Restaurant Association] and just let them know what we were doing. And maybe we agree on 75% of what they’re asking for, the 25% made my diversion. We wanted to make sure that we had a seat at the table. We weren’t going to let the NRA represent all of us. And again, I’m not saying that they do a bad job, but they just had their interests also in other places and that’s fine. They represent larger chains and publicly traded chains. And so that’s their constituents and that’s fine.

The other thing that we did is collectively, we all have contacts on the Hill, whether house members or senators, and we all work those contexts. And really what it was about was just telling our story, because we got to educate members of Congress about how our restaurants look and how they operate. There’s several people who were helpful to me. Rosa DeLauro is a Congressman from Connecticut who does a lot of work around hunger. That’s how I know her. And Jim McGovern, who is the best member of Congress who works on hunger issues. Cory Booker is a personal friend, us both being from New Jersey, and a great guy. So I had some conversations with Cory. So you know, we all have again, because we’re running businesses and, people like to entertain in restaurants and so we have contacts and so we really work them hard. But it was really just about getting everybody up to speed at what was at stake if restaurants weren’t included. This is our continuing conversation that we’re having.

AK: And are you guys working on a followup bill asking for more money?

TC: Absolutely. A follow looking for longer periods of time and we can employ people. Looking for additional loans, long term loans. Yeah, we’re still at it. And right now, here’s the problem. If I could pay my staff for two and a half months, the question is, when do I hire them back? Now I have to hire them back right now by June 30th. And so if I do it too soon, I’m going to run out. So let’s just say I hire them all tomorrow, and it takes three months to open it up and I’m not open in three months, now I’m out of that money. So for me, because the way this bill is written, it’s better for me to actually hire everybody back by mid June.

This way I have them on a payroll for two and a half months. They’re not working. We’re not open. But now they’re ready to go when I open September 1st, if that’s when I choose. And what’s really important, it’s important for two reasons, because yes, unemployment’s robust, but there’s two reasons why it’s important. I think for one from a restaurateur to want to... I want to make sure when I open, I have my staff that’s already trained. As you guys know, every restaurant is very particular, not only to how the operation runs, but just a physical space where everybody knows when they take an order, what foot to turn on to go to put the order in. They know where to turn to go towards the bar. When you’re new, you have to navigate that. That’s hard.

So when we open up, I want a staff that’s trained, ready to go. And so, it’s really important that, we don’t have to make decisions between when to bring the staff back. I want to bring them all back now, but if I do, I’m concerned a month from now, is it going to be over? We’re not getting ready to open up. They’re back on unemployment and now I’m done. I have no lifeline left. So, and this is part of the education here. This is again, is part of the education that we have to provide to members of Congress. Just sort of like what they actually did and how it actually works now.

So again, first good step. I’m glad that the partisan bickering was put aside. At least that’s what we’re hearing. Even whenever you saw it on TV, that was just politics. But yeah, it was really good to see the officials get together, get this done. But we do need more.

AK: And what about local governments? What are you calling on them to do that they can do on their own?

TC: Yeah, so ROAR, that’s another group that popped up in New York City, and what we’re asking for some rent relief, though there is money there in the Care Act to pay rent. But you know, I believe Robin, see I haven’t seen yet and I haven’t spent much time looking for it, but I think we need... Because of the size of the problem and there’s so many foundations and charities popping up, I think we need to focus on just paying health bills for any restaurant worker that has a hospital stay.

It’s not going to be hopefully not a lot of people, relative to what we’re seeing right now. But those are going to be pretty big bills. It’d be great for them to know that those bills are going to get paid. Because that could bankrupt you. It could really screw you for years. I think our governor is doing a great job, telling us how it is. He’s not sugarcoating it and he’s not playing politics, but he’s just being honest.

AK: What about the GoFundMes you see popping up everywhere? Do you think that those are helping restaurants? Is it too small to make a difference? Is it a distraction?

TC: I think for the individual restaurants, I think it’s pretty good. My concern with that is just in the messaging. If we are looking for a 4-0 and then a 5-O, what I don’t want to do is have the public say, “Oh wait a minute, why do restaurants need all this tax dollars development? Look at all these GoFundMes charities popping up taking care of the restaurant industry. They need this. That’s the danger. That’s also the danger I think in opening up and doing take out and you know, you’re doing $4,000 in a day, you’re employing four or five people.

And again, it gives the public the idea that well they’re still open. Like look, all this business is doing and, “There’s a line down the street for Carbone’s, $6 veal parmigiana. Why do they need help?” It’s just the wrong message right now. And so that’s what I’m afraid is that when people are going to start, I’m already seeing it on social media. “Why does this person need this help? Why do restaurants... That’s their problem.” I don’t think it’s helpful. That said, yeah. Is it good for the individual? Yeah. But again, this is the response we knew it was coming. Everyone just immediately goes to charity. And I understand the response is a good response for someone saying, “I want to help. I have a few dollars, I want to help and this is how I can do it.” What I want people to understand is along with writing that check for a couple hundred dollars to support your favorite restaurant, pick up the phone and call your member of Congress to say, I want this restaurant to be there and have them have it together.

AK: And if this next bill doesn’t pass, what is in your mind, the estimate for the closures we’re going to see? What do you think we’re going to be looking at come September?

TC: I think two things. I think that, I mean I put it at 50%. When you think about restaurants, you’ve got to think about it a little more... Don’t take this the wrong way, a little bit more than the restaurants that you’re reporting on. And you guys do a great job also getting outer borough stuff. Think about all these restaurants in Queens, neighborhood restaurants, that maybe don’t have the wherewithal to even understand what’s going on right now and how to tap into that loan, or the money they can get from the through Congress. The number? I don’t know 40%, 50% but that’s not even what I’m concerned about. I’m concerned about after we get through this, it’s the restaurants that open up, but then close two months later, three months later, a year later. Listen, you guys see the closings. You look at them every month.

We were in for some tough times before this. The restaurant industry it’s been rough lately. And especially in New York city, rents just keep going up. I have no problem with paying people more money. I have a problem with not being able to charge more for food, because there’s only so much you can charge. Certain restaurants may have a little bit of elasticity where they can charge more to cover those costs, but where’s it coming from? Most restaurateurs that I know, they got 2%, 3% profit lines. So, it was already tough, but I just think that looking at a year from now, I’d be surprised if half the restaurants in New York City are in business.

DG: I guess one quick question I saw on Twitter that someone said Forbes reported this guy’s got 20 mil, why doesn’t he just figure it out? And then you said...

TC: “Well, I can take this article to my bank and see if they’ll just write me a check for $20 million.” Number one, don’t believe everything you read. I wish I could work that. Most people also don’t understand that whatever net worth that I have, it’s wrapped up in my business, which is now worth nothing. And so in fact, there are liabilities and most people don’t understand the liability side of this. I live a comfortable life because of TV, but it’d be great if I had $20 million right now and I can write checks on, but I don’t have that. So my bankers would laugh at that.

Anyway, also, I think if you look at that thread, a lot of people were very, very quick to point out how long you can actually pay this payroll before the restaurant goes bankrupt? And then there are no restaurants for employees to come back to. And that’s what you got to focus on. And this is what’s really important, making sure after this crisis, get back open so we can employ as many people as possible and do that for a good length of time. We don’t want to have people come back to work and then a month later, they’re all back on employment.