As the owner of a foodservice distribution company that serves the Mid-Atlantic region, we supported government-mandated closures of dine-in restaurants, schools and large public venues, even though we knew these closures would bring economic devastation to our company and the customers we serve. I firmly believe we are in this together.
The foodservice distribution industry is the backbone of the American economy. We feed America, distributing 8.7 billion cases of food and food-related products annually and employing more than 350,000 people. As a part of our nation’s critical infrastructure, our employees are considered essential, serving on the front lines of this crisis, delivering food and supplies to restaurants, hospitals, healthcare facilities, food banks, convenience stores and military bases. While we greatly appreciate the public acknowledgment from the nation’s leadership, we need swift action and a concrete plan from our leaders to ensure the foodservice distribution industry and our customers survive.
My company, Saval Foodservice, is an 88-year-old, fourth-generation, family-owned business serving more than 1,400 independent, largely family-owned restaurants. We procure and store their inventory, provide interest-free credit to finance their cash flow and deliver all of their product needs safely and efficiently on a daily basis. We have shared their growth and now suffer — on a larger scale — their plight.
When restaurants and other businesses closed in March, our industry walked off a cliff. Our company lost 65 percent of our business that first week of the economic shutdown. We have been slowly inching back by pursuing opportunities in other segments such as grocery and non-profit feeding and by helping our customers diversify their offerings. Our industry has a history of serving the community, and we have proudly continued that role by donating food to unemployed restaurant workers in Maryland, Washington D.C. and Virginia each week.
America cannot re-open without a strong foodservice distribution industry. Even when doors re-open, social distancing requirements will limit restaurants potential capacity and gathering size. This scenario will make it impossible for our customers to start paying their deferred expenses, which include rent, utilities and supplies, while continuing to bear 100 percent of the overhead.
We need Congress and the Administration to ensure distributors and their customers have the necessary liquidity to get through the closure period and recover successfully. Here are my recommendations: The PPP and EIDL loans as part of the CARES Act offered our industry a life raft during this storm, but the artificial hurdles to forgiveness will sink us further into debt. The eight-week, limited timeframe to use these funds and receive forgiveness is too narrow and makes no sense. In the Mid-Atlantic region, some states have begun the reopening process. But even when they do, restaurants will face restrictions on how many diners they can accommodate. Additionally, restaurants are required to spend 75 percent of the funds on payroll to gain loan forgiveness. If they aren’t open, or open to full capacity, how can they be expected to support a payroll to gain loan forgiveness? At the very least, this requirement should be changed to 50 percent so restaurants can use these funds to pay for the food and supplies needed to open their doors for both their customers and employees. Congress designed these loans to be completely forgivable so unless these restrictions are changed, our customers will not be able to take full advantage of this opportunity.
Additionally, Congress must act to provide continual support to the industry since the recovery will be a long one. If government-mandated social distancing continues to restrict restaurants’ ability to maximize revenue, then the government needs to provide a mechanism for rent and utility relief so restaurants can reduce and pay their overhead accordingly. Without this, many of the local, independent restaurants, distributors and processors will cease to exist.
Foodservice distributors like Saval Foodservice not only play a vital role in our economy but also in our way of life. We keep America fed and support the communities we serve. Congress cannot afford to let our vital industry fail.