A new survey conducted by the Arkansas Hospitality Association shows that restaurants are still struggling as the coronavirus continues spreading through the state. According to the survey, 36% of restaurant operators believe it is unlikely they will still be in business six months from now without additional federal aid.
Arkansas restaurants are currently limited to two-thirds capacity for dine-in service, but the trade group’s CEO Montine McNulty says many eateries aren’t seeing even that much business as people are afraid to go out to eat while the virus continues reaching record levels in the state.
"It’s been very devastating to restaurants in general. If you were geared to take-out and had windows you may have fared pretty well, but if you were just an in-house dining restaurant you’ve had an especially hard time," McNulty said in an interview with KUAR News.
The group sent the survey to member and non-member Arkansas restaurants in its database, with the results tabulated by the National Restaurant Association as part of a national report.
Fewer patrons is only one of the challenges facing restaurants, McNulty said.
"Their expenses have gone up and their income has gone down, so their profit margin is lower than it was prior to COVID-19," she said. "Restaurants typically have a small profit margin percentage and I think you will find that when it comes down to what's causing the virus, it’s not being in a restaurant, and they're doing everything they can to keep their customers safe."
Shortly after the first cases of the virus were reported in Arkansas, the state halted all dine-in service on March 19, with restaurants limited to take out, drive-thru and delivery service. On May 11, the state began loosening restrictions with dine-in service allowed at one-third capacity. That was expanded to two-thirds capacity on June 15.
McNulty praises Gov. Asa Hutchinson and state leaders for providing grants to businesses to get them through this difficult time, calling Arkansas "one of the most progressive states in trying to help the industry." But she says federal assistance is needed now from the federal level.
"There is currently a $50 million fund that they are applying for now, so there has been some temporary help, but the reason for that high number that may not be in business is most restaurants are able to calculate how long they will be able to stay in business under the current situation," McNulty said. "They really need help. They’re going to get some from the state and hopefully the federal government, it looks like they’re about to reach an agreement. That can help them get through the winter which will be really important, but if they don’t do it in the next couple of days… we will lose many businesses."
Congress has been deadlocked for months on efforts to pass another COVID-19 relief bill. But with millions of Americans set to lose jobless benefits at the end of the month, members of the U.S. House of Representatives and Senate restarted negotiations last month. Many are optimistic a deal can be reached before lawmakers are scheduled to leave Washington at the end of the week.
Here are some of the findings of the survey of restaurants in the state, according to the Arkansas Hospitality Association:
- Consumer spending in Arkansas restaurants remained well below normal levels in October. 84% of Arkansas restaurant operators say their total dollar sales volume in October was lower than it was in October 2019. Overall, sales were down 28% on average.
- Most restaurant operators do not expect business conditions to improve in the coming months. 64% of Arkansas operators expect their sales to decrease from current levels during the next three months.
- 74% of Arkansas operators say their restaurant’s total labor costs are higher than they were prior to the COVID-19 outbreak.
- With costs rising and sales falling, the result is added damage to the bottom line. 85% of Arkansas operators say their restaurant’s profit margin is lower than it was prior to the COVID-19 outbreak.
- With business conditions deteriorating, more federal government assistance is critical for the survival of many restaurants. 36% of Arkansas operators say it is unlikely their restaurant will still be in business six months from now if there are no additional relief packages from the federal government.
- Absent additional government assistance, one option is to close the restaurant until business conditions improve. 31% of Arkansas operators say they are considering temporarily closing their restaurant until the COVID-19 pandemic passes.
The White House Coronavirus Task Force recently recommended that with the state being categorized as a "red zone" because of the rate of the spread of the virus, the restaurant and bar capacity limit be reduced to 25%. But the governor has rejected the recommendation saying that the businesses – which are under added scrutiny from Alcoholic Beverage Control agents – are not where most new cases are coming from. Last week he suggested the virus is spreading through social gatherings.