Restaurateurs, Trump Administration Talk Industry Concerns

    Operators are pushing for extension of eight-week forgiveness period.

    Legal | May 2020 | Ben Coley
    President Donald Trumps stands at a podium.
    wikimedia commons/Gage Skidmore
    Trump offered two main solutions to assist the industry.

    In what appeared to be a sign of progress, a variety of restaurant operators held a face-to-face discussion Monday with President Trump and his administration about how the federal government can help the industry.

    At the White House meeting, Trump offered two main solutions to assist the industry—an “Explore America” tax credit that Americans can use for domestic travel, including to restaurants, and restoring the deductibility of meal costs for businesses. Trump was referencing the Tax Cuts and Jobs Act in 2017, which eliminated deductions for business entertainment expenses and limited how much a business could write off for providing meals to workers.

    “That’s going to create a tremendous amount of business,” Trump said at the meeting, regarding the potential restoration of deductibility. “I think you’re going to have to open a lot of additional restaurants in this country. I think it’s, frankly, more important than even the other things we’re talking about. I guess, short term, what you’re [restaurant operators] talking about, is more important, but long term, the deduction would be phenomenal.”

    When the restaurateurs had an opportunity to speak, several suggested tweaks to the Paycheck Protection Program. The most notable request was extending the forgiveness period from eight weeks to 24 weeks.

    As the program is currently structured, the forgiveness period begins as soon as the PPP funds are dispersed. Companies must spend the money in eight weeks in order to qualify for forgiveness. Any funds not spent during the period would have to be paid back in two years. The monthly payments start after a six-month grace period.

    The industry veterans weren’t asking for more money over those 24 weeks, but more time to spend the loan and still meet forgiveness requirements.

    “One of the things that we’ve talked about as we were kind of chatting here is this idea of extending the eight-week deadline,” said José Cil, CEO of Burger King parent RBI, at the roundtable discussion. “We think that eight-week deadline, when it was implemented, was probably—you know, eight weeks probably seemed like an eternity.  But today, we’re in the 10th week of the pandemic, and I think it’s going to take some time for our restaurants and our owners to get back to the capacity levels and the traffic levels that we were seeing pre-COVID.”

    Treasury Secretary Steve Mnuchin said there’s support to extend the forgiveness period.

    “We’re working on a technical fix that we do have bipartisan support for it to extend it,” Mnuchin said. “I’m not sure it’s that long. But I’ve spoken to the SBA [Small Business Administration] committee and there is bipartisan support, so we’re working on that.”

    Chef Tim Love, who owns restaurants in Texas and Tennessee, told Trump that he believes the administration should delete the 75/25 rule that requires loan recipients to spend 75 percent of the funds on payroll and the remaining 25 percent on rent and utilities.

    “The 75/25, the way that it’s spent, I know it’s tough, but I’m speaking for my friends who are in New York—not necessarily for myself, even in Texas where the rents are higher—and they need the ability to spend the money on rent if necessary, so long as they’re hiring their employees back,” Love said.

    Operators also asked for business liability insurance protection, which will undoubtedly receive more spotlight as customers return to restaurants that attempt to meet increased health and safety concerns.

    Cil said he expects “frivolous” and “unfounded” lawsuits against operators that are “trying to do the right thing, trying to survive.”

    Larry Kudlow, director of the U.S. National Economic Council, said that the administration is working hard on liability protection and that it will be a key part of the next stimulus package.

    Trump indicated that his team has been fought on the inclusion of business liability insurance protection.

    “The Democrats don’t want to give you the liability provisions,” Trump said. “They just don’t want to have that.  And it’s crazy that they don’t. But the Democrats do not want to give that to people, and that’s not a good thing.”

    The restaurant operators also noted that the industry has only received 9 percent of available PPP funding.

    The National Restaurant Association and Independent Restaurant Coalition—both of which had representatives at the meeting—have each called for separate funding. The Association wants a $240 billion recovery fund; that’s equal to the amount of losses it expects in the industry by the end of 2020. The Coalition wants a $120 billion stabilization fund specifically for the independent sector, which consists of 500,000 locations and 11 million employees.

    Tilman Fertitta, owner of Landry’s, a dining, hospitality, gaming, and entertainment brand that encompasses more than 60 brands and 600 restaurants, essentially played devil’s advocate for larger chains that weren’t able to acquire PPP loans given public perception and pressure from the federal government.

    His company, which earns $4 billion in yearly revenue, laid off 40,000 employees. Fertitta said he received a PPP loan, but returned it because of criticism. He instead borrowed $300 million at 12 percent interest to add liquidity, but it wasn’t enough to rehire all of his employees.

    “if you would just split it up—and I’m not saying add any more money, but add a category for the larger private restaurateur that could go out and take this money and put it in a different bucket so it wouldn’t be me taking this money away from the little beauty salon,” Fertitta said.

    The meeting comes after it was announced that 5.5 million in the food and beverage industry were laid off in April, which represented about a quarter of the total job loss. That’s on top of the 500,000 jobs that were cut in March.

    Kudlow, however, said in the meeting that he thinks brighter days are ahead.

    “I guess I’m usually the optimist, but we’re in a terrible pandemic contraction here in the second quarter—we know that—and there’s a lot of hardship and a lot of heartbreak,” Kudlow said. “But there’s also a few glimmers of hope of recovery, because I know you, sir [Trump], believe in the second-half recovery, and I do too. And I think with the right policies, we can have a booming next year.”

    Speakers at the meeting included Cil; Fertitta; Love; Marvin Irby, acting CEO of the National Restaurant Association; Niren Chaudhary, CEO of Panera; Sean Feeney, cofounder of Grovehouse Hospitality Group; Melvin Rodrigue, chairman of the National Restaurant Association; James Bodenstedt, CEO of Muy Cos., which operates fast-food franchises; Thomas Keller, owner of the Thomas Keller Restaurant Group; and Will Guidara, cofounding member of the Independent Restaurant Coalition.

    Members of the White House at the meeting included Trump, Kudlow, Mnuchin, Vice President Mike Pence, senior adviser Jared Kushner, First Lady Ivanka Trump, Labor Secretary Eugene Scalia, Brooke Rollins, assistant to the president for strategic initiatives in the Office of American Innovation, and senior economic adviser Kevin Hassett.

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