Even in the best of times, tight margins and fixed expenses result in many new restaurants never seeing their first birthday, but restrictions on eat-in dining under stay-at-home orders instituted to combat COVID-19 have caused the profits of many restaurants to evaporate, while expenses remain, according to an opinion from Adam Fletcher published by Crain’s. While loans provided through the Paycheck Protection Program have been a temporary cash lifeline for some restaurants, they may not be sufficient to keep restaurants afloat in light of back rent and other expenses that continue to mount while revenues remain depressed as a result of continued social distancing measures. Confidence in the industry seems to be at an all-time low, with the Independent Restaurant Coalition estimating that 85% of independent restaurants could fold by the end of 2020. In the past, restaurateurs were often unable to use bankruptcy to save their businesses because, in a typical chapter 11, but two recent changes to federal bankruptcy laws now make it possible for owners of smaller or independently owned restaurants to restructure their debts in bankruptcy and maintain ownership of the business without having to pour in more capital.
