As restaurants across the country are being forced to limit their services to takeout and delivery or worse, close their operations altogether, tenants are reaching out to discuss their options with April rent payments looming.  Our initial response has been consistent and succinct: Don’t Panic.

The conventional restaurant owner was not likely prepared for COVID-19 and its impact on their business.  During a recent interview with CNN, Tom Colicchio, celebrity chef and owner of Crafted Hospitality, stated that he thinks three out of every four restaurants won’t be able to rebound after this pandemic without a direct income replacement from the government.  However, it may not be enough to rely on a possible government stimulus and restaurant owners need to take action now to prevent a possible default under their leases.

MAKE A PLAN

In fact, make 2 plans: (1) establish a plan for how to keep your restaurant operating under the current conditions (if permissible both by law and your landlord); and (2) establish a plan for what needs to be accomplished in order to re-open your fully operational restaurant once the COVID-19 restrictions have been lifted.  And be realistic.

  • Regarding Plan #1, speak with other local restaurant owners to see what people are doing in order to stay afloat. Try to create a network between local restaurants in order to help each other get the word out if takeout and delivery options are available and to share kitchen or delivery staff if you are in need while others are over-staffed.  Condense your menu and create lower-cost dishes to keep your overhead low and to sell your food before it spoils.  There is no perfect way to handle this, but the goal should be to reassess your monthly breakeven costs by cutting corners without reducing quality of the product (after all, you still need return business).
  • Regarding Plan #2, take a conservative approach to determining what it will take to re-open after the restrictions are removed. However, there are many questions to consider based on each particular situation.  For instance, how much money will you need to restock your kitchen?  Is your insurance still in effect and where do you stand with your utilities payments?  How much time will you need to get fully staffed and operational?  Will your distributors be on your timeline or should you prepare for a delay in the supply chain?  The goal is to determine how much time and money you will need once you can start fully operating before you can resume rent payments.  Be sure to give yourself a little bit of breathing room in case of delays in set up and distribution outside of your control.

CALL YOUR LANDLORD

If you haven’t done this already, it is important for you to reach out to your landlord as soon as possible to discuss your situation.  You should get the conversation started regarding what rent payments you can make, if any, while operating (if at all) under the current limited conditions and how much time you will need after the restaurant is fully operational before you can resume making normal rent payments again.  The idea is to establish a direct line of communication with your landlord and a teamwork approach with them to reach an informal understanding on how both parties are going to proceed while this situation remains fluid.  Document conversations and follow up with confirmation e-mails just to be sure that there are no misunderstandings.

THEN CALL YOUR LAWYER

After you and your landlord (hopefully) reach an agreement on the business terms, call your lawyer before signing a formal agreement.  Discuss the terms to confirm they are reasonable in light of the current situation and unknown future.  And, if you cannot come to terms with your landlord directly, your lawyer can review your lease and help you assess all of your options.

Keep in mind that there is no one-size-fits-all solution to any of this.  Most everyone is in the same boat, dealing with a situation that no one anticipated, at least not enough to be fully prepared.  To steal a phrase, this will take a village for us as an industry, a community, and as a nation to overcome this and prosper.

As COVID-19 continues to negatively affect commerce around the country, there are different programs available to help businesses in need.  In addition to the Small Business Association’s recent expansion of its Economic Disaster Loan Program (click here for more information regarding that program), there is also relief available to small businesses located in New York City.

Mayor Bill de Blasio recently announced that New York City will provide relief for small businesses that have had a reduction in revenue because of Covid-19 through the NYC Small Business Continuity Fund (the “Continuity Fund”) and the NYC Employee Retention Grant Program (the “Grant Program”).

The Continuity Fund allows businesses with fewer than 100 employees that have suffered sale decreases of 25% or more to apply for zero interest loans of up to $75,000 to help mitigate losses. In order to be eligible for the Continuity Fund, a business must:

  1. Be located within the five boroughs of New York City
  2. Demonstrate that the Covid-19 outbreak caused at least a 25% decrease in revenue
  3. Employ less than 100 employees in total across all locations
  4. Demonstrate the ability to repay the loan
  5. Have no outstanding tax liens or legal judgments

The Grant Program offers a small business with less than 5 employees a grant to cover 40% of its payroll costs for up to two months to help retain employees. In order to be eligible for the Grant Program, a business must:

  1. Be located within the five boroughs of New York City
  2. Demonstrate that the Covid-19 outbreak caused at least a 25% decrease in revenue
  3. Employ 1 to 4 employees in total across all locations
  4. Have been in operation at least 6 months
  5. Have no outstanding tax liens or legal judgments

The application for both the Continuity Fund and the Grant Program can be located online here.

Please do not hesitate to reach out to your firm contact if we can be of any assistance.

On March 23, 2020, Florida Governor Ron DeSantis issued Executive Order 20-80. The Order directs all persons whose point of departure originates from the New York Tri-State Area (Connecticut, New Jersey and New York) and entering the State of Florida by air travel to isolate or quarantine for a period of 14 days from the time of entry or the duration of the person’s presence in the State of Florida, whichever is shorter. The Order, which took effect on March 24, 2020, is in response to an increase in individuals fleeing to Florida from states where “shelter-in-place” orders are being implemented, including the New York Tri-State Area.

Persons isolating or quarantining in the State of Florida are responsible for all costs associated with their isolation or quarantine including transportation, lodging, food and medical care. The Order directs the Florida Department of Health to take all necessary steps to ensure the screening and isolation and quarantine of those persons covered by the Order. Furthermore, all Florida law enforcement agencies are required to assist the Department of Health in enforcing the Order. Any person violating the Order can be charged with a second-degree misdemeanor, which is punishable by imprisonment of up to 60 days, a fine of up to $500, or both.

On Saturday March 21, 2020, Governor Phil Murphy issued Executive Order No. 107 and Executive Order No. 108, introducing additional protective measures amidst the evolving COVID-19 pandemic. For details, click here.

The State of New Jersey has since issued related guidance, expanding upon the definition of “essential business”, and providing additional mechanisms aimed at containing the virus. Here’s what you need to know:

  1. In the event that your retail business or operations do not fit squarely within the definition of “essential business” under Executive Order No. 107, you may now submit a designation request to the State Director of Emergency Management (who, at this time, is the Superintendent of State Police). Per Governor Cuomo’s executive orders, New York has a similar procedure in place to determine what is/is not an essential business in the State of New York.
  2. The State is now calling upon New Jersey residents to report non-compliance with social distancing guidelines. If a business is not following the prescribed protocol, individuals can report non-compliance by contacting their Local Health Department, which can be identified by using the Find Your Local Health Department
  3. Non-essential retail businesses continue to be required to close storefront and/or brick-and-mortar premises operations. The following businesses may continue operations: manufacturing, industrial, logistics, ports, heavy construction, shipping, food production, food delivery, and other commercial operations, provided that such businesses should limit staff on site to the minimum number of individuals necessary to ensure that essential operations can continue.
  4. The State has specifically defined “medical facilities” as any facility where a sick or injured person is given care or treatment, including doctor’s offices, hospitals, dentist offices, long-term care facilities and other medical offices.
  5. Under Executive Order No. 107, all businesses and non-profits must accommodate their workforce for telework or work from home arrangements where practicable. To the extent businesses or non-profits have employees that need to be on site, the State is instructing such businesses to operate with the minimum number of on-site employees required to ensure that critical operations can continue. Examples of such employees include, cashiers or store clerks, construction workers, utility workers, repair workers, warehouse workers, lab researchers, IT maintenance workers, janitorial and custodial staff, and certain administrative staff.
  6. On March 24th, the New Jersey State Director of Emergency Management expanded Executive Order #  107 to include the following as essential retail businesses:
    1.  Mobile phone retail and repair shops.
    2. Bicycle shops, but only to provide service and repair.
    3. Livestock feed stores.
    4. Nurseries and garden centers.
    5. Farming equipment stores.

These businesses must adhere to the social distancing guidelines set forth in Executive Order # 107, which remains in full force and effect until further Order.   Today’s EO can be found here.

Continue Reading COVID-19 Update – Guidance on New Jersey Executive Orders 107 and 108

In an effort to assist small businesses impacted by the Coronavirus, the Small Business Association (SBA) has recently expanded access to its Economic Injury Disaster Loan program for small businesses and private nonprofit organizations.  Under the revised criteria, disaster assistance loans are now available for small businesses in every state.

In order to qualify for a disaster assistance loan, among other things, the small business or private nonprofit organization must demonstrate that it has suffered an economic injury or business loss as a result of the Coronavirus.  If a business has an existing SBA loan, that will not prevent it from being able to apply for a disaster assistance loan.

These loans may be used to pay fixed debts, payroll, accounts payable and other bills that are unable to be paid as a result of the impact of the Coronavirus.  It is not intended to replace lost sales or profits or to be used to expand a business.  It also cannot be consolidated with another outstanding loan. Each loan application is reviewed on a case-by-case basis and a business may qualify for a secured loan up to $2 million.

The interest rate for these loans is 3.75% for small businesses and 2.75% for non-profits.  Terms of each loan are determined on a case-by-case basis and are based upon the applicant’s ability to repay and its credit history.  If approved, the loan can have a repayment term of up to 30 years.

A business can apply for a disaster assistance loan online at disasterloan.sba.gov/ela.  The following information/documentation will need to be completed and submitted in order for the application to be considered:

  • Business Loan Application (SBA Form 5).
  • IRS Form 4506-T for the applicant, each principal owning 20% or more of the applicant, each general partner or managing member and for any owner who has more than a 50% ownership in an affiliate business.
  • Complete copies, including schedules, of the most recent Federal income tax returns of the applicant.
  • Personal financial statements (SBA Form 413) by the applicant (if a sole proprietorship), each principal owning 20% or more of the applicant and each general partner or managing member.
  • Schedule of Liabilities listing all fixed debts (SBA Form 2202).

Although not initially required to process the application, the SBA may also require the following:

  • Complete copies, including schedules, of the most recent Federal income tax returns of each principal owning 20% or more of the applicant, each general partner or managing member and for any owner who has more than a 50% ownership in an affiliate business.
  • If the most recent tax returns have not yet been filed, a year-end profit and loss statement and balance sheet for the applicable tax year.
  • A current year-to-date profit and loss statement.
  • Additional Filing Requirement (SBA Form 1368) providing monthly sales figures.

Once submitted, the assigned loan officer will review the amount of the losses incurred as a result of the Coronavirus and whether any additional information is needed in order to determine whether the applicant is eligible to receive a disaster assistance loan.  Assuming the loan is approved, loan documents will be provided for signature and a case manager will be assigned to provide assistance in making sure all conditions of the loan have been satisfied and to come up with an acceptable disbursement schedule.

Our team is readily available to discuss any questions or concerns you may have, so please do not hesitate to reach out to your firm contact.