- The restaurant industry has been hit particularly hard by the economic slowdown of COVID-19.
- From operations to finance to tax considerations, we’ve compiled a checklist of items restaurant owners should consider as they reopen.
- At CLA, our professionals can provide guidance to help you chart a successful path forward.
Need guidance as you reopen your restaurant?
While many American businesses have been impacted by COVID-19, the restaurant industry is among those hit hardest. In response, many restaurants adapted to shutdowns across the country by offering drive-through or curbside pick-up, allowing them to remain partially open and serve customers who were sheltering in place.
In March, we provided tips on how to adjust your restaurant operations to the changes brought about by the pandemic. Now, as many restaurants begin to reopen, it’s time to update those strategies.
From operations to finance to tax considerations, consider this checklist as you prepare to reopen.
- Sanitation — Make your efforts visible to show guests you care. Provide paper towels, improve lighting, and utilize clean design lines.
- Marketing — Brand your social distancing and PPE requirements, update your website with your current menu, and use social media to promote reopening.
- Congestion — Create a separate off-premise pickup area for to-go and delivery partners, declutter the dining room to create more space, provide social distancing stickers to indicate distances of six feet, and take reservations and text customers when the table is ready to avoid congestion in the lobby area.
- Experience — Make it exciting to dine out again by making people feel comfortable. Find ways to create a safe dining experience reminiscent of pre-pandemic times, and continue to improve and enhance the off-premise experience as you continue to grow this revenue center.
- Paycheck Protection Program (PPP) loan forgiveness — Be on top of PPP loan forgiveness requirements before your measurement period is up. Stay abreast of new legislation regarding timeframes and forgiveness rules, be familiar with the forgiveness application, don’t rush to obtain forgiveness, and retain all required documentation for six years after submission. Read more guidance on PPP loan forgiveness.
- Forecasting — Create a forecasting process to take you through the rest of 2020 and make it a part of your monthly financial process. In addition, implement key performance indicators (KPIs) to track your performance against your goals, create multiple scenarios so you can plan accordingly, and develop or find a good cash flow model. Check out CLA Intuition® 2.0 model for scenario planning.
- Vendors — Update landlords, bankers, and suppliers on your financial situation. From this experience, learn the importance of continual dialogue with these parties to foster smooth operations and adequate cash flow for your business.
- Growth — Consider growing your footprint with new locations or franchise opportunities, as there will be an increase in available real estate in the coming year.
- Work Opportunity Tax Credit (WOTC) — This tax credit is for organizations that hire people who meet certain criteria. The application must be submitted within 28 days of the employee start date, and credits range from $2,400 to $9,600 per qualified new hire. Read more guidance on WOTC.
- Employee retention tax credit — Eligible organizations can claim a tax credit of up to 50% of employee compensation, with a limit of $10,000 paid to a particular worker — but it cannot be combined with the Payroll Protection Program. Read more guidance on the employee retention tax credit.
- Qualified improvement property (QIP) — This correction to the IRS code allows QIP to qualify as 15-year property and makes QIP eligible for bonus depreciation. QIP assets placed in service during 2018 also qualify for 15-year bonus depreciation treatment — however, additional steps must be considered. Read more guidance on QIP.
- Business interest limitation — The overall limitation on business interest deductions has been increased from 30% of adjusted taxable income to 50% for years 2019 and 2020.
- Excess business loss limitation (EBLL) — The CARES Act has suspended the EBLL through 2020.
- Net operating loss (NOL) carryback — NOLs can be carried back to the preceding five years for years 2018 – 2020. Read more about NOL opportunities.
How we can help
It’s been a challenging year for the restaurant industry, and the ever-changing landscape makes it difficult to plan accordingly. With a plan, you can begin to chart your path forward. Our professionals are here to provide guidance and help you develop a financial reopening strategy that’s right for you.