As the country begins reopening, the restaurant industry is suffering huge losses but hopes to start rebounding in the coming weeks. The Washington Examiner had a phone interview with Sean Kennedy, the executive vice president of the National Restaurant Association, to learn about how the industry has fared in the past few weeks and what it needs going forward.
Kennedy served in the Obama White House for three years as a special assistant to the president for legislative affairs. Before that, he served as chief of staff to Sen. Claire McCaskill, a Democrat from Missouri. He got his start in politics serving as legislative director for House Minority Leader Richard Gephardt, another Democrat from Missouri. He has also been a government affairs executive for AT&T and the airline industry.
Washington Examiner: You spent some time in the Obama administration on the legislative side. I was curious: How do you think the Obama administration would have dealt with the pandemic, and specifically the small-business or restaurant relief, in comparison to how it’s being dealt with right now?
Kennedy: There’s no answer I can give you on the record on that one. I don’t want to compare. I don’t want to compare performances. What I — what I will say is that President Trump has been heavily engaged in the restaurant industry as a private citizen, and he has had an ongoing series of calls, and he knows a lot of restaurant CEOs — both independent and chain CEOs. He’s been very active in reaching out to us directly. He gets the industry, and we have been really pressing the case to him directly about what a dire position we are in — and we know he gets it. So we’ve been impressed with what he’s done with the past task forces to reopen the economy. And we’re going to continue working with President Trump and the administration as a whole to get us back online as quickly as we can.
Washington Examiner: Can you give me any deeper, or more colorful sense, of your conversations and interactions with the president and the administration regarding this specific kind of empathy for restaurants?
Kennedy: The president’s actually just reached out and called restaurant CEOs. I know he’s had conversations with [famous California chef and restaurateur] Thomas Keller. Mr. Keller’s CEO is the past chair of our board of directors. I know he’s had conversations with [celebrity chef] Wolfgang Puck. [Trump] is someone who knows who to call when he wants to learn more about the industry or wants to learn, rather, about the state of the industry. And he’s picked up the phone and done that. We have had the same kind of experience working with, with other senior officials. We’ve had great dealings with Ivanka Trump. A number of folks in the industry have had phone conversations with her. We’ve been on and we’ve organized industry calls with her. They get the importance of this, and they get that it matters. It doesn’t matter what your market is — if you’re a large city, if you’re a small town. … For many places, the restaurant is the cornerstone of a local community. They get that, and they understand just how dire the situation is right now.
Washington Examiner: Can you give me a sense of what are the legislative and political priorities of the restaurant association at this particular juncture, a few months after the pandemic started?
Kennedy: The first is the creation of a restaurant and food service industry recovery fund. The restaurant and food services industry is collectively the second-largest employer in the United States — 15.6 million jobs. We are an industry that has lost more jobs and more revenue than any other industry in the country. And we have a reason to think that, quite honestly, the worst is yet to come. We need a federal response from Congress to a federal problem. That’s the first, and the second is changes to the [small-business relief program], the Paycheck Protection Program. I suspect you’re probably fairly up to speed on the good, the bad, the ugly about PPP. We’ve been pushing the Treasury for changes. We’re still waiting for some kind of signal, but we are cautiously optimistic. That’s the second item, and then third item is: Restaurants are going to be making a lot of capital-intensive investments in their business as they reopen to comply with state mandates. And that means that we’ll be buying new protective equipment for our employees, perhaps new testing equipment for our guests. More barriers, more ways that we can be, you know, quote-unquote, “healthy,” as well as just reconfiguring the restaurant in general. So we want tax credits for these investments because we have very little cash on hand right now.
Washington Examiner: Are there any signs or indication of these happening? Or support within the federal government for them?
Kennedy: On No. 3, there are encouraging signs. Rep. Kevin Brady today gave a shoutout to the notion of tax credits for businesses as they come back online for exactly what we’re talking about — the changes we’re going to have to make to be compliant with social distancing requirements. On the restaurant industry recovery fund, the good news, so to speak, from an advocacy perspective is that with the members of Congress being home, they’re going out to restaurants, and they are seeing what the state of the industry is like firsthand, and they’re seeing firsthand the way we are suffering more than any other industry right now. We’re not trying to profit. We’re just trying to survive right now. Changes to the [small-business relief program] are really important, but the PPP is not the solution. Basically, in my mind, the restaurant industry should not be competing for recovery dollars when we have the largest economic impact of any at-risk industry and we have the most uncertain path before us.
Washington Examiner: Have you seen any initiatives or actions from the government that are either in play or going to come up that haven’t been reported or haven’t gotten much attention?
Kennedy: No, the focus has really been on the [small-business relief program]. The PPP was designed with the premise that the coronavirus would be a fast-moving pandemic that would shut our restaurants or shutter businesses for eight weeks. And then, the lights would come back on, and we would all be “business as usual.” What we’ve obviously come to realize in the weeks following the passage of the peak of the Paycheck Protection Program is that this is going to be a much longer haul and that restaurants are going to be the last industry to recover.
Washington Examiner: So what happens in that worst-case scenario, where additional aid doesn’t come through and the economy is opening up in stages? Paint a portrait for me as to what people and politicians can expect if additional relief isn’t given and restaurants just are kind of left to survive for themselves.
Kennedy: So you start with the premise that restaurants have, on average, 16 days of cash on hand. We’re at day 57 now. The restaurants that are operating right now, virtually all of them are losing money. If you have a decent restaurant in terms of the number of tables, you’re not going to make up for that revenue, to pay rent, based on takeout and delivery. So a lot of owners, they are only doing take out. They’re staying online right now to keep their name out there, to continue serving some customers, and to keep some people still on the payroll. Before coronavirus, the average profit margin for a restaurant was about 5%. So that’s going to go down to presumably something approaching 2.5%. So we’re going to cut what we can. They’re going to let more people go. Those people are going to have more difficulty in this economy finding a job — certainly in the restaurant industry. So not getting help is going to be a drag on the economy. There’s a really disturbing ripple effect.
