As New York City Pushes Ahead With Reopening, The Restaurant Industry Remains Imperiled

New York City’s reopening plans have provided a lifeline for the city’s pummeled restaurant industry. But the slow return of patrons and now major staffing problems continue to vex operators still battling to make enough for expenses, including rent.

“Many restaurants haven't been able to pay rent or only paid partial rent over the past 15 months, they have bills they owe to vendors, exhausted some of their personal savings to keep the business afloat,” New York City Hospitality Alliance Executive Director Andrew Rigie said.

He said the state’s moratorium on commercial evictions through to August and the city’s ban on the enforcement of personal liability provisions in commercial leases have been a saving grace, though he predicts there may be scores of restaurants that aren’t able to reach a deal and are thrown out once those arrangements expire.

“We've heard some positive stories where restaurants and their landlords have been able to negotiate deals to get through the pandemic. And we've heard horror stories where landlords are trying to go after restaurants for being unable to pay rent and evict them," he said. 

As of Wednesday, restaurants in New York, as well as stores, salons and gyms, are able to operate at 100% capacity for the first time, provided they can accommodate 6 feet of distance between people. The city has also dropped mask mandates for those who have been fully vaccinated, in keeping with the Centers for Disease Control and Prevention advice. More than half of all adults are vaccinated in New York state, per government figures.

It’s all welcome news, but hospitality sources say they are still far from out of the woods. Many are still operating at reduced numbers, as office workers delay their return and tourism numbers remain low. Plus, the federal government’s Restaurant Revitalization Fund, which offered grants to bars and restaurants, already has significantly more applications than funds available.

The Small Business Administration received applications for a total of $65B, which is twice the amount of aid on offer, per the Los Angeles Times. More than 300,000 restaurants and bars applied, according to the Independent Restaurant Coalition. 

Rigie said the alliance is now hoping the fund will be replenished, and it is calling on the state government to pass legislation to continue the “alcohol to go” rules that were brought in last year and which the alliance has described as “a lifeline source of revenue” for restaurants and bars. 

The group also wants the state to grant temporary liquor licenses to new restaurants in the city — rapidly speeding up the typically six-month process for operators — and for liquor to be allowed to be served in outdoor dining setups permanently. Measures like outdoor dining were introduced as emergency arrangements that will eventually expire, and Rigie said restaurant operators need the measures to get up and running more quickly and generate needed tax revenue.

Restaurateurs say a suite of existential problems for the city is hurting their ability to recover quickly.

“We can’t open for lunch, because we don't have enough staff … And unless we're able to hire more individuals, we're still going to be missing about 20% to 30% of our sales, because we can’t open for lunch,” said Philippe Massoud, a chef who owns ilili Restaurant and ilili Box in the city.

He believes there are workers opting to take unemployment rather than return to restaurant work, and the mass exodus from the city of those kinds of workers through the worst of the crisis is causing the problem. That particular challenge is wreaking havoc across the country, with experts pointing to issues like lingering fears about the virus and childcare as potential causes of why many industries are finding it hard to secure workers.

But Massoud is not yet sure if reopening for lunch would be worthwhile — not that he can even test it out right now.

“The problem with lunch is that if the offices are not back at full occupancy, then lunch is not what it used to be, so it is a new revenue level, and I have no clue what it is because I can't open for lunch,” he said, though he noted he has had multiple conversations with guests who tell him they are not keen to rush back to their desks. Most of the tables are groups of two or four, with few big tables of people with 10 people, he added. 

“Many of us have worked out the deals [with landlords] based on the percentage occupancy. So now that 100% occupancy is back, those of us that have base-rent with percentages and all that are going to be able to send our landlords very good sums of money,” he said.

He declined to give specifics of his rent arrangements, but he said the deal he reached with his landlord has allowed him to survive.

Some 92% of the city’s restaurants could not pay full rent back in December, per the Hospitality Alliance, a number that has steadily worsened through the crisis. Rigie, the Alliance’s executive director, said there will be multiple restaurants with rent debts, and while he hopes deals are reached, that will not be possible in every case.

Jeremy Wladis, president of The Restaurant Group, which owns Harvest Kitchen and Brad's Burgers & BBQ, is facing similar challenges. He has applied for money from the revitalization fund and is still waiting to hear back. He too is facing major challenges with staffing.

"Cooks, busboys, runners, delivery guys, dishwashers, managers — you name it, we're short on it,” he said, adding that many people are anxious about restaurant work in the wake of the coronavirus pandemic. He said, overall, he is 10% to 20% below staffing levels, and he is worried about lasting behavioral changes as well.

"Everybody said, ‘oh, it's going to be the roaring '20s — it is, you know, compared to what we've seen in the last year,” he said. “[But] I think people figured out that they don't need to go out every night. In New York, everybody [used to go] out every night. Now I think people are saying ‘Hey, you know, I can sit home, I learned how to work my Netflix really well.’”

Alexandra Charpentier, who owns an all-women-winemaker wine bar, Winemak’her, on Fifth Avenue in Park Slope, Brooklyn, has seen a similar sluggish return and has faced major problems finding staff.

“We have people vaccinated now … [but] we're not ready to remove the mask for sure,” she said. Charpentier’s rent is $6K a month, but from March to July last year her landlord agreed she did not have to pay anything because of the crisis. From July until December, she paid just 50% of the rent.

In the depths of winter, when only outdoor dining was permitted, the rent was reduced to around $1K per month. Since March, she said, the rent has increased by $1K a month. The rent will increase on the next payment, she said, but she will be able to make it as a result of the Revitalization Fund.

“We really feel like normal life is coming,” she said. “But it’s very, very slow.”