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Why are landlords still raising rent on restaurants during a pandemic?

News has spread that Cafe Ponte in Clearwater is now permanently closed due to COVID-19 and leasing problems. This is the beginning of many stories that will soon be told about failing restaurants in Tampa Bay. Personally I did not dine there, but was constantly told about the place from those who love to eat in Tampa.

The owner told the Tampa Bay Times: “He wanted to increase the rent and we couldn’t come to a fair agreement.” Other projects are in the works, but this spot was running for 18 years and is now closed.

Unfortunately, this is going to be really common as the virus continues to persist.

One of the big reasons is because most restaurants in Tampa Bay are due for leasing renewals or may have recently signed one.

Many of the restaurants in Tampa Bay appeared during the last financial crisis or Great Recession in the early 2010s. Those leases expired in a market where Tampa real estate has swelled and become quite expensive as more people moved to Florida and companies began relocating to the region. It wasn’t as much of a problem until Coronavirus showed up and put ice on tourism in Florida.

This also begs the question, why are landlords still increasing rent in the middle of a pandemic? Who exactly is going to move into these empty units during one of the worst times of uncertainty? It is a problem that is plaguing both businesses and working class people already being squeezed.

Even Starbucks is asking for rent relief after their sales fell by 85% from their landlords. How can small businesses survive like that?

Restaurants have experienced a huge disruption with states closing their businesses for over a month and putting them into minimized operating capacity to help stop the spread of COVID-19. While this is important for public health and needs to be done, the same government who mandates closures should also be working to protect restaurants from rent increases, evictions, and other forces.

There’s a number of tools that can be used to help restaurants that still aren’t being used in Florida or Tampa Bay even get a little bit of help.

Cities around the country are putting caps on delivery fees to help restaurants that have lost much of their dine-in business and are seeing increases in delivery and take-out. Even with restaurants re-opening, studies show that most customers will not be dining in again until a vaccine is hopefully created for COVID-19.

OpenTable data shows that for the most part, dining has yet to recover and has hung stubbornly around -80% or higher for most cities that already opened their doors.

A viral photograph shows how Grubhub and the various delivery platforms actually take in a huge amount of profits from restaurants even during the pandemic as they struggle to survive. Uber Eats takes up to 30% of a delivery commission. Rumor has it that Uber is about to buy Grubhub for $6 billion, which will lower the bargaining power that restaurants will have on fees.

Although PPP (Payroll Protection Program) loans are being heavily floated as a way for restaurants to stay afloat, many owners cried foul after they realized that PPP loans are mostly for payrolls (as the name implied) and most of the money cannot be used towards rent or other costs. This is mostly good for workers which is important, but it will not fundamentally save the restaurants who now have the funds but still have numerous costs to figure out.

If cities and states really want to protect their small businesses and restaurants as they say they do, they need to come up with more tools to help those places stay in business. It’s unfair to ask restaurants simply to shoulder the burden of staying closed during this health emergency and to not offer them tools to survive the pandemic as well.

California has come up with a few interesting things like paying restaurants to help feed the elderly and more things like that might be needed nationwide.

Policymakers need to find ways to provide rent relief for restaurants and to help ease other issues plaguing restaurants now like supply disruptions, spiking food costs, the cost of acquiring PPE, and other issues at play. At the very least, landlords should not be raising rent on restaurants in the middle of a pandemic.