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Two Cents: Can the Food Industry Survive Covid-19?

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      They say diseases don't discriminate, but that's not really true. Some people will be more impacted by the coronavirus than others, medically and financially. And the same is true of businesses.

      (host 2) Giant corporations might see their stock prices sag, but they probably have enough cash on-hand to weather the storm. Grocery stores and personal health suppliers have seen a surge in sales. And even some small businesses are doing okay, like bike shops and farmers' markets, as people look for ways to recreate and shop away from crowds and enclosed spaces.

      (host 1) But those are the exceptions. According to the Census Bureau, retail sales fell a mind-blowing 8.7% in March. That's three times worse than the previous biggest drop on record. And unlike Amazon or Target, small businesses typically have very little margin for disaster. According to one study, the vast majority of small businesses don't have enough cash on hand to go for two months of expenses without revenue, and the median can't go two weeks. This leaves a lot of owners in tight spots with limited options. We spoke with some about how their businesses have been impacted by the pandemic.

      (Describer) Title: Two Cents.

      Well, I'm a long-time entrepreneur. I have started businesses my entire adult life, and 13 years ago, I started Fresh N' Local Foods with a real passion for trying to improve the quality of food that our kids are eating. And we serve schools, small, rural school districts, charter schools, Boys & Girls Clubs, Head Starts-- anywhere kids eat, basically. Wow, and normally, pre-COVID, how many people did you have on staff? How many schools were you serving?

      (Describer) Evann Remington:

      Yeah, we had 38 people. We had production people, delivery drivers, and we served tens of thousands of meals throughout Oregon and Washington. Obviously, as soon as they closed schools, basically, it was like the rug was pulled out from under us. We went to, you know, that level of volume to essentially zero overnight. Wow.

      (Remington) Initially, we were being told, "Oh, this is just a slightly longer spring break." So we thought, okay, we can keep people employed for that time. And then, you know, the date was the end of March. And then it was the end of April, and then it was May. And we kept on those employees through that period. Because of that, we... you know, we burned through a lot more cash in a lot shorter amount of time than we had-- than we had thought. Eventually, we did just have to let everybody go, which is pretty devastating.

      (Describer) A staff photo is shown.

      With the mandatory closing of non-essential venues where people congregate, food service became one of the first and hardest-hit sectors. According the National Restaurant Association, the industry has laid off or furloughed eight million employees and will lose over $50 billion in sales in April alone. Some restaurants are attempting to change their business model, like selling meals to go, or even groceries, but it's difficult to make even a fraction of one's previous revenue that way. People don't go to restaurants for the food alone; they go for the experience, the atmosphere, the service, the company. I miss company. I've been cooking professionally for, like, 17 years,

      (Describer) Michael Fojtasek:

      both, I think I-- it took me a decade to where I got to where I felt like taking on a restaurant of my own. And Olamaie has been operating for six years.

      (host) So how has coronavirus impacted your business?

      (Fojtasek) I closed the restaurant on March 16,

      (Describer) ...2020.

      and I chose to completely close the restaurant. Leading up to that, I did some math, you know. There's a--many restaurants, the strategy they've chosen to employ is to pivot their model. So they're going to a take-away or delivery system. I did the math, and for me, to go to a take-away and delivery system, I would have continued to lose money. In addition, I would have been in a position to compensate the team that works with me at a lower rate. You know, I expect to be operating at some point in the future. But we chose to let everybody go and put them on unemployment because they would be making more money than if I had gone to take-away and delivery. So, at this moment, everyone's on unemployment, and I have continued to pay their health insurance.

      (host 2) To make even a modest profit margin, a small business must be a finely-tuned financial engine, balancing expenses and revenue, predicting supply and demand, knowing your customers inside and out. Changing one's business model can feel like taking apart a car and trying to build an airplane out of the same parts. Although mandatory closings are responsible for much of the lost sales, Recent figures show that the downturn has spread to retailers that could theoretically still be open for business-- electronics, sporting goods, books, furniture, cars, clothing; almost everybody's feeling the pain, which isn't surprising. With so much unemployment and uncertainty, people are, understandably, cutting back wherever they can. Who's going to buy a new car if they don't know when they're going to have a commute again. To extend a lifeline to small businesses, Congress created a $349 billion loan fund called the Paycheck Protection Program. It offers super- low-interest loans to companies with fewer than 500 employees, which can be partially or totally forgiven if the business uses the money to keep their employees on payroll. What has come through for you as it relates to the stimulus bill that went through? Like, what's been your interaction and experience with that so far?

      (Describer) Remington:

      Yeah, so we did apply for the SBA disaster loan, gosh, three weeks ago now and have not heard anything back. As far as the PPP is concerned, I was really lucky enough to have a banker through Bank of America who called me Tuesday night at, like, 9:00 o'clock at night and said, "Okay, the link's gonna be live tomorrow." My banker had given me a heads up as far as what type of reports and documents that were going to be required, so I was ready to go as soon as that link was live. And then just got another call from her last night saying that the PPP loan for Fresh N' Local is in underwriting now. So I'm hoping that funding occurs within days. Applying for PPP has been a struggle for a lot of people. A crush of applicants means long wait times, and you have to apply through established banks and lenders. Since these institutions tend to give priority to their existing customers, if you don't already have an account with one of them, you're sent to the back of the line. And guess what? All 349 billion is already spoken for. Congress is finalizing a bill this week to add more money to the fund, but the sooner you get your application in, the better. We fortunately applied and received our Payroll Protection Plan loan.

      (Describer) Fojtasek:

      But I have chosen not to spend any of that money. The money hit our account three days ago. But I'm not going to spend a dime of it until I understand what-- how much of that loan will be forgiven, as well as kind of what the right strategy is for our team.

      (Describer) Remington:

      We've talked about just kind of sitting on it and waiting to use it until our natural cycle in our school year comes back. We've talked about utilizing it for other things that are really important right now and then just not asking for forgiveness, and just kind of terming that out down the road. But now that we have this new potential operation that we're going to be setting up in the next week to help supplement the Meals on Wheels program regionally, and if that all works out, we'll be able to bring back some employees, then certainly I will utilize it for them. Confusion about eligibility for loan forgiveness is widespread. According to U.S. Treasury guidelines, any money you spend on rent, utilities, mortgage, and payroll, will be forgiven if you don't lay off any employees and use 75% of the loan on payroll. This is meant to encourage businesses to keep their employees, but here's the catch: you have to spend all of the money within eight weeks of receiving it. If you own a business that you know won't be open in that timeframe, like bars and restaurants, that puts you in a strange predicament. Do you apply for the loan and use it to pay your employees to stay home? Or do you lay them off so that they can collect unemployment benefits that might be even better than what you can pay them? I'm involved in several calls across the country. We have Zoom calls with operators from both coasts.

      (Describer) Fojtasek:

      I'm involved with the James Beard Foundation, who's been incredible; they've pivoted and provided resources. Even though I'm lucky enough to be in those phone calls and in those virtual rooms, I still don't have a clear understanding. The government hasn't given us any other idea what further assistance we have. And the PPP is a drop in the bucket in relation to what this industry is going to need. Uncertainty is like kryptonite for businesses, large and small. And this crisis is so unprecedented, there are countless unanswered questions. Is this a recession or a depression? What further government assistance will there be? Will the economy be open this summer? This year? Entrepreneurs are expected to be resourceful and adaptable. But you at least have to be confident that your industry still exists. The challenge right now, I believe, for us as businesses is that there are multiple narratives for multiple places. Managing the narrative in a way that helps a huge portion of our economy understand what's around the corner would be really helpful.

      [both laugh]

      The hard truth is that we are still in the early stages of this crisis. As economist Paul Krugman puts it: The economy is in kind of "a medically induced coma." It's not until the infection is licked that we can wake the patient back up and see how much damage has been done. I'm curious how optimistic you are about the survival of Olamaie as it stands today. I'm super confident. Olamaie's gonna be back. We're going to be doing things differently. We may be offering, like, a meal pack for four that you pick up at 5:00 o'clock and then running our standard dinner service, but taking less reservations so we can make sure people are spread out. I definitely am encouraged with some of the new partnerships that we've got with the food shares, and I'm felling very, very hopeful now that we can figure it out, we can be innovative, we can--you know, we've done it before, so we can do it again. So far the thing that I've learned through this process the most is that our community is everything. Trying to find ways to help each other has been, I think, the most helpful thing and what I would continue to push everyone to try to do. Relationships and communication are key. Whether you have a staff of 100 or are an independent contractor, find others in your same situation and start comparing notes. You could discover resources and strategies you hadn't considered or learn from others' mistakes. A solid relationship with banks and financial planners will make it more likely that you'll get to take advantage of any government assistance down the road. And if you have to make the tough decision to close up shop, you might find out how to do it while limiting the financial damage. Remember, this will pass. Things will return to a state of normalcy, and the more information and relationships you have, the better your chance of rebuilding your business.

      (both) And that's our Two Cents.

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      Now Playing As: English with English captions (change)

      The COVID pandemic hit the food service industry especially hard. This episode explains how small business owners are coping. Part of the "Two Cents" series.

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