Expecting Job Losses, Industry Associations Call for Billions in Aid
As the Senate passed and President Trump signed into law Wednesday, March 18, an emergency aid package that, among several provisions, includes paid leave benefits for Americans impacted by the coronavirus, the International Franchise Association and National Restaurant Association are calling for billions more in industry-specific recovery funds.
On Wednesday, the IFA sent a letter to President Trump and congressional leaders outlining its priorities for additional legislation, including the creation of a Small Business Workforce Stabilization Fund, $300 billion in SBA lending authority and relief for Business Interruption Insurance.
“We hope that Congress will address this small business crisis immediately and without partisan bickering. Major actions are needed to ensure businesses can keep employees and continue employer provided benefits, especially health care benefits as people’s livelihoods are at stake,” said Matt Haller, IFA’s senior VP of government relations, in a statement.
As cities and states across the country order the temporary shutdown of bars, restaurants, gyms and other public gathering places in an attempt to slow the spread of the COVID-19 virus, franchise business owners are grappling with how and if they can stay in business and continue to pay workers.
During a call earlier Wednesday with IFA leaders and members, Darrell Johnson, CEO of research firm FRANdata, said the vast majority of franchisees only have 30 to 45 days of cash reserves on hand. “There’s 25,000 to 30,000 businesses that will be running out of cash in the next 30 to 45 says in franchising alone,” said Johnson. “We need an on-ramp that gets access to cash.”
In the event of a 90-day shutdown, FRANdata estimated severe unit and job losses in four major franchise segments:
• Lodging: 1,000-1,500 unit losses; 25,000-38,000 job losses
• Restaurants: 8,000-10,000 unit losses; 175,000-225,000 job losses
• Personal Services: 7,000-9,000 unit losses; 80,000-100,000 job losses
• Residential & Commercial Services: 2,000-3,000 unit losses; 18,000-30,000 job losses
The Small Business Workforce Stabilization Fund and a Small Business Stabilization Account “will provide immediate support to employers that keep employees on payroll, as well as funds to provide liquidity to keep affected franchises solvent through the crisis,” said the IFA in its letter. “By our estimates, upwards of $300 billion may be necessary to address the challenges in franchising related businesses,” and speed is essential. “Business owners need capital today in order to make it to the other side of the crisis, and bring their employees with them.”
The National Restaurant Association also called on President Trump and Congress to provide relief amid the government-mandated closures and ensuing operational changes. Early economic forecasts, according to the NRA, report the restaurant industry will sustain at least a $225 billion loss and be forced to eliminate between 5 to 7 million jobs over the next three months.
The $455 billion aid package requested by the NRA includes a $175 billion restaurant and foodservice recovery fund to be established by the Treasury Department to help cover operational costs and pay employees, along with $35 billion for community development block grants for especially hard-hit areas. Another $100 billion is also requested for federally backed business interruption insurance; $45 billion for affordable federal and conventional loans; and $130 million in disaster unemployment assistance.
Noting, as the IFA did, that most small businesses don’t have long-term cash reserves, the restaurant association also requested assistance in allowing businesses to defer mortgage, lease and loan obligations.
"We are revising our business model to provide meals in different ways, takeout, delivery, safety-enhanced dine-in, but the majority of our restaurants do not have this capability today,” Sean Kennedy, the association’s executive vice president of public affairs, said in a statement. As restrictions continue, “we are facing economic headwinds that will lead many restaurants to shut down operations, lay off workers, and end service in our communities.
“Taken together, these proposals will ensure that restaurants have increased liquidity and access to necessary financing to help the industry and its employees recover.”