Home » The Paycheck Protection Program Remains a Restaurant Lifeline

The Paycheck Protection Program Remains a Restaurant Lifeline

This past week, the Senate passed a bill to extend the Paycheck Protection Program’s deadline from March 31 to May 31. Doing so will offer much-needed relief to operators and other small businesses across the country hustling to get applications in.

The PPP’s latest round presented an added wrinkle, intended to prevent fraud, which slowed the process for many. More compliance checks, for instance. The American Institute of Certified Public Accountants released a statement earlier in March calling the March 31 deadline “unrealistic” due to these updates.

The Biden administration announced new rules in February as well that gave businesses with fewer than 20 employees a dedicated two-week period to apply.

The original eligibility criteria resumed recently, with any business with fewer than 500 employees able to apply for a first-time loan, and any business already with a PPP loan able to apply for a second if it employs fewer than 300 workers

For a refresher, businesses can choose to spend the funds over any window between eight and 24 weeks, with at least 60 percent going to maintaining payroll in order to receive forgiveness. The interest rate remains 1 percent.

Senators voted 92 to 8 to pass the PPP Extension Act, effectively giving the SBA an additional 30 days after the new May 31 deadline to process pending applications. President Joe Biden indicated he would sign the legislation, which is expected to arrive on his desk this week. The House of Representatives passed the Act on a bipartisan basis. So it’s really only a matter of time at this point.

The PPP, for all its challenges, has remained a critical lifeline throughout COVID-19. This year through March 7, the PPP approved 2.4 million loans worth about $165 billion—just more than half of the $284 billion allocated to the program when it reopened in January. The SBA previously said the PPP distributed roughly $525 billion in forgivable loans to 5.2 million companies during a four-month stretch in 2020, saving some 50 million jobs.

For restaurants, the “Accommodation and Food Services” sector received just 8.1 percent of PPP dollars the first go-around. However, it collected more than 134,166 loans in the latest round, according to February data from the SBA. This time, the hospitality sector was the leading borrower across the board with 18 percent of the $101 billion, or $18 billion or so.

The National Restaurant Association lobbied for the PPP Flexibility Act in June, which addressed some glaring holes, such as the 75/25 split needed for payroll that dropped down to 60/40. The Association said the PPP provided more than $70 billion in support for restaurants to date. 

Van Golemis, who owns and operates Tops Diner in Newark, New Jersey—once named the “most famous restaurant in New Jersey”—was a recipient of both rounds of PPP stimulus. The 40-year-old restaurant acquired funds through its partnership with ConnectOne Bank.

Golemis spoke with FSR about the process, how it helped his brand stay afloat, and where operators can turn to navigate the final stretch of the crisis.

Tell us a little about Tops Diner and your history in the business.

Tops Diner was started in 1972 by my father, George Golemis, who ran the business in East Newark, NJ for 20 years on his own. I started working at Tops in 1990 when I was 15 years old with my brothers doing chores around the diner like sweeping the floors, washing dishes, and chopping onions. I slowly started to work my way through the restaurant and learned the ins and outs as I took on different roles. In 1998, when I was 23, I took over the business. I’ve always had an interest in the field and a lot of passion for the business. Eventually my two brothers joined me as co-owners of Tops Diner and the three of us still run it together today.

Let’s go back to the early days of COVID-19. How significant was the impact in those first weeks on the restaurant?

When COVID-19 first hit there was a lot of confusion, not just with our business, but around the world. I think a lot of people experienced that fear and were scared because everything was so unknown. As a restaurant owner it was frustrating to not know what was going on. Right at the beginning we made the decision to close down Tops Diner for three days to navigate our next steps and make a game plan. We knew we had to shift quickly to a strictly take-out business in order to survive, which was new for us. We made some quick changes to our normal operations: cut back on some of our menu items and adjusted our hours to fit the requirements of the municipality. The future was uncertain, but we knew that quickly switching over to leverage our take-out business was an important first step. For the 2019–2020-year, business for Tops Diner was down 40 percent, but these fast changes helped us to remain afloat in the early days of the pandemic.  

What were some early pivots you made?

One of the first things we did at Tops Diner was scale back on our menu, we had to make it more conducive to carry-out and delivery options rather than in-house dining. With indoor dining no longer being an option, we had to make the necessary changes to go forward with being a 100 percent takeout operation. We created a contactless pick-up system and also started using services like UberEats, DoorDash, and Postmates. Now we have QR codes you can scan with your phone in the restaurant instead of physical menus.

Talk about your experience with the PPP. As you know, it didn’t lack controversy, especially among smaller restaurants and businesses. How did Tops Diner navigate the application process?

The first round of PPP came with a lot of uncertainty. There was so much misinformation floating around and concern that there would not be enough money to go around for everyone in need. When we first heard about the first round of PPP we reached out directly to our bank, ConnectOne Bank, which is a leading regional bank based in Englewood Cliffs, New Jersey. After we contacted them regarding participating in PPP they had a team member reach out to us directly with information on how to apply via their website. We honestly were scared at the beginning that we wouldn’t qualify, but ConnectOne made the whole process easy and comfortable. Two or three weeks after we applied, we were given our first round of PPP.

In what ways did it help the brand stay afloat?

The money we received through PPP gave us the confidence and reassurance that Tops Diner was going to stay afloat. We were able to hire back more of our employees and didn’t have to worry as much about areas of vulnerability like being able to pay our mortgage or other bills. We had been worried we were going to lose our employees to careers in larger industries and are really thankful that PPP allowed us to keep them as part of the Tops Diner family.

How did the second round process compare to the first?

The second round of PPP was a lot smoother than the first, largely because there was less of the unknown and we had a good idea of what needed to be done. By this point ConnectOne Bank had really upgraded their application portal to be incredibly user friendly and easy to navigate. We applied right as it was available and the whole process just felt more comfortable. The money we received in the second round allowed us to bring back even more of our employees. Now that we are allowed to have 35 percent indoor capacity on top of our take-out business, we’ve been able to add staffers and make our business overall larger in the long run.

What are your thoughts on the latest changes, announced this week? That brands with fewer than 20 employees can only apply.

Tops Diner has over 100 employees so we were not impacted by this change, but my understanding is that it was only for a two week period. In my opinion, any and all small businesses should be able to take part in the PPP program.

While the PPP was an invaluable resource, what do you think small restaurants need in terms of aid to make it through these next few months?

While the rollout of the COVID-19 vaccine will give everyone some confidence to return to more normalcy, it would be great to see some aid specific to the restaurant industry. This industry has been hit the hardest by the COVID-19 pandemic, seeing something similar to a third PPP round specifically for restaurants would really help the industry get back on its feet. An employee tax retention program may also significantly help those impacted. Restaurant employees are risking a lot by going to work every day.

What are some ongoing challenges unique to smaller restaurants?

Smaller and local restaurants were hit with some unique challenges if they didn’t already have a strong take-out business. Take-out was not previously part of our core business, so we had to shift. The presentation is different, the way you make the food is different given that it is being eaten a bit later. I think take-out is going to be key for restaurants for a long time. Even as things start to open back up there will still be those people who are only comfortable with take-out and we want to make sure we aren’t excluding them from our services.

Talking about 2021 and the future, how would you describe your outlook today? Are you starting to see light at the end of the tunnel?

I think the worst days are behind us and I am looking forward to the rest of 2021. I’m excited to see the gradual process of restrictions being lifted so we can slowly start to have more people back in the restaurant. Here’s hoping 2022 will bring some much-needed normalcy and give us our confidence back to go to a restaurant with minimized concerns.  

Do you foresee a golden era of sorts on the other side of this?

My hope is that people are going to eat out eight days a week after this is all over! I’m bullish for the future and am confident that there will be better days ahead of us.

Lastly, what is one major industry change you think is going to stick after COVID clears?

There is going to be a lot more technology involved in the restaurant industry coming out of the pandemic. At Tops Diner we’ve been using an app where customers can join a waitlist for a table remotely and I don’t see that going away after the pandemic. There is new technology where you can order food through portals and delivery systems or through contactless kiosks to minimize the amount of face-to-face interaction with staff. I think this is all here to stay. At Tops Diner we really want to make sure we are able to connect the dots for every type of customer and make sure people are comfortable.