Rethinking Your Retail and Restaurant Business Strategy: 3 Important Steps
As the U.S. and other markets around the world move past the first wave of COVID‑19 infections and focus on recovery, it’s clear that customer behavior will continue to evolve. But how? What will “normal” look like? How soon will we get there? What are the implications for a brand’s business strategy?
These unanswered questions lead to a lot of confusion among retail and restaurant leadership teams … and a lot of opinions on the right path forward. How do you bring order to the chaos and design a strategy to compete in the months ahead?
We believe that smart retail and restaurant leadership teams will focus on monitoring changes in three key areas: customers, competitors, and markets.
Americans May Be Ready to Spend But Some Businesses Aren't Ready to Sell.
The coronavirus pandemic has hit hard. More than 100,000 Americans have died. Businesses nationwide shuttered, and more than 44 million people have filed for unemployment insurance since mid-March. The stock market wobbles. However, as the economy reopens, and many Americans benefit from federal assistance, businesses across the country may be in line for a healthy dose of increased consumer spending.
"If jobs are coming back relatively quickly," which the May jobs report indicates, spending should pick up, says Scott R. Baker, an associate professor of finance at Northwestern's Kellogg School of Management. Baker recently co-authored a study for the National Bureau of Economic Research, which found that consumers curtailed spending since March, while incomes remained largely untouched. Baker suspects that consumers largely pushed off purchases because of financial concerns or because the businesses they'd typically patronize weren't open.
This spending hiatus pushed the U.S. savings rate to a record high of 33 percent in April--boosted in part from federal stimulus checks of up to $1,200 per person, depending on income. Americans are notably bad at deferred gratification, a trait that will favor companies that can meet any uptick in demand as the economy continues to reopen.
A Second Round of PPP loans for distressed sectors, such as hospitality, restaurants, travel, and tourism. Secretary Mnuchin said another economic stimulus will likely be needed and it should target those industries that are undergoing the most challenges. We’ve lost 3X the number of jobs as any other sector, We continue to struggle with capacity restrictions and lackluster demand for dine-in, and costs are piling up to operate in the COVID-19 era. Think of this as a targeted recovery fund for our sector!
Tax Deductibility of forgiven PPP loan expenses on payroll, rent, mortgage interest, and utilities. The IRS said these expenses, when paid with forgiven PPP loan funds, are not tax deductible. This would leave small businesses with a massive tax liability at a time when liquidity is already extremely challenged. The IRS notice (2020-32) also runs counter to congressional intent behind the CARES Act. Senator Cornyn is sponsoring bipartisan legislation to fix this issue - S. 3612. I know as you are reading this you are thinking “you must be kidding me." I wish! This is why we need to get this bill passed as well. We will have a chat with Cornyn’s team tomorrow to get an update on the bills progress.
MB Permit Fees: Today we reiterated our request to Governor Abbott for a waiver to allow TABC to accept payment plans from restaurants and bars that have been negatively impacted by COVID-19 and need to renew their alcohol license this year. We aren’t asking for a fee waiver, just more time for our restaurants and bars to get back on their feet.
Alcohol To-Go. We also reminded Governor Abbott’s team of our ongoing request to expand the existing alcohol to-go waiver for the duration of the recovery. This is an easy win that would be very helpful to restaurants now. We’re hearing from more and more stakeholders in the alcohol industry who agree it could help everyone, regardless of their place in the three-tiered system. We continue to advocate for the waiver to remain in place for the duration of the recovery and that it be expanded to include:
Retro-fit Restaurants: The reality is most of you are having to make changes to your restaurants to accommodate more to-go, delivery or other opportunities to bring in more revenue. This costs money, along with the cost of sanitation, cleaning and PPE. We are asking Governor Abbott for $390M so we can provide grants to help cover costs like this. We have to get louder here and message why this matters. Please send this link to your friends and post all over social media. I know we need this relief but with so many asking for support, we need to be the loudest industry.
Today included defending our sector from media who want to highlight every restaurant that has a positive COVID-19 case to drive clicks and engagement for their own financial gain. This behavior is beyond unfair and, worse than that, it hurts an industry already brought to its knees and owners and employees who are going above and beyond to keep their guests and each other safe. There is so much pain and fear and to have individuals and companies exploiting that gives me pause to consider if we are all really in this together.
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The noise TRA has been making on the PPP loan and needed changes is working. Senator Schumer is introducing a bill that will have many of the fixes they want. The pressure is on and they know we need fixes and they know it is the restaurant industry that is making the most noise. Key things that are within the proposed plan include:
Moving from 2 years to 5 for repayment
Changing the 75/25 split so you can make it work for you
Extend the forgiveness period until the end of 2020
Change the covered period from eight weeks to 12 or 24 weeks
On a call, they specifically asked about any fixes being made retroactive, and it was confirmed they would indeed apply. Note, on Tuesday they moved the Safe Harbor (the period of time when you could simply return your loan and not use) from May 7 to May 14. They believe this is so Treasury can release guidance on forgiveness early next week. In summary, it would be great if the Treasury could give us several of these fixes, but if they will not, in Phase 4 aka CARES 2.0 we believe the key items we need will be addressed. We also believe tax credits and state allocation of funding will be a big piece of the bill.
Today TRA signed on with the AHLI regarding liability. They know we need liability protection with the current environment and believe signing on to this and making it part of CARES 2.0 will be important.
They also made great progress this week on pulling together our “Blueprint for Recovery” and this plan includes the creation of a Restaurant Recovery Fund that will be driven from the state level. Kelsey and I are putting the finishing touches on this over the weekend with the goal to bring to the governor and our legislators next week. We feel strongly that we need state support in the recovery and cannot bear all the costs of getting our restaurants back on track. Remember, we were closed due to government mandate and have done everything to support public health. With this proposed fund, we feel we can ask for a fair financial recovery plan supported by the State of Texas and dollars secured from the CARES Act. Our Blueprint for Recovery plan also includes consideration on taxes, expansion of the current alcohol waiver, and relief from any pending regulatory changes. We need to create the best possible environment for our restaurants to succeed.
They had an opportunity to meet with several bar owners and operators are helping to craft a plan to get them open as soon as possible. They hope to have the framework of a plan that we can complete by early next week. This will be submitted to the governor’s office, like they did with the Texas Restaurant Promise, with the goal to provide a comprehensive plan to safely reopen bars. While it will be the Governor’s team and his medical experts that have the final say, we know giving them a plan helps a lot. We have more than 5,000 bars in Texas and they need our help getting customers safely back in the door. We are stronger together.
The COVID-19 outbreak has wreaked financial havoc around the globe, leaving many small-business owners struggling in its wake. According to the National Federation of Independent Business (NFIB), as of March 30—still early in the crisis—92% of small businesses said they had suffered negative effects as a result of the pandemic. Just 5% of small-business owners said they had experienced no effects at all.
While the short-term outlook for small businesses varies greatly by industry, it’s important to consider what recovery mode will look like once the economy begins to return to a state of normalcy—or establishes a new normal. Having an exit strategy in place for after COVID-19 can help you be prepared to hit the ground running and rebuild. If you’re not sure what your coronavirus exit plan should include, this guide can help with getting your business back on track.
1. Assess the Financial Damage
The first step in developing a rebuilding plan for COVID-19 is determining just how deeply your small business has been affected.There are different layers involved, starting with the hard numbers. If you haven’t updated your financial statements—such as profit and loss or cash flow statements—recently, it’s helpful to do that now. You can then compare them to last year’s numbers to see how much your business may be down. And while only a small percentage of business owners say they’ve benefited from the pandemic, 3% according to the NFIB, it’s possible that the damage might not be as bad as you think.
"It’s never to early to begin planning for re-opening! Our team has built what I believe is a very strong phased approach towards responsibly re-opening our venues in what is sure to be a challenging environment. I wanted to make this plan public in the event that it is useful to some, as well as to collaborate with others who may have their own plans. We are stronger together!" - Mitchell Roberts CEO of EVO
A few key points of advice to those looking to establish their own plans:
1.) Expect and prepare for heavy lead times and unexpected costs. Operating in the upcoming “new normal” will almost certainly require equipment that you most likely do not have. (Masks, Touchless Thermometers, Sneeze Guards, etc.) These items are currently seeing 2-3 week lead items. Get ahead of that.
2.) Don’t forget your team members. I’ve seen a lot of great guest-focused precautions, but don’t forget to take care of your staff too, as they are the ones on our front lines.
3.) Last but not at all least, weigh the impact of public perception. As important as it is that our guests ARE safe, it’s equally important that they FEEL safe. Public Perception will be the fuel that ignites our return to normalcy.
Here are some of the steps they will be taking in EVO restaurants
- reducing table capacity to 50%
- limiting groups to no more than 4
- removing bar stools from the bar
- using disposable paper menus
- sanitizer on every table
- masks required unless eating
- mask & nitrile gloves required for servers
Currently exploring mobile ordering as well.
Texas Gov. Greg Abbott’s “retail-to-go” phase of reopening the state’s economy starts Friday. But your favorite store may not be ready, and don’t expect to stroll into the mall.
A week’s notice may not be enough for some, from individual shop owners worried about new world protocols to store managers who must get payment systems turned back on and clearance from corporate offices outside Texas that are preoccupied with bigger issues.
And small shop owners said they haven’t received funds from federal loans yet to pay the employees they need to offer retail to go.
The COVID-19 pandemic has taken an especially hard toll on small retailers, which tend to have limited access to capital and minimal cash reserves. A March 30th survey by the National Federation of Independent Business found that the COVID-19 pandemic has negatively impacted 92 percent of small employers. About half the employers who participated in the survey can survive for no more than two months under current conditions.
Shopping center owners aren’t standing idly by in the face of this existential threat, and it’s not hard to understand why. Nearly 70 percent of shopping center tenants are small businesses that employ fewer than 10 people, according to ICSC. These small businesses play an outsize role in many shopping centers by helping distinguish one property from the next. “Small businesses are the heart and soul of our properties. They build long-lasting emotional connections with communities,” said Trademark Property Co. CEO Terry Montesi.
Many shopping center landlords are providing small-business tenants with some type of short-term rent relief, typically on a case-by-case basis, while steering them to resources designed to help them weather the economic storm and prepare for what’s expected to be a gradual return to normalcy.
March 26, 2020 — DENTON — Women-owned small businesses in Texas suffering financial losses associated with the coronavirus pandemic were thrown a lifeline today after the Center for Women Entrepreneurs at Texas Woman’s University announced a million-dollar grant program to help get them back on their feet.
Texas Woman’s University Chancellor Carine M. Feyten announced that the Center for Women Entrepreneurs is launching the AssistHER grant program, which will provide 100 $10,000 grants to women-owned small businesses in Texas that have been impacted adversely by the coronavirus pandemic. Grant funds can be used for operating expenses (excluding payment of sales tax and payroll, advertising, purchase of food for consumption, penalties and fees, and charitable donations), technology upgrades or help adapting to a new business model.
To be eligible for the grants, businesses must be at least 51% owned by a woman, have a demonstrated need due directly to COVID-19, and be owned and operated in Texas. Awardees will be required to complete online training on how to maintain business operations in the current environment and report all expenditures of grant funds. Eligible businesses must be up to date on payroll, sales and other taxes and be properly permitted.
APRIL 15, 2020 — The UTSA Institute for Economic Development today launched the Small Business Development Center COVID-19 Business Recovery Accelerator (SBDC COBRA) to help small businesses weather the financial hardships caused by the coronavirus pandemic. COBRA is the only recovery accelerator of its kind in Texas to help stabilize and rebuild the small-business economy.
COBRA will provide small businesses with the counseling and resources to pursue loans from the financial industry and to begin recovering from the economic impact of the COVID-19 pandemic. The accelerator will serve businesses in Bexar County and 10 surrounding counties. It will be funded by a $1.2 million grant from the U.S. Small Business Administration.
“For nearly 40 years UTSA’s economic development programs have been creating jobs, growing businesses and strengthening the economy,” said UTSA President Taylor Eighmy. “UTSA is committed to leveraging its knowledge enterprise to support the community in this time of need. I can think of no better way to do that than to pave the way for small businesses to get emergency financial relief.”
Jenna Saucedo-Herrera, president and CEO of the San Antonio Economic Development Foundation, answers your questions on KSAT.
Governor’s Small Business Series Webinar to be held 1:00pm - 2:00pm on Wednesday, April 15, 2020. Participation in the Webinar is FREE. The Governor’s Small Business Series Webinars provide Texas small business owners and entrepreneurs with timely, relevant, actionable information on the COVID-19 recovery resources such as Paycheck Protection Program, EIDL Loan Advance, SBA Express Bridge Loans, and SBA Debt Relief. Businesses will also get the chance to connect with local experts and support systems. Click here to Register
Knight Talks: Town Hall with Roy and Crenshaw Thursday, April 16 8:00 p.m.
Many of the questions we're hearing in Texas are related to the Paycheck Protection Program (PPP), when to anticipate more help from the government, options for taking care of employees, and business interruption insurance. Join us for a virtual town hall meeting with Dr. Emily Williams Knight, President & CEO of the Texas Restaurant Association; Representative Dan Crenshaw (TX District 2); and Representative Chip Roy (TX District 21). Click here to Register
Each employer must post a notice of the Families First Coronavirus Response Act (FFCRA) requirements in a conspicuous place on its premises. An employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.
The law requires alcohol manufacturers, wholesalers and brewpubs to submit monthly excise tax reports and payments to TABC on the 15th of each month. TABC will not seek to penalize licensees and permittees for late submissions that were caused by a circumstance outside of their control related to the coronavirus pandemic. The agency will assess whether a business qualifies for penalty relief on a case-by-case basis.
The Paycheck Protection Program (“PPP”) is the crown jewel of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act allocates $349 billion to the PPP loan initiative in an effort to stabilize small businesses during the COVID-19 outbreak and to allow them to retain their workforces while weathering the Coronavirus storm. But while $349 billion is a staggering number, it is unlikely to be enough to satisfy the demand for capital. The appropriated funds will go fast, and it is a first-come, first-served program. Indeed, reports are already indicating that Treasury Secretary Mnuchin is seeking an additional $250 billion for the PPP loan program.
Applications for PPP loans were available for submission on April 3rd. Processing began in earnest for small businesses and sole proprietorships this week. The U.S. Small Business Administration (the “SBA”) is opening up applications for independent contractors and self-employed individuals starting April 10th. The PPP gold rush is on and there is plenty of confusion and chaos to go with it. With many PPP borrowers having received their loan proceeds, or receiving them soon, what should borrowers be doing after receiving their loan? Here are five things that need to be on that list according to Forbes,
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