Published in Food/Agribusiness

Michigan bar/restaurant closure ‘will be a bloodbath’

BY Monday, March 16, 2020 09:59am

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West Michigan brewery owners are reeling this morning over news that Gov. Gretchen Whitmer ordered a temporary closure of bars, restaurants and other venues over concerns related to coronavirus. 

Whitmer’s executive order made the closure effective 3 p.m. today through Monday, March 30. 

As details about the closure began to emerge, local business owners started bracing for the worst. 

“This is going to be a bloodbath,” David Ringler, founder of Cedar Springs Brewing Co., told MiBiz by phone this morning, referring to the survivability of many small and independent bars and restaurants. 

Ringler, who recently returned from Europe and is in voluntary quarantine, expected something like a shutdown could happen given what he saw taking place during his travels. 

“I warned my people two weeks ago that we need to start preparing now,” he said. 

Part of that preparation included voluntarily reducing capacity in the taproom last weekend, as well as canceling upcoming events, and talking to customers on social media about cleaning practices and other measures. 

Joe Infante, the head of the alcoholic beverage regulation team at law firm Miller, Canfield, Paddock and Stone PLC, said he’s getting calls and messages from clients asking what they can do to keep their doors open. His advice: “Do whatever you can to make revenue. A lot of places will have to shift their model.”

For example, bars with specially designated merchant licenses as well as licensed brewpubs and microbreweries have the ability under state law to offer delivery services for beer, Infante said. Companies also should check with their insurance provider before launching the service. 

“For those microbreweries that do pizza, they could do pizza delivery and a six-pack. People are going to be stuck in their houses and they will want that,” Infante said, adding that focusing on carry-out orders could be another good measure. 

At Cedar Springs, Ringler said revenues were down all of last week, and he’s trying to prepare for “close to zero” revenues as the ban takes effect. 

“Obviously, I know the government is trying to act to protect the public, and communication is obviously difficult,” Ringler said. “The reality of the situation is I’m not sure it’s going to do more harm than good between the stress that everybody is going to be going through.” 

He cited the size of the state’s hospitality industry and the fact that many workers are on the frontline as parents caring for children. If they have no work and no income because of this ban, then it adds stress throughout the system, he said. 

“This is real life for a lot of people who need to feed their kids and pay their rent,” Ringler said. “I know I’m not taking a paycheck — I loaned the business everything I have — and my managers are taking pay cuts. It’s just really, really, really tough for small independent business owners. 

“We need some kind of guidance from the government from the feds to the state to locals. We’re all scrambling, but everyone is just hanging in there waiting. It makes it really, really, really tough to make contingency plans.” 

Infante said he’s heard from some clients who are laying off staff so they can apply for unemployment.

Seth Rivard, co-founder of Rockford Brewing Co., said the way the situation is playing out shows the lack of preparedness on the part of all levels of government. Like Ringler, he also expressed concern about the fate of hospitality workers in this situation.

“I understand the need to do this, and it’s wise to slow down the virus spread, I’m just completely and utterly disappointed in both of our levels of government on their pathetic planning of all of this,” Rivard said in a text. “They should be at least hinting what they are going to do to help real Americans on the front lines and the small businesses on the front lines. Is an aid package being worked on? 

“Right now, the perception is the governments are only helping Wall Street and the big corporations. We are completely baffled that there is not yet a plan to help our workers and our small biz that is essentially being forced to close.”

REVISIONS NEEDED

Ringler at Cedar Springs Brewing called out the federal assistance package as helping the large corporations and chain restaurants while doing little to support small businesses.

The National Restaurant Association is pushing for changes in the federal Families First Coronavirus Response Act, which passed the U.S. House and awaits a vote in the Senate. 

“The House bill admirably provides federal support to allow employers to offer paid leave to employees suffering from coronavirus. However, the mechanism to do so — with small businesses paying for it, and having to wait for a substantial timeframe to be reimbursed from the government, in the form of payroll tax credits — creates substantial challenges for restaurants that are already struggling to maintain cash-flow,” the National Restaurant Association said in an action alert to members today.

“They’re saying small businesses can get a tax credit a year from now. What good is that if you’re out of business?” Ringler said. 

Infante at Miller Canfield agreed, adding: “A tax credit is not going to help the employees, many of whom are living paycheck to paycheck.”

In a statement today, Attorney General Dana Nessel called the measure to temporarily close dine-in service “necessary and appropriate in light of the extraordinary circumstances,” while acknowledging the gravity of the situation for workers. 

“It is heartbreaking that an industry built on service to others must be shut down to help protect and keep safe the families they call their customers and friends. In an effort to help them through this difficult and unexpected shutdown, I am asking our partners in the state and federal legislature to look for ways to help alleviate the financial impact of this shutdown,” Nessel said. 

TALK TO YOUR BANK

Bars and restaurants — or any small businesses hit by the pandemic that experience cash flow disruption — should communicate with their bankers about what they’re facing. Banks can work with businesses on loan deferrals to avoid delinquency and other ways to get them through the crisis, said Mike Tierney, president and CEO of the Community Bankers of Michigan.

“The main thing is if you’re in a jam, call the bank and get them working on a plan to work with you individually,” Tierney said. “They’ll do everything they can to help their clients get through this and then get re-established on the other end and get business back to normal as soon as it can happen.”

Over the weekend, the Federal Reserve, FDIC and the Office of the Comptroller of the Currency issued a statement encouraging banks to use the “discount window” to borrow from the central bank, if needed, “to meet demands for credit from households and businesses at this time.”

“By providing ready access to a backup source of funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress,” the regulatory agencies said in the statement. “Thus, the discount window supports the smooth flow of credit to households and businesses.”

Federal regulators last week had urged banks to help customers through the crisis, and that they will in turn work with the banks accordingly.

SEEKING SUPPORT

As Cedar Springs Brewing awaits more information from the state, the company is moving ahead with trying to launch a delivery service for its restaurant. The taproom will be closed for lunch today, according to Ringler. He said the company will be OK in the short-term, but the situation carries with it unprecedented levels of uncertainty. 

Ringler also serves as vice chair of the Michigan Brewers Guild and said the organization will be meeting via conference call later today to discuss communication with members and sharing best practices and resources. 

In the meantime, Ringler’s best advice for patrons is to find ways to keep supporting local businesses despite the trying times. 

“People have been as supportive as they can,” he said. “I encourage anyone out there who has favorite bars or restaurants, whether it is takeout, delivery or gift cards, to try to support them. The reality is by the time this is over, some of them will not be there. This is unprecedented; it’s scary for everyone.”

Infante echoed those sentiments. 

“My best advice for consumers is to stay home and try to support local businesses you love,” Infante said. “Local bars and restaurants are getting hit hard. If you want to be able to go to your favorite bar or restaurant four weeks from now, support them today, buy carry out or gift cards so they can get money today. Revenue from gift cards is not going to be enough, but it’s something.”

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EDITOR’S NOTE: This story has been updated with commen from Miller Canfield’s Joe Infante and with comment from the Community Bankers of Michigan. 

Read 44757 times Last modified on Friday, 20 March 2020 17:35
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