Philly’s struggling restaurants are nearing a moment of truth as the coronavirus crisis drags on

Philadelphia’s famed restaurant scene is approaching a crucial moment of survival.

Several restaurateurs are pleading for the possibility of getting forgivable federal loans through a coronavirus economic rescue package. Some have shifted to takeout and delivery, hoping that someday their bars and dining rooms will reopen. Others fear that they will be forced to shutter.

And all are looking to May 8, when Gov. Tom Wolf wants to start relaxing restrictions on Pennsylvania businesses. Still, restaurant owners aren’t expecting life and business to return to normal. No one knows how the public will respond: Will they balk at sitting at a bar or settling into a banquette, even with accommodations for social distancing?

Michael Schulson, who owns nearly a dozen restaurants in Philadelphia, wants city officials such as Mayor Jim Kenney to cut restaurants a break.

“The best thing you can do during hard times is the right thing,” said Schulson, owner of Sampan, Double Knot, Harp & Crown, Giuseppe & Sons, and others.

Though Schulson is one of the city’s major restaurant operators, he said he feels for everyone in the industry. He noted that Philadelphia is one of the highest-tax cities in the United States. Schulson, who has about 1,500 employees, most of whom are out of work, called on Kenney and City Council to temporarily suspend or defer the city’s liquor tax, soda tax, and other fees on the restaurant and hospitality industry during the economic recovery.

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Statewide and nationally, the situation is just as dire. The National Restaurant Association on Monday said that more than eight in 10 restaurant employees in Pennsylvania — at least 332,000 people — have been laid off or furloughed since the beginning of March.

Even in the best of times, restaurants operate on razor-thin margins, said Casey Parker, who owns three Pistola’s bars, including Jose Pistola’s and Pistola’s del Sur.

“The well-run restaurants might make a 20% margin a year," Parker said. “Most restaurants make a 10% profit or less."

Ideally, he added, “a restaurant should have three months of operating expenses in the bank. Most restaurants have one month, if that.”

Parker is angry that national chains such as Ruth’s Chris steak house received $20 million in Small Business Administration loans under the Paycheck Protection Program, the federal government’s attempt at helping small businesses make payrolls during the crisis. Congress and the White House reached a deal Tuesday to replenish the PPP, which quickly ran out of money, with $310 billion more in funding.

“It frustrates the hell out of me," Parker said. “Ruth’s Chris gets $20 million? They have access to other funding. This is meant for people like me.”

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PPP was intended to help small businesses keep employees on the payroll with 75% forgivable, federally backed loans. Parker has applied for three separate PPP loans totaling just over $540,000. After a frustrating and fruitless process with his bank, he applied through several smaller banks.

Tim Way, co-founder of the Ways Restaurant & Brewery in Glenside, said he applied and hasn’t heard anything.

“I’m looking to get money into my 27 employees’ hands because we had to furlough everyone on March 16," Way said. “Some of them are being denied unemployment, some of them are getting a fraction of what they need, and we wanted to be able to give this money to them so they can pay rent and eat.”

Brian Calhoun, who owns the Häagen-Dazs store on South Street, says he was approved for an Economic Disaster Loan, a separate program. He said he found the paperwork to be easier than that for the PPP loans.

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The National Restaurant Association said the government’s initial $350 billion Paycheck Protection Program to help small businesses was too limited for most restaurants because it covers eight weeks and required businesses to spend at least 75% of the loan on salaries through June 30.

If a restaurant is closed, owners said, employees often collect unemployment, which puts more money in their pockets.

The association’s survey of 6,500 restaurant owners found that 60% of the federal emergency measures won’t help them keep employees on their payrolls.

Mark and Deena Frank had to close their B&B in New Hope, the Inn at Barley Sheaf Farm, after the state shutdown. But the couple is hoping to reopen “in the next weeks or months” after receiving a relief loan through M&T Bank.

M&T Bank has approved PPP loans for 911 businesses in the Philadelphia region, totaling $428.5 million. In all, M&T Bank funded PPP loan applications for 27,711 businesses in its mid-Atlantic and Northeast footprint, totaling more than $6.4 billion. M&T Bank received about 30,000 applications — though not all were eligible. Most applicants were small businesses: 45% of approved applications were funded for no more than $50,000.

Barley Sheaf Farm received a notice that its $140,000 PPP loan was approved, and as of Monday the hotel, restaurant, and spa was contacting its 10 full-time employees to return from furlough, Frank said. Their chef was still working, fulfilling takeout orders for customers.

Schulson, the Philadelphia restaurateur, believes that reopening after the lockdown will reveal the winners and losers among city restaurants.

“We closed down and had a week to pay everyone, then throw away all the food," he said. "We paid rent for two months now. And still had utilities and insurance costs. How can we reopen at 50% capacity?”

He called on the state to bail out small restaurants in Pennsylvania and “give money to local restaurants to open up again, pay some of the debt they incurred, and maybe put a dollar in our pocket.”

Schulson wants the SBA loans to be 100% forgiven — instead of just 75% forgiven if spent on payroll, which he says is unrealistic, given the business model of most restaurants and bars, whose fixed costs are higher and will require more capital to reopen and regrow.

“If it’s 100% forgiven? That’s a game changer,” he said.