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

7 min read4,277 views and 829 shares Posted August 13, 2020

Gov. Tom Wolf’s latest ruling regulating restaurants during the pandemic has not been welcome news to local eatery owners.

LebTown spoke with representatives from three restaurants, along with the communications director of the Pennsylvania Restaurant and Lodging Association (PRLA), who said the new mandates that came out in mid-July are confusing while other regulations may eventually force them to go out of business.

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The most disconcerting mandate is the one that reduced restaurant capacity from 50 to 25 percent and also now includes staff in the maximum allowable percentage. 

Read more: Gov. Tom Wolf imposes new restrictions on bars, restaurants, businesses as the coronavirus surges

“No one goes into business to earn 25 percent profits,” said Gin Mill owner Mark Arnold IV. “Margins in the restaurant business are already small and the only way to make money is by volume. We can’t just do the volume we need in this business at 25 percent maximum capacity.”

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PRLA communications director Stephanie Otterson said members have told the organization that the new orders are “devastating” to their establishments and for their employees, which numbered 417,500 statewide prior to the onset of COVID-19 in mid-March. 

“At 50 percent, they said it was hard but I think we can work through it with takeout and cocktails-to-go and this will allow us to at least keep the lights on,” Otterson said. “When it went back to 25 percent, there was no scientific data presented to support that it was going to prevent someone from getting infected with the virus.”

The 25 percent mandate, she said, is an “arbitrary number.”

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“No one from the industry has said this is going to make everyone safer.”

Mike Rotunda, who co-owns Rotunda Brewing Company in Annville, said the math for running a profitable business versus what they are allowed to do under the new mandate does not add up. 

“If 75 percent of your business is empty all the time but we’re still expected to pay all of our taxes and the full cost of the bills that go along with running a business, then there is no way we can remain sustainable,” he said. 

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Restaurants get creative with unclear, confusing rules

Otterson noted that the association was waiting to learn if the capacity ruling included all staff or just front-of-house employees since back-of-house staff, like cooks and dishwashers, rarely come into contact with customers.

In an email to LebTown, Gov. Wolf’s press secretary Lyndsey Kensinger said the maximum capacity includes “all staff” and added that health officials had seen a shift in the infection rates from older to younger individuals.

“The demographics of cases in these four counties [Beaver, Butler, Washington and Westmoreland] changed substantially toward more younger age groups,” Kensinger wrote.

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She noted that over 50 percent of cases occurred in individuals ages 19-49, an indicator of community spread as opposed to spread in congregate care facilities such as nursing homes where cases are declining. In April and May, most of the cases were in individuals 50 years of age and older.

“As the Wolf administration has assessed the data surrounding the increase in cases, particularly in the southwestern part of the state where there has been the greatest spike in cases and among the longest period of time in the green phase, we have seen a notable increase in the cases among younger demographics through our contact tracing efforts.”

Kensiger added that one Pennsylvania establishment was identified to be a main source of the spread of the virus across a four-county region. Another example is of a bar that was visited by 27 cases in one county, and those cases then also spread to a nearby county, confirming a need for more than county-by-county mitigation.

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“Bars, restaurants, nightclubs and out-of-state travel all were indicated as risk factors in growing numbers of cases, leading to the mitigation efforts announced last week and the travel advisory criteria,” Kensinger wrote in her email.

Also confusing for businesses, according to Otterson, are the provisions requiring alcohol sales to stop once a guest’s meal is over and how the state defines the word meal. A customer must order a meal if they wish to consume alcohol, Kensinger noted in her email. 

“It’s not clear to us as to what is a meal and if you haven’t finished your meal, when does it actually end,” Otterson said. “As long as my tab is open, does that mean my meal is still going on?”

The state, according to Kensinger, is following the definition of a meal under PA Liquor Code [47 P.S. § 4-406(e)]: “Food prepared on the premises, sufficient to constitute breakfast, lunch or dinner; it shall not mean a snack, such as pretzels, popcorn, chips or similar food.”

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“The code does not define when a meal ends,” she said, “but patrons should not linger at a restaurant after they have finished their meal.”

What constituted a meal was clarified by the state shortly after the initial orders were issued on July 15 after some businesses started offering some creative “meal deals” for their customers.

Adam Harmon, club manager at The Perse Social Club, which has decided to temporarily cease operations, said he knew the creative genius of some restaurants self-determining what constitutes a meal wasn’t going to last.

The Perse at the Perseverance Fire Company funds 90 percent of the volunteer fire company’s annual budget. (Provided photo)

“Someone said to me, ‘Well, other bars are selling toast as a meal,’ but I read the guidelines and knew that wasn’t going to fly for too long,” Harmon said.  

Otterson said the association appreciates the innovation and adaptability of the restaurant industry during these trying times. 

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“Some were handing out packets of Ramen noodles or giving away free bread sticks,” Otterson said. “They’d say, ‘Here you go, here’s your meal. If you don’t want the noodles, then you can donate the package to the food bank.’”

She quickly added, however, that PRLA’s position throughout the pandemic has been to “request compliance with our members because this is a public health issue” while “also working to get answers on behalf of our members.”

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Getting those answers or clarifications hasn’t always been easy, and has left many restaurant owners wondering what they must do to ensure they are compliant.

“Compliance is something that can be achieved, but the problem is that the compliance that we have to abide by is constantly morphing and changing, so it is very hard to abide by the rules under those circumstances,” Arnold said.

He added that multiple state agencies are making, or have rules, and that the mandates don’t always gel.

“The Governor’s office is making rules, the [Pennsylvania Liquor Control Board] is making rules and so are the departments of health and agriculture. While they are all coming from a position of great concern for the safety and well-being of everyone, the rules are not always quite on the same page, so it is difficult to keep up with the mandates,” he said.

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Arnold added that the clarification concerning what constitutes a meal came once it became clear that some businesses were offering side dishes or appetizers as a meal, and noted “an order is not transparent if you have to put out clarifications on the original order you have issued.”

Industry frustrated with sweeping, short-notice regulations

Owners feel like the timing of both rulings, the one that shuttered businesses in March and the latest revisions in July, could have come with more notification. Both the Perse and Rotunda Brewing Company had made major food and alcohol purchases prior to the first shutdown or right before capacity was reduced a few weeks ago. 

“They didn’t make the guidelines one day and then issue them the very same day,” Harmon said. “They had to have known that this was coming and so they should have said, ‘Hey, restaurants, take it slow and be aware that bad news is going to be coming.’ That would have given us a little more time to be prepared.”

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For Rotunda, the March decision was painful because it came the day before St. Patrick’s Day, one of the most profitable holidays for Pennsylvania restaurants.

“It would have been nice if we would have had more than an eight-hour notice to shut down,” Rotunda said. “All of our food orders were placed, and we literally had thousands of dollars in food, beer and other Irish items that were already purchased when he made us close on March 16. The governor needs to realize that these actions have serious consequences. Every time you do this, every small business takes a hit.”

Otterson said the association was not happy about the limited timing to respond to the new ruling. She noted the industry was given about 8.5 hours’ notice before the new guidelines went into effect. 

“We were blindsided by how quickly they came down, and there was no communication to us despite the fact that we had a very close working relationship with the governor’s office,” Otterson said. “It was a frustrating moment because we felt we were working together on the same goals. The industry had to react extraordinarily quickly to the new mandates.”

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With uncertainty as to how long the mandates will be in place, it is also equally unclear how long restaurants will be able to keep their doors open. 

Prior to the pandemic, there were 1,186 restaurants employing nearly 19,000 employees in the 9th Congressional District, according to the National Restaurant Association, but it is unclear how many of those businesses are in Lebanon County since the district includes all, or part of, eight counties. 

Additionally, while no data exists for local impact on area establishments, the national association noted, in an April 20 survey, that 800 restaurants nationwide expected to close within the next 30 days. National media sources have also reported that up to 60 percent of restaurants are expected to permanently close because of the pandemic.

“There is no hard or fast data from any sources but projections from industry experts say that 30 percent in PA are expected to permanently close,” Otterson said. “No one knows where that true number is going to lie but we do know though that 25 percent [capacity] doesn’t even come close to allowing them to keep their lights on.”

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Concerning a question about how the reduced capacity is crippling profits and what the Wolf administration is doing to address this issue, Kensinger called on Congress to pass the Real Economic Support That Acknowledges Unique Restaurant Assistance Needed to Survive Act, or RESTAURANTS Act.

That bill, proposed June 18, provides $120 billion to independent food service or drinking establishments devastated by the pandemic. 

While there has been disagreement over how restaurants should operate in the midst of a pandemic, there is one thing that all can agree upon: wearing masks to mitigate spreading the virus is necessary.

“In order to successfully reopen restaurants, we need to remain vigilant about taking precautions, especially wearing a mask that covers our noses and mouths while around other people,” Kensinger wrote.

Kensinger added that masks are an evidence-based mitigation tactic that won’t be lifted until the state shows progress in controlling COVID-19 cases.

Otterson agreed with the mask assessment, adding that she believes most restaurants are following the Center for Disease Control guidelines to be compliant because they know it is in the best interest of their customers and staff. Mitigation efforts include sanitizing surfaces, staying six feet apart, frequently washing your hands and, of course, wearing a mask when in public.

“You’ve got to wear the mask because that is part of the deal to help to keep our staff, as well as yourself, safe,” Otterson said. “Everyone doing their part is a win-win for everyone.”


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

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