Local bars, restaurants face uncertain future as mandates hamper profits

8 min read2,960 views and 498 shares Posted August 13, 2020

Business at the Gin Mill was the best it’s ever been in the first two months of 2020.

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Revenue was up 15 percent compared to the year prior, and customers had named the restaurant the Best of the Lebanon Valley 2020, according to owner Mark Arnold IV.

Then, COVID-19 struck in mid-March, bringing the positive momentum Arnold’s Lebanon-based restaurant had been enjoying during the first quarter of the year to a screeching halt.

The Gin Mill is not alone in its battle to turn a profit during these tough times.

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LebTown also spoke with Mike Rotunda, co-owner of Rotunda Brewing Company in Annville, as well as Adam Harmon, steward at the Perse Social Club in Jonestown, about their ongoing financial struggles during the pandemic.

While there is still much uncertainty about the future, one thing is crystal clear: very few, if any, restaurants can afford to stay open operating at 25 percent capacity, which is part of the mandate issued on July 15 by the Wolf administration. The mandate took effect at 12:01 a.m. on July 16.

Read More: Restaurant industry baffled by new mandates: ‘No one goes into business to earn 25 percent profits’

The Perse was severely impacted when the business didn’t qualify for PPP and other federal funding and was not permitted to issue cocktails-to-go under state law. The mandated reduction by half of its total indoor capacity from 50 to 25 percent forced Harmon, who manages the social club, to temporarily cease operations: the 25 percent edict includes staff as part of an establishment’s maximum count.

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Read more: High and dry: social clubs omitted from cocktails-to-go law

“The Perse has shut down temporarily after Gov. Wolf issued his new order which limits what bars can and can’t do,” Harmon said. “We’re a bar-bar; we exist for people to drink. When this happened, I called the president [of the club] right away to have an emergency board meeting because I immediately knew that we were going to have to close our doors.”

The impact of the bar closing will ripple like an earthquake throughout the community, Harmon said, since their income helps fund the fire company and other charitable organizations, as well as help keep taxes lower for local residents.

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“We were treading water at 50 percent capacity and we were starting to build business back up and getting back to some normalcy,” Harmon said. “But no one’s in business to lose money, especially for a business like ours that has the needs we have. There are no restaurants that I know can make money at 25 percent capacity.”

Closing the business means a massive decrease in funding for fire services, area youth sports teams and other local charities, Harmon added.

“Last year, we donated $55,000 to the fire company. The way it is going this year, we probably won’t be able to donate anything,” Harmon said. “They budget $40,000 from us, and that money is probably gone at this point, that money is going to be zero this year.”

The Gin Mill

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The Gin Mill. (Photo provided)

Business was booming at the Gin Mill pre-COVID thanks to a number of new initiatives launched over the past year, Arnold said.

“Business was going great and continuing to grow,” Arnold said. “We started doing brunch on Sunday mornings, and that became instantly popular. We had some other promising plans for the rest of the year with the goal of increasing the dining experience for our customers. All those things got put on hold very abruptly.”

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Arnold said business was up due to some strategic decisions to improve customer service. Some changes included making mostly homemade dishes, including their desserts. The Gin Mill had also started smoking their own meats, sourcing local food to guarantee maximum freshness and making minor tweaks to certain dishes.

“We also have great employees who have stayed here a long time. People really appreciate it when they come in and see familiar faces they know because they also know that they are going to be treated well,” Arnold said. “We were just at a point where we felt that we had the business where we wanted it to be and that we could move on to offering more specials to our customers.”

Rotunda Brewing Co.

The Rotunda bar before the shutdown began. (Photo provided)

At Rotunda Brewing Company, which also has a brewpub in Hershey in addition to its brewery and restaurant on the 200 block of West Main Street in Annville, the coronavirus came at a most unfortunate time. The company had just completed a rebranding initiative last October at the brewpub and recently completed renovations at the brewery led to an increase in business.

“Honestly, when we were in red [complete shutdown], it was a huge, huge, huge hit to our business,” Rotunda said. “The really bad thing is, March through Mother’s Day, due to the college being here in Annville, is our busiest time of the year, so that really hurt us a lot.”

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As a Mexican-themed restaurant, Rotunda also lost revenue over the Cinco De Mayo celebration in early May as well as St. Patrick’s Day in March, which occurred the day after Gov. Wolf shuttered businesses on March 16.

“We missed the spring sports season in Annville at the college, graduation and Mother’s Day,” Rotunda added. “After we were allowed to reopen, in yellow, we did have some outdoor seating available by then. We experienced an initial pop of business and were maybe doing about 40 percent of our normal business. But that has died down now after the initial rush when everybody wanted to go out.”

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Financial distress

All of the businesses continue to bleed financial resources during a pandemic that’s now in its fifth month, and still showing few signs of ending anytime soon.

“When we were allowed to reopen, things started to feel normal again,” Harmon said. “People were drinking, laughing and having a good time. The week before the governor said there weren’t going to be anymore shutdowns, we bought $1,000 worth of kegs, $1,000 worth of soda. So, we’re going to have a $2,000 restocking fee once we finally do reopen again because that stuff will be no good. We also had $40,000 out-of-pocket expenses while we were trying to stay open.”

The same financial predicament holds true at Rotunda Brewing Company, which is losing an estimated $10,000 and $20,000 per week and $60,000 and $80,000 overall at the Gin Mill, located on the 300 block of East Cumberland Avenue, since mid-March.

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“Everyone in this business has money set aside for a rainy day, but it is pouring now,” Arnold said. “I was prepared for this, but not to this extent. People thought this would only last one to two weeks, but it has now gone on for five months with no one really knowing how long it’s going to last.”

When asked what the threshold is to weather the storm, Rotunda said most restaurants could probably get by at 75-80 percent of capacity over the short term.

“What matters is how much in savings an individual restaurant owner has put away,” Rotunda said. “People could get by for a while if we were at 75, or even 80, percent, but restaurants are not really designed … to be profitable at that level. It is a hard number to predict because the question is really, ‘How long can you, as an individual business, hang on until you have to close for good?'”

Restaurant workers feeling impact

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Not only are restaurant owners hurting, but their employees, too. Reduced profits for restaurants also translate into less work for staff and, of course, lower gratuities.

“We had to lay off about half the staff, initially, because it was difficult being takeout only,” Arnold said. “We only needed so many people to make that work, so when we first reopened, we were at about one-third than we used to have. Now we’re basically back to full staff with the exception of two people who decided not to come back.”

“We had hired 10 employees when we went green,” Rotunda said, “but then with this latest cutback in capacity, I had to let those people go shortly after hiring them. So, we spent money hiring and training them and then I had no choice but to let them go through no fault of their own.”

The future of the business

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Prior to the latest mandates, all of the businesses had made operational changes in an attempt to keep their cash registers ringing. Even the Perse is working to reinvent itself during these difficult times, according to Harmon.

“We’re looking at offering catering, and opening our doors to business meetings and other functions,” Harmon said. “As soon as we can, we’re going to start renting out the place. There is a fairly brand-new bar, a brand-new kitchen and it’s perfect as a banquet space.”

While Rotunda Brewing already had an outdoor patio pre-COVID-19, the Gin Mill added their own and both restaurants included other services.

“When we got into this, we didn’t do delivery,” Arnold said. “But now we are delivering during lunch hours to businesses within a 7-mile radius. We’ve tried out other new things and also have had to learn how to operate the business in more untraditional ways.”

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Read more: ‘Cocktails-to-go’ embraced by local taverns, helps offset financial impact

New methods to earn money saw the Gin Mill add outdoor seating and new specials like their family-based meals that can feed between four to six people.

“We put in five tables for outdoor dining and we’re looking if there is a way we can work with the city to close off a side street and add more tables,” Arnold said. “We’re also doing affordable family-style takeout meals. We wanted to make it affordable for families so that they can get a whole meal at a cheap price any night of the week. This has worked well for us and has been very well-received by the community.”

Since they have an onsite brewery, the Rotunda has expanded its line of alcoholic beverages for sale to the public since mid-March, especially beer and mixed drinks that are sold in Crowlers, which are beverages in 32 oz. cans.

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“We have new beer releases on Saturdays, offering from one to up to seven new beers that are sold in four packs and in 32 oz. cans,” Rotunda said. “We also started selling mixed drinks in 32 oz. cans. You can get our signature margaritas and orange crushes.”

As restaurants continue to innovate in an effort to keep the lights on, no one wants to have to say goodbye to their customers.

Harmon posted on the Perse’s Facebook page on July 16th that it was with “great sadness and a heavy heart” that the social club was closing on Sunday, July 19. It was especially hard given the fire company’s and social club’s long-standing service to the community.

“The fire company’s been there since 1803; the club has been there since the ‘40s,” Harmon said. “So, our decisions were really looking at the long term, not the short term, and that’s why we closed. We upset a lot of people because the staff and the customers are all family and that was a tough pill to swallow. It’s hard to tell people that we’ll be back when there is no guarantee. We have an older clientele and there’s no guarantee that when we reopen, those people will be there. Those are people we may never see again.”

Harmon added that staff gathered around one last time that Sunday evening so he could make a toast with the club’s staff for one “last” last call.

“It felt very much like a wake,” Harmon said. “I made a toast, and quoted an old Irish saying: ‘May the roof above this club never fall in, may the friends that gather below it never fall out.'”


Read all of LebTown’s COVID-19 coverage here.

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