Restaurants across the county have been looking forward to the economy reopening in recent months as Covid vaccines continued to spread and pent-up consumer demand was felt.
But headwinds from supply chain interruptions to labor shortages and rising costs hit the industry as the contagious Delta variant tarnishes hopes of a return to normal.
Small business owners in the food, restaurant and hospitality sectors are more concerned than most about the ongoing disruption of the pandemic, according to new data from Goldman Sachs’ 10,000 Small Business Voices program. The data shows that 84% of owners in these sectors are concerned about the impact of rising Covid-19 infection rates on businesses, compared to 75% of the entire small business population.
Almost all of them saw an increase in operating costs, with 93% saying inflationary pressures have increased since June, negatively affecting finances.
The data subset of 117 food, restaurant and hospitality owners came from a broader survey of 1,145 participants in the Goldman Sachs 10,000 Small Businesses program earlier this month.
The numbers underscore the ongoing pressures restaurants face even in an economy recovering from the worst of the coronavirus damage. While the introduction of vaccines and looser public health restrictions have brought the industry closer to normal, challenges remain as restaurant owners look to fall.
Ruby Bugarin, who runs Margaritas and Pepe restaurants in the greater Los Angeles area, said both the availability of goods and the higher cost hit her business. Products like crabs are harder to find, the cost of chicken and pork has increased by more than $ 1 a pound, and the prices of other goods have increased.
“In the past two or three weeks, the price of avocados has gone from about $ 40 a box to $ 85 a box. So that’s more than double, ”said Bugarin, a member of the Small Business Voices program. “We can’t do the same to our customers – we raise prices once or twice a year.”
Labor costs are also rising in her two restaurants with a total of 63 employees. Bugarin said she would like to add a chef or two at each location, but instead pays overtime weekly to her current staff.
Restaurant, hospitality and hospitality owners like Bugarin are also hit harder by labor problems than in the wider small business community. The data shows that 79% of these business owners say the challenges facing employees have worsened since the pandemic, compared with 64% overall.
Recent data from the National Federation of Independent Business underscores the labor law issues that weigh on the optimism of small businesses. The vacancies in August were above the historic 48-year average for the second month in a row.
“In June, despite inflation and despite labor challenges, 67% of small businesses said they believed the US is on the right track,” said Joe Wall, national director of Goldman Sachs 10,000 Small Businesses Voices. “That number is now 38%. The delta variant is sure to be the # 1 topic on sentiment change and then pile on it, inflationary momentum and workforce challenges.”
With the pandemic taxing restaurant operators, Goldman’s data revealed that nearly 40% of food and hospitality companies expect to have to take out a loan or line of credit for their business this fall or winter. This corresponds to 29% of the companies as a whole.
The Small Business Administration recently announced a revision of the Economic Injury Disaster Loan program for businesses. The credit limit will be increased to $ 2 million and recipients will be allowed to use the funds to prepay business debts, which allows restaurants to use the money on business debts and more.
“At a time when small business restaurants still have extreme working capital needs, these changes will improve the prospects for thousands of operators and improve the economic prospects for communities large and small,” said Sean Kennedy, executive vice president of public policy at the National Restaurant Association said in a statement. The group worked with the SBA on the new small business terms.
Beyond these changes, small business and restaurant owners and advocates have urged lawmakers to top up the $ 28.6 billion restaurant revitalization fund. It granted grants to the industry but was quickly exhausted due to high demand.
“We were able to distribute it to over 100,000 companies across the country, but the demand was 2.5 times as much,” SBA administrator Isabel Guzman told CNBC about the RRF last month. “There are still restaurants, food and beverage companies that need support. We know they have been hardest hit, and will often be the last to reopen in communities, but they define so many of our main streets.I can’t say exactly what the actions of Congress will be, but the SBA would be ready to take these Manage programs quickly, efficiently and fairly. “