Andrew Zimmern on restaurant extinction and problems in supply chain

  • The award-winning chef Andrew Zimmern is one of the founding members of the Independent Restaurant Coalition, which is working to help local restaurants survive the coronavirus pandemic.
  • Zimmern says the food-service industry received only 9% of the federal Paycheck Protection Program dollars even though it made up 60% of the job losses in March.
  • “If we don’t backstop restaurants, I believe we are looking at a near-extinction event for them,” Zimmern told Business Insider, citing a recent poll in which 80% of restaurant owners said they were not certain they would be able to reopen after the crisis.
  • Zimmern says the numbers simply don’t add up. When restaurants are finally able to open with capacity limited to 25% or 50%, they will still be paying 100% of their rent. He argues that these businesses need to be at 85% to 90% capacity just to survive.
  • Zimmern is worried about America’s food supply chain — but not because of distribution problems, which he said were readily solvable.
  • “What is not solvable is how do you replace the worker on the line in the meatpacking plant or in the strawberry field or in the crab-picking factory or on the fishing boat?” he said. “You can’t.”
  • Visit Business Insider’s homepage for more stories.

Andrew Zimmern is a four-time James Beard Award-winning chef and one of the founders of the Independent Restaurant Coalition, which was created to help ensure the survival of restaurants during the pandemic.

Zimmern talked to the Business Insider editor-at-large Sara Silverstein about how difficult it would be for most of America’s restaurants to open without additional help and addressed mounting concerns about the country’s food supply chain. Following is a transcript of the video.

Sara Silverstein: Andrew, tell me what the Independent Restaurant Coalition is trying to accomplish and what steps have you take it to impact policy?

Andrew Zimmern: Well that’s exactly why we formed was to impact policy. A group of us had been talking for many, many years about the fact that all the galas, all the fundraising that we do is oftentimes just a drop in the bucket to address some of the bigger systemic issues that we’re trying to solve. Things like hunger.

So when the pandemic started to grow, 30 or 40 of us got on a Zoom call together and started the coalition, raised some seed money, hired a Washington-based lobbying firm, and PR strategies company so that we could be most effective and started to organize. And we now have I think 10,000 members.

We are a very large, strong group, and we have a very specific mission that has become narrower and narrower over the last, I would say 2 1/2, three weeks. One is try to fix the PPP regulations and how that payroll-protection plan actually works in real time. Although with so much of that money already dispensed, we are lessening our focus on that and trying to focus on a stabilization plan for restaurants. People see the restaurant industry as needing a six- or eight-week payroll-protection-plan helping hand, and what we really need is a substantive 12- to 18-month package that allows restaurants to reopen at a time where we’re going to be reopening to an extremely different economy with limited seats, with massively different protocols for handling food and interacting with customers. And if we don’t backstop restaurants, I believe we are looking at a near-extinction event for them.

If we don’t backstop restaurants, I believe we are looking at a near-extinction event for them.

We did a poll last week after the first round of PPP, the payroll-protection plan was distributed to businesses across the country, and 80%, four out of five owners, restaurant owners, were not certain they’d be able to reopen after the crisis. Despite the fact that we account for 60%, six zero, of the job losses in March, the food-service industry received only 9% of the PPP loan dollars.

The fact of the matter is that we’re being given this money, we’re being given an eight-week period to spend it on payroll, but in many states we can’t reopen. And even in the ones where we just saw, I believe it was yesterday, Texas reopened or today Texas reopened for restaurants, there’s so much going on state to state. I think today Texas reopened for restaurants, but at 25% of capacity. Well, that’s not enough to make it. Restaurants need to be at 85, 90% of capacity just to survive. It’s a cash pass-through business built out of passion and culturally relevant to our country in a way that is very special as a business.

I think the other thing that’s fascinating about restaurants, and in a time of crisis, you really learn so much about your industry relative to other industries. Restaurants as a total are a trillion-dollar-plus industry. We make up about 15 million employees just in restaurants alone. But that number expands greatly when you look at people up and down the supply chain, which we’ll talk about in a minute.

That 15 million people plus is a very special population, but they’re also paycheck to paycheck. You have to remember these are newcomers to our country, immigrants. We’re still the largest or the second-largest employer of single moms, depending on which poll you look at. We’re the largest employer of returning citizens, people coming out of jails and institutions, and we’re still the number one resource for first-time job seekers.

So it’s a very unique population that without their jobs back in the restaurant industry, they’re going to go right back on to public assistance. So it’s not can we afford to bail out the restaurant industry, it’s we can’t afford to not bail out the restaurant industry.

I think the last special consideration that I would want people to understand is that we pay out taxes in such a different way than other businesses do, and we’re an economic dollar multiplier. Every dollar that comes into the restaurant, because of the way we spend our dollars, in other words, the money comes right through — it doesn’t stick around. It goes to pay rent and payroll and for food supply. So the economic analysis is that for every dollar that comes into a restaurant, about two and three-quarter dollars goes out into the economy, which is the case with several different specialized businesses around the United States, but none more so than restaurants. I think that pales in a way in comparison to the amount of sales tax and trust taxes that we generate for our states and municipal governments, which is also a very important thing.

One thing we’re hearing a lot about in the news these days is about states requiring [inaudible] they’re looking for their checks from the federal government because they’re missing their biggest sources of income in sales taxes. People haven’t been out shopping, and the big one is they haven’t been out eating.

Silverstein: And so how much of the stimulus packages that we’ve already seen is actually applied to the independent restaurants that we’ve seen?

Zimmern: I don’t have those figures, but I do know that we have only … The food-service industry has only received 9%, according to our polling, of PPP loan dollars. And those numbers come from the National Bureau of Economic Research. That’s not someone independent or someone who we paid. So it’s 10% of what the total. I would have to do the math.

Silverstein: And are you looking for a new type of PPP for the restaurant industry with different expectations and a tax rebate? What are you looking for?

Zimmern: It would be fantastic if some regulatory agency stepped in immediately and extended the runway on PPP. The way it works right now, and it’s so complex, as restaurant people it’s been hard enough for us to understand. But essentially what’s happened is that there was a land rush to apply for the loans, the money went into the banks, there was a very rickety and wonky period where people didn’t know if they would get their monies. A lot of people were rejected by banks. A lot of banks weren’t set up properly because the PPP itself is sort of like a piece of Swiss cheese.

We had PPP delivered for one of my businesses, but our bank still hasn’t gotten instructions on some of the stipulations on payback and the regs on how we can apply it. So we’re just kind of holding onto it and using as little of it as possible as we squeak through the next few days hoping to get some regulatory advice because we don’t want to be stuck in a place where we spend money that’s not ours to spend. And I sympathize with the Fed on this and with Congress. You’re trying to build an airplane and fly it at the same time. But we really need regulatory advice and some more stipulations on how exactly we can use the monies.

But more importantly than that, if you own a restaurant and you’re currently closed right now, you’ve already had to apply for the money. There’s a window, short, 10 days, where once the money comes in, you have to take it or lose it. So you take it in. At that point, according to the regulations as they exist right now, you have 10 days to start spending it.

So what happens if you’re a restaurant in a state like Minnesota for example, where we have closed restaurants? We’re going to be bringing employees in, taking them off public assistance, giving them money, there’s no work to be done, and then they’re going to go back on public assistance. And in many cases, because the government was generous and beefed up the unemployment insurance, a lot of those employees are making the same or more money by staying at home. So it’s become a very, very confusing system.

That’s why we need some rules and regulation adjustment on that. The reason that as the IRC we’re sort of focusing and we have a very large announcement tomorrow with a news conference I think at 11 a.m. Eastern on exactly what we are asking for and we have a panel of chefs who will be talking about the stabilization issues, is because the PPP money has already rolled out. People that are already on the clock. So we’re still hoping that there’s some regulation, but we have to move on to the next issue.

Imagine if you’re a restaurant, and this is why the stabilization is so important, and you’re at 25% of occupancy or 50% of occupancy. That doesn’t mean you’re going to be full with those people all the time. Are we going to go to movie theaters? Are we going to be going and sitting on planes next to people or going to restaurants? Everything I see in the news and talking to people says no. Everyone’s being very cautious, and there are so many states out there and industries that are simply shut down.

So the restaurants will be opening into what I’m calling a new economy, one that some people call a recession, some people call a depression.

The fact of the matter is, and you know this as well as anybody, these recessions and depressions are defined for noneconomists like myself, sort of two ways. There’s a [inaudible] more importantly there’s the —

Silverstein: Sorry, we lost you on that, the depth. Sorry, you cut out. You were saying there’s a depth to the recession or the depression?

Zimmern: Yeah. Yeah. For people like myself, there’s a depth to a depression, right? How far down does it go, how many unemployed, how many businesses closed, how much of our economy and GDP is lost. But even more importantly is the duration. We’re not going to rebound right away. The lights aren’t going to flip back on and we go back to November 2019 numbers. That’s just not how it’s going to work.

And so restaurants who have so many large hard costs, we’re locked into long-term rents, we’re locked into a lot of other commitments, we have very high fixed costs, have to be backstopped there because you have restaurants opening, mandated in some cases by state laws to only be open with 25% of occupancy. Yet we’re paying 100% of our rent. The numbers just don’t add up.

So we have to backstop this industry. It’s too vital. It’s a trillion-dollar industry. You know what’s fascinating? The only employer in America larger than the restaurant industry is the Defense Department. We’re the second-largest employer of people in the country. And I think we really need to turn our attention to it. And after all, from a humanistic standpoint, I think everybody who’s been at home for four, five, six weeks in some cases is dying to get out and eat at their neighborhood restaurant. We want to support the local places, the place that we proposed to our girlfriend, the place we had our parent’s 75th birthday. Restaurants play a very, very special place in our culture.

I think oftentimes we’re miss-viewed as being that tablecloth fancy restaurant that gets all the awards and all the accolades. That’s a very small percentage of our business. Our average businesses are small neighborhood restaurants. That’s what the Independent Restaurant Coalition membership really looks like. And we need to help. We need to help all restaurants. We all win when we all win. This has to be a blanket fix for our industry as best we can construct it. And we think that a stabilization package that includes forgiveness for rent and trust taxes and things like that is one of the best guarantors of some success; otherwise we’re going to see a massive extinction event.

Silverstein: And it seems like you said, it seems very clear that it’s impossible to gauge what percentage of restaurants will open without, depending on what protection they get or stabilization they get. But in this new economy, do you expect to see restaurant prices increasing to make up for some of this loss that we’re experiencing?

Zimmern: Well, this is the most fascinating part to me. When I sit at home at night and I start to let my mind wander into the future, what does it look like? There’s so many different scenarios. One thing for sure that I believe is going to have to happen, and now I’m speaking simply as someone who’s been around the food world his whole life and not speaking for the IRC because it’s not an IRC issue.

Restaurants have traditionally not charged customers what the food really costs. In other words, they’ve tried to spread out the profit that’s necessary for them to survive across their food, across their beverages, across what’s called their menu mix. In other words, certain food, plates of food have a different percentage cost than others. There’s only so much that a customer will pay for a half roast chicken, a head of broccoli, and a baked potato on a plate. And the cost of that has not kept up with inflation, the cost of goods and the cost of operating a restaurant over the last 25, 30 years.

I’m 58. When I started in the business when I was a teenager, restaurants would accumulate two, three months of prudent reserve. Now they’re lucky to have two, three weeks, and that’s even at the top end. What used to be a pennies, we called it a pennies business, but that would bring, really good restaurants would bring 10, 12, 14% to the bottom line. Now really good restaurants are bringing 6, 7, 8% to the bottom line. And a lot of restaurants over the last three or four years, because it’s been the biggest trend in our restaurants pre COVID-19, is that they were taking that profit and investing it in their people.

The biggest trend in restaurants during 2018 and 2019 was moving towards creating a more sustainable and more equitable business model within the restaurant itself, and the reason we were doing that was, A, it was the right thing to do, B, we’re trying to change all the inequitable systems that have plagued our industry for generations. But most importantly, it was to address the economic need. Because as the economy was getting better over the last eight or nine years, it was getting harder and harder to retain employees.

So we had to compete with all those other places that were offering paid sick leave and health insurance and profit-sharing and all that kind of stuff. And for many restaurants, that sucked away a lot of prudent reserve. I think most restaurants looked really healthy economically on the outside. They were full, the cash register was ringing. But this pandemic has raised a mirror up to the face of restaurants and shown how brittle and fragile our entire industry was on average.

Silverstein: And is it time to reassess wages in the restaurant industry even more so now that we’re considering all of the people that feed us as essential workers, and then continuing on through the supply chain, where there’s a lot of people who are paid very little, who have very hard jobs?

Zimmern: As far as the supply chain is concerned and as far as our low level and menial labor employees in our industry, these are employees that we have notoriously mistreated in this country since its very inception. I’ll go back and stick the whole concept of slavery into our country’s model for supplying itself with food and other necessary goods.

This is a hundreds-of-years problem that is coming home to roost in many ways over the last hundred years to plague our country, and we’re just seeing one of the latest examples here with the supply chain. The mistreatment of human beings who put food on our plate, people we’ve pushed into the shadows, people that our current administration has demonized from the bully pulpit for the last three years, are now being called essential workers. And yet at the same time, legislation put in front of Congress and put on the president’s desk to help protect those workers has gone unanswered.

I just saw this morning, it just broke that there are now lawsuits afoot against some of the big food companies to force them both at the state and federal level to actually protect their employees with the proper equipment. You have food employees who are housed together, transported to work together, forced to work in conditions where they’re too close together, they change in locker rooms together. On our MSNBC series, “What’s Eating America,” I had a chance to be in some of those factories and fields and see it with my own eyes. It’s absolutely horrific. And these people who are, these skilled workers who are doing this incredible work are the ones who are touching every plate of food that goes onto American tables.

The problem with the food supply chain wobbling — and I disagree with a large amount of what I read in the press with meat-company owners talking about intense doom and gloom and how there’s not going to be enough food in America. I believe we have enough food in America. We’re seeing scary pictures. Dairy farmers are pouring milk down the drains, chicken farmers are euthanizing chickens. A friend of a friend called me, emailed me two days ago from Iowa saying, what do we do? I have 24,000 pigs. Is there anyone to process them?

coronavirus farmers dump milk milwaukee

Fresh milk gushing down a drain at the Golden E Dairy farm near West Bend, Wisconsin, on April 1.

Mark Hoffman/Milwaukee Journal Sentinel/USA Today via Reuters

And the reason that we’re having all of these issues is that the distribution of it has to go instead of from point A to point B, because we have restaurants and schools taken out of the equation, two huge customers, it has to go from point A to point D. It has to go directly to the consumer. It has to go to the grocery store, it has to go to the neighborhood bodega, it has to go to the restaurant that is now reinvented itself as a community resource kitchen.

So first thing we have to do is have the trucks go to the right place. This requires an insane amount of help from the Fed. I think the Department of Agriculture has … I don’t need to pillory them anymore, they’ve been dragged out in the press enough over the last month for not doing anything on this issue.

But the bigger problem for me, the one that is not readily solvable, because distribution is readily solvable. We can get another driver in another truck to take a thousand pounds of zucchini to a different place. But what is not solvable is how do you replace the worker on the line in the meatpacking plant or in the strawberry field or in the crab-picking factory or on the fishing boat? You can’t. And so we have these hotspots breaking out, I think the 150 largest meat plants in America as of last week we’re in the top 25% of counties in America with the highest COVID-19 outbreaks.

And we’re finding that like prisons, like cruise ships, like military vessels and some of our military camps, people clump together. Obviously it’s a virus. It spreads by close contact. If people don’t have PPE and they’re forced in close contact to each other, we’re going to have these hot spots.

You take those workers out of the system, there’s no one to replace them. Historically, and we heard it over and over again on “What’s Eating America,” historically and even today, the only people who would take those jobs are the ones that are in them now, and those people are getting sick and not able to go to work. And they’re the ones who have been disincentivized from seeking medical help in the first place. It’s an incredibly sad situation, and I’m very, very concerned about it. It’s always about the people. Putting profits ahead of people will always come back to haunt a business, and this pandemic has held up a very ugly mirror to that fact.

Silverstein: And before I let you go, I just want to get your take on this. This mirror that we’re seeing, is this just bringing to light treatment of these workers that needs to be fixed regardless of coronavirus, or is this very specific to the pandemic?

Zimmern: No, it has to be fixed regardless of coronavirus. I find it ironic that the very same people that have been demonized by the White House are the ones that the White House is now calling essential workers and insisting that their businesses stay open, yet denying them the basic health protections that other frontline workers are given.

It’s just the latest in a historical string, 400 years long, of abuse of people who do essential work here in this country. I think it is a problem that needs to be fixed. It’s needed to be fixed since the founding days of our country. Like immigration reform, like some of the other issues that we’re seeing, like a fair wage system. These are things that administrations have kicked down the road for my entire lifetime. And if we don’t address them now, then the next time a disaster hits, it may not be a pandemic, it could be a new pandemic in a couple of years, but whatever that next disaster is, it’s going to cause the same amount of problems.

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Rebecca R. Ammons

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