Coronavirus takes toll on restaurants, as owners question if it's worth the red ink

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Food-service industry hit hard by COVID-19 crisis

The National Restaurant Association expects 10-30 percent of restaurants to close; William La Jeunesse reports from Los Angeles.

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Ten months ago, Francesco Zimone cashed out his 401(k) to open L’Antica Pizzeria da Michele in Los Angeles. It was an overnight success serving 600 meals a night on weekends, he said, until the coronavirus wiped out 85 percent of his revenue.

Since then, he's relied on takeout and serving discounted meals to hospitals to keep 16 workers employed.

"A business owner is a father," said Zimone, an Italian immigrant. "A business owner is someone who has to look out for the interests of his staff. This is the way I feel. This is who I am."

Restaurants are already a small-margin business, so most have had little staying power without a daily cash flow to buy more food and booze.

The National Restaurant Association has predicted 10-30 percent of restaurants could go under because of the virus and stay-at-home orders. Right now, many have been treading water, using takeout revenue to stay alive.

"My main interest right now is to be sure we are ready to reopen when the government will allow," Zimone said. "If we are safe ourselves, then we can provide safety to others in the kitchen and in the front of the house, which means we will make sure every single customer doesn't have a fever, is spaced out from others, covers their nose and doesn't cough."

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Aside from a few national chains, most restaurants have been shut out of the government's Small Business Administration [SBA] loan program. One stipulation required that money be spent within 10 days of receiving the loan. Another requires 75 percent be spent on employees, 25 percent on overhead. The national association has argued that's unrealistic, since it's largely unknown when the businesses can reopen, and typically one-third of costs goes to food, with only one-third to labor and overhead.

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Unable to get Congress to loosen terms of the loan program, restaurants have been looking for state and local help, including:

- property and payroll tax credits

- a freeze on unemployment and health-insurance premiums

- a postponement on alcohol and health department license fees

- suspension of mandatory minimum-wage increases

"We're looking into every facet of any assistance," said Randy Sharpe, the CEO of the Xperience Restaurant Group. "What I can say is, it's still confusing at best. We're still trying to wade through it. We don't know exactly what we're gonna do. We've been focused on, how do we keep takeout and delivery alive and keep our brands relevant in our markets? And, when we are given the green light, how do we use our resources to get open as quick as we can, [as] safe as we can?"

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Xperience has managed 64 restaurants nationwide, including the El Torito Grill in Orange County. Instead of the usual 40 employees, now just four have been handling takeout. Sharpe said the restaurant has been waiting for the local health department to issue rules on reopening. He expected it will allow no more than 50 percent capacity.

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"Essentially you'd remove 50 percent of your seating," he said. "You would make sure you have the safe social distancing six feet across. It could mean gloves and masks. Employees could be temperature-checked. There could be a safe social distance outside the door where you're only letting in a certain amount of guests in at one time."

Having failed to convince Congress to amend loan rules, the restaurant lobby now has been focused on getting state insurance commissioners to force insurance companies to pay claims made under owners' "business interruption" policies. It claimed that because states forced restaurants to close, insurance companies needed to pay for any losses during the shutdown. The insurance lobby signaled that it disagreed, preferring a federal taxpayer bailout.