Ailene Siharath is a self-described fighter. She has used that mentality to survive two decades in an industry notorious for long hours and razor-thin profit margins.
Trying to keep two restaurants above water during the novel coronavirus pandemic has her considering all solutions, even one she previously would have previously thought unconscionable.
“I only fought to stay open because I thought I had a fighting chance,” Siharath said, who co-owns Katie’s Diner in Guthrie and The Hive Eatery in Edmond. “(After closing out) April’s numbers, frankly, I should’ve just shut down had I known what I know now and filed for unemployment. I would’ve come out ahead.”
Siharath said she’s had trouble figuring out how to meet the requirements for loan forgiveness from the federal Paycheck Protection Program, which is designed to reduce the skyrocketing number of unemployment claims. Her experience mirrors that of some other Oklahoma City area restaurant owners.
More than eight million restaurant workers have been laid off or furloughed since states forced dining room closures in mid-March due to coronavirus infections. Restaurant job losses represent a significant portion of the more than 30 million unemployment claims nationally. The industry was projected to lose $80 billion in sales through April, according to the National Restaurant Association.
The federal government injected a second round of funding into the Paycheck Protection Program late last month, bringing its total to more than $650 billion. The loan, administered by the Small Business Association, turns into a grant if a business reaches 100 percent of its pre-pandemic payroll by the end of an eight-week period. If not, funds must be repaid over two years with 1 percent interest.
“People are rightfully concerned about what they need to do to obtain forgiveness for that loan,” said Larry Weatherford, public affairs specialist for the Oklahoma City district office of the Small Business Administration.
Weatherford said that guidance from the SBA for reaching loan forgiveness remains forthcoming, but that restaurants should consider re-hiring staff for non-traditional work.
“I know of some businesses that were shut down and had their employees painting and cleaning, staff education,” Weatherford said. “Whatever you could do.”
Siharath has operated Katie’s Diner for over 17 years, building a successful business based on comfort classics. She recently expanded with the Hive Eatery in December 2019 by adding health-conscious meals and indulgent breakfast items. She received Paycheck Protection Program loans for both restaurants through her bank.
Longtime customer support in Guthrie gave her confidence that sales wouldn’t fall off too much in the first few weeks of to-go-only service, but sales started to fall as the state’s stay-at-home recommendation extended through April, Siharath said. Oklahoma became one of the first states to allow restaurants to reopen dining rooms following social distancing measures at the beginning of May.
Siharath is not going to give up yet. Katie’s Diner opened its dining room in May to customers, but she is wondering how to get back to 100 percent employment while the number of tables in the restaurant are reduced.
“How can you be at 13 employees by June 30 when they restrict you again when you can open? If it’s only 50 percent (of) employees, why do I need 13 people to wait on 10 tables? It’s all I can have now,” Siharath said.
“I reached out to (furloughed) staff, but it’s not going to be the usual job. They were going to have to paint or do whatever work we could find because they were servers. They were making more on unemployment, and I couldn’t compete with that, and if they do come back to work they risk their health.”
‘Not written for restaurants’
If employees decline to work, they risk losing unemployment benefits, which include an additional $600 per week as part of the CARES Act. The Department of the Treasury recently announced that employees who decline to return to work will not be factored into Paycheck Protection Program loan forgiveness, but it kept the same eight-week deadline. Hanging over employees is the prospect that restaurants might not be able to continue staffing them when the loan money runs out.
At 84 Hospitality Group, which operates restaurants such as Empire Slice House Goro Ramen and Gun Izakaya, CEO Rachel Cope furloughed more than 200 employees and has consolidated a few restaurants while managing about 90 workers as they concentrate on to-go service. Their dining rooms will remain closed indefinitely.
Cope said they received loans for six of their restaurants, but those funds remain untouched as they figure out the best way to spent them. Overall sales are down 60 to 75 percent as her restaurants have offered carryout-only options, she said.
“You’ve got an eight-week period and they want you to hire 100 percent of the staff,” Cope said. “For what? For one-third of the sales? That doesn’t make sense, and then you’re going to have to lay them off again, so you’ve gotten them off of unemployment only to put them back. It doesn’t work for us.”
Hot chicken restaurant Nashbird has been able to rehire about 75 percent of its normal workforce, thanks to a concept built on to-go and third-party delivery orders. It is in the process of opening locations in Edmond and Norman in addition to still operating its original downtown Oklahoma City location.
“We want people to come back, but we also don’t want people to come back for a few weeks and then have to furlough or fire them again,” Nashbird owner Marc Dunham said.
Kurt Fleischfresser trained many of the city’s chefs through his Coach House apprenticeship program. He also is the food and beverage director for Western Concepts (Sushi Neko, Mushashi’s, Lobby Café and Tasting Room, The Hutch on Avondale). He also serves as director of operations for Vast restaurant and works with Coury Hospitality for its restaurants in hotels. All of the Western Concepts restaurants received Paycheck Protection Program funds.
“PPP loans (are) kind of a learning curve. … We have to stay on top of it, and we actually have to stay active motivating our legislators – state and national – to kind of fix things,” Fleischfresser said.
The offices of Sens. Jim Inhofe and James Lankford did not respond to requests for comment.
At A Good Egg Dining Group, which includes nine concepts including Cheever’s Cafe, Tucker’s Onion Burgers and Republic Gastropub, CEO Keith Paul said they furloughed 400 workers in March. Paul said the company has used the federal loans to rehire all of its managers at full salary and a few hourly workers, increasing from a low of 35 employees to just over 80; its restaurants are focused on curbside to-go service.
The company has hosted biweekly grocery markets and to-go family meals for furloughed workers through the help of community sponsorships. Its leadership, including Paul and his wife, have not taken a paycheck during the pandemic.
“The PPP was not written for restaurants, and it’s not beneficial to restaurants and it will never be beneficial to restaurants unless there are changes. … They should give us more time to bring them back.” Paul said.
The Independent Restaurant Coalition is advocating for Congress to extend the Paycheck Protection Program deadline to reach 100 percent employment to three months after restaurants can legally operate at full capacity.
With Oklahoma becoming one of the first states in the country to reopen dining rooms, owners have tried to figure out how to make the numbers work. Oklahoma City requires tables to be six feet apart and to meet other health and sanitation requirements.
Restaurant groups like A Good Egg are keeping a few of their concepts shuttered or consolidated until they can figure out the best way to reopen. Paul said sales at the rest of their concepts are down 75 to 80 percent, except for the to-go-friendly Tucker’s Onion burgers, which is seeing an increase.
“A restaurant like Red Prime — we have to replenish inventory, and there is another $30,000 to get inventory back up and another $30,000 to bring everyone back to clean and get everything back open,” Paul said. “Then your revenue will be 50 percent at best. Fifty percent for most restaurants is not a winning proposition.”
Ned Shadid Sr. has operated Ned’s Catering for 37 years and became one of the state’s most successful banquet-sized catering businesses; he opened his restaurant Ned’s Starlite Lounge in 2018. Shadid said he received PPP funds at the end of April for both businesses and was able to rehire all 15 full-time workers at the catering business. He was able to keep all of his staff on the payroll thanks to supportive to-go customers.
The catering business is at a standstill, Shadid said, as gatherings larger than 10 people are still prohibited. He said unlocking the doors to his catering business recently was like “starting from scratch.” Those employees will work the next few weeks deep-cleaning the kitchen and warehouse facilities, but he’s worried there will be no clients for them to cater when the PPP money runs out in two months.
“It’s a possibility that neither the restaurant industry or the catering and banquet industry will ever come back to 100 percent,” Shadid said. “I think the numbers that people are talking about — 30 to 60 percent of these small businesses will possibly close. I’m trying my darndest that my two small businesses aren’t part of that. There’s no guarantee that I can make that happen.”
Shadid opened the Starlite Lounge’s dining room on May 1 and was thrilled to get 50 percent of its normal sales on the opening day, with that percentage, a restaurant is a hamster spinning its wheel without going anywhere.
“No restaurant can operate on 40 to 50 percent revenue,” Shadid said. “It’s not realistic at all. For the next two months I can because this loan will pay for employees, rent and utilities. For my friends that already have this money and they might only have two weeks, or a month left of it, it could be a tragic, tragic set of events.”
Restaurant groups have an easier time navigating the potentially rocky waters of the federal loan. Cope said that using the Paycheck Protection Plan money as a 1 percent loan isn’t the worst idea if it means expanding outdoor patio seating, which will be more attractive in the age of social distancing.
“It’s one of the cheapest loans you can possibly get,” Cope said. “Granted there are a lot of people that if they got a $100,000 loan and they’re already debt-heavy, they don’t want to take on any more debt. For us, a lot of our stores don’t really have a lot of debt, so I’m not really afraid if those are converted to a two-year loan, but not everyone is in that boat.”
Restaurants survive on small net profit margins under normal conditions, as full-service restaurants average about 3 to 5 percent profit margins nationally, and to survive post-pandemic they will have to rethink serving models and increase turnover.
Truong Le is the owner of the fast-casual Chick N Beer restaurant and Okie Pokie in the Collective Food Hall. Le previously owned full-service Guernsey Park and its sister restaurant Covell Park before transitioning to fast-casual concepts to better control food costs. He now hits double-digit profits with the help of alcohol sales at Chick N Beer.
“When I had Guernsey and Covell Park, it was six percent (profit margins) all day because you’re making everything from scratch, your menu is huge,” Le said. “Now, with fast casual at Chick N Beer and Okie Pokie, margins are much higher because I can predict very easily what is going to happen. Now I can focus on a few main proteins and the rest is sauces, and the sauces have a longer shelf life.”
Le said the dining room at Chick N Beer will remain closed as he monitors the partial reopening of the Oklahoma economy, designed to prevent a spike in COVID-19 infections. In the meantime, he’s adding a ramp to the back of the restaurant to make access easier for delivery drivers, and is a few months away from installing a locker system that will enable contactless food pickup.
Other owners are thinking of ways to reduce contact during service. Fleischfresser said Vast is considering making wine menus available only through a scanned QR code on mobile devices, and Dunham is working to add pay-at-the-table and other mobile payment options.
Before the pandemic, Goro Ramen did not offer to-go service, but Cope, of 84 Hospitality Group, said that it has been so successful that it will remain even when dining service resumes. She said other restaurants will potentially switch to counter service with a floating server for drinks and meal additions. Gun Izakaya recently added a three-course to-go meal from James Beard Award regional nominated chef Jeff Chanchaleune, available for pickup through a reservation system.
“The whole future of dining has changed and for how long, we don’t know,” Cope said. “We’re having to kind of rethink the way we’re doing everything. We need to go faster because we’re going to have less seats and we need to do more volume.”
Jacob Threadgill recently spent over two years covering the Oklahoma City restaurant scene for the Oklahoma Gazette, writing food reviews and following restaurant openings and closings. Prior to moving to Oklahoma, he spent five years at the Clarion-Ledger in Jackson, Mississippi. Follow him on Twitter at @JacoboLaSombra. See more of his work here.
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