The Cost of Doing Business During COVID-19

Service fees, limited menus and increasing prices could be a rising trend as the economic fallout of the pandemic drags on

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The cost of doing business during COVID-19 can be expensive.

The pandemic has created a slew of additional costs for businesses, especially for restaurants. But who should foot the bill?

You may have started seeing some restaurants adding "COVID fees" or service charges to the bill. Other businesses -- dentists and salons -- are even increasing prices to cover lost revenue.

It's become such a big deal the Texas Restaurant Association had a recent conference call with state representatives to talk about it and just how much restaurants are suffering.

“We talked about the never-ending crisis. Shut down for six weeks, brought back with limited capacity and then protein prices and dairy prices are starting to skyrocket when they reopened. And the consumer just hasn’t returned,” said TRA president Emily Knight.

The costs are adding up for restaurants like Fish City Grill.

“It’s incredibly expensive,” said Gje Greene-Wallace, the marketing director for the Texas-based chain. “It’s an expense that I don’t think all restaurants have the ability to take time and really quantify.”

Since early March, she said they've spent $58,000 on PPE. A majority of that cost came from masks but they have also stocked up on sanitizer, wipes, gloves and deep cleaning their 19 restaurant locations.

"Since March, it's been difficult. We've struggled with costs for things like PPE and reduced capacity," she said. "Fortunately though, we have been doing fairly well and we attribute all of that to the resilience of team members and our amazing customers."

She expects they will spend $100,000 on PPE by the end of the year.

“It’s so important for us to make our team members feel comfortable with masks and gloves, all the things that they need. It's also important for us to make the customers feel and see the safety measures that we're taking. They need to see us wearing our masks, washing our hands, wiping down tables and high touch areas. All of the expense is worth it, even though the cost is very high,” said Greene-Wallace.

But so far, they've been able to hold off on passing that cost onto the customer.

“People don’t realize all the things we're spending money on to help keep them safe and help keep our business is going," Green-Wallace added. “We are lucky in that we have 19 restaurants and they were able to buy things in bulk. That really helps but not every restaurant has that ability."

Others have no choice but to do what it takes to save their business, adding service charges to their bills.

“I think that’s just where restaurants are, is they are just at the end of the rope,” said Knight. “We’re seeing that acceleration that we were fearful of -- restaurant closures.”

Knight said skyrocketing protein prices that occurred right around the time of reopening have been adding to the financial turmoil for the food industry.

“Because of the meatpacking plants. They were sort of being brought down due to cases of COVID-19 across the U.S.,” she said.

Knight said the TRA has been flooded with calls asking for guidance on not only implementing these service charges but how to stay afloat for the unforeseeable future.

“What we don’t have right now is consistency,” she said. “Every day these restaurant owners get up, they don’t know how many customers are going to come in, they don’t know if there’s been comments that it’s not safe to dine out. There is no way to project right now."

Greene-Wallace said the TRA has helped Fish City Grill on guidance this difficult year.

"I don't think we would been able to have navigated this as well as we have without them," she said. "The nightly emails we get from them have been encouraging. They help us problem solve and look to see what's coming ahead."

Knight is urging struggling businesses to consider limiting costs by limiting menus, which is something many were already doing to avoid paying high prices to suppliers for items such as ribs or stocking up too much.

"So if you’ve got a mass amount of inventory, that’s really hard especially when you don’t have the kind of revenue coming in," she said.

Knight said businesses can also work with suppliers to manage that inventory. If the decision is made to implement a surcharge on customer's bills, she said it's important to be upfront with them.

“As an association, we know that restaurants have to do everything they can to keep customers,” she said. “What we don’t recommend is putting it as a line item on the check. The consumer needs to understand that they have a role in helping these restaurants survive. These restaurant operators are tired. They’ve been holding on for four and five months. And one of the last resorts would be to increase prices, it’s not what you want to do. But if you can’t even make the margin on that food, we just tell them to be honest be open and transparent.”

As the financial strain continues, Knight projects that consumers could see these trends stretch well into 2022 as recovery drags on.

"I think as we see this go on more and more, it's going to be that you're going to have to raise prices. Because the cost of doing business has accelerated so much,” she said.

As the country awaits the official implementation of another relief bill, the TRA said the next step right now is to work with the state on regulatory and tax relief for restaurants on the state level.

“The representatives and senators across the state are reaching out to us to see, ‘How can we help? What can we do right now to help influence the governor’s office as we go into the next session?’” said Knight. “Which believe it or not is just two months away.”

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