US government shutdown hits restaurant industry

The decline of consumer spending during the two-week shutdown put pressure on the restaurant industry and led to calls to Congress to raise the debt ceiling

The shutdown of the US government for two weeks directly impacted on sales at restaurants in Washington DC and at national parks and institutions across the country as tourism and consumer spending declined. Looming concerns over the national debt and healthcare law debates continue to put pressure on all industries.

Through a grassroots effort launched by the National Restaurant Association, restaurants around the country called on Congress to end the government shutdown, and to raise the debt ceiling to ward off much deeper problems.

“The restaurant industry provides opportunities to over 13 million Americans, and the ability to sustain business while maintaining consumer confidence is greatly impacted by our nation’s economic health,” Scott DeFife, the Association’s executive vice president of policy and government affairs said. “The debate over government funding and the debt ceiling, while important, is cutting into restaurant operators’ bottom line every day the government remains closed. The shutdown is negatively impacting the livelihood of our restaurant customers and our workers.” Even the FDA was forced to cease health inspections as a result of the shutdown.

The Association is directing its members to America’s Restaurant Advocates initiative, an industry-wide, national grassroots advocacy programme that connects restaurateurs with elected officials on issues critical to the industry.

Those efforts included a call on Congress by the NRA, along with than 250 other organisations, to fund the federal government into the next fiscal year, raise the debt limit, reform entitlement programmes and tackle tax reform.

The Association’s chief economist, Bruce Grindy, noted that both consumers and restaurant operators already have low expectations for the economy. The shutdown has only added to the uncertainty in the months ahead. In fact, according to the Association’s September Restaurant Industry Tracking Survey, only 23% of restaurant operators said they expected the economy to improve in six months. Just 21% of consumers said they expected the nation’s economy to be better in the next six months, according to another NRA survey.

“While the overall economic impact of a partial government shutdown is limited, the fact that it is occurring at all doesn’t do anything to boost the fragile psyche of consumers and businesses,” Grindy said. “To be sure, the political wrangling only adds more uncertainty to the situation, particularly with the significantly more dangerous debt ceiling and default looming.”

A consumer poll conducted by the International Council of Shopping Centers and Goldman Sachs during the shutdown found that 40% of consumers are lowering their spending as a result of the shutdown, and might continue to do so even afterward. About 70% of those surveyed who reduced spending said they were cutting back “a little”, while the remainder said that their spending reduction was “considerable” according to the report. This raises concerns for retail outlets and restaurants as the busiest time of year – the winter holidays – are approaching.

Delaware North manages foodservice at Yosemite National Park

Employees of Delaware North, a hospitality management company which manages foodservice and lodging at Yosemite, Grand Canyon, Yellowstone and other national parks saw its business grind to a halt when the shutdown hit. Ten days into the shutdown, the company reported losing more than $6.2m in revenue and estimated it would lose another $600,000 for each additional day of the shutdown. Nearly 3,000 employees were sent on leave from the company’s national parks operations. Since the end of the shutdown, however, business has bounced back.

Same-store beverage sales at DC-area restaurants rose 1.3% during the first week of the shutdown, with government workers who had been stood down hitting the bars in a sort of “unscheduled vacation”. But as the shutdown stretched into its second week many restaurants reported cancellations and other lost business.

Same-store covers decreased 7.6% during that time and same-store gross sales fell 0.1%, according to the Association. Lunch and breakfast sales also took a hit, with same-store gross sales down 3.3% and covers down 5.4% compared to the same period last year.

Online Healthcare Woes

Aside from strong backlash by the tea party and other Republican entities, website crashes and online glitches have added further challenges to President Barack Obama’s healthcare law amidst a government stalemate.

When the Small Business Health Options Programs (SHOP exchanges) opened online on October 1, the websites consistently crashed that first day.  While supporters of the healthcare law concluded that the crashing might suggest a strong demand for Obamacare, others challenged the president’s credibility.

One of the major concerns is the time and additional funds needed to fix the glitches in time for the original enrollment end-date, which is December 15. President Obama has said he’s putting 100 percent of his resources toward fixing the problem quickly.  The exchange website at involves 36 states and include many links to other government departments sites, which could have had some impact on the crashing. Already, the government has spent $400 million on initial development of the sites, with a goal to get 7 million people signed up for insurance by March.

The SHOP exchanges are intended to serve as a “one stop shop” for small employers to make better comparisons when purchasing health coverage plans for their employees.

The National Restaurant Association offers a healthcare toolkit for understanding and working with the new laws, available on its website. In the interim, the Association offered a few points for restaurants and operators to note in getting their businesses ready for the changes.

In 2014, those with 50 or more full-time employees will be considered a large employer and could face penalties if they fail to offer health plans for staff and dependents. It’s possible, however, to possibly combine employees in multiple entities under “common control” to ease those penalties.  The Affordable Care Act will also require large employers in particular to report employee data in new ways, including filing information returns with the Internal Revenue Service and statements with employees in early 2016.

The Association also suggested communicating with employees to understand the new law and to get coverage, either through their employer or through a government-run health exchange.  Restaurants and other businesses are required to give their employees written notice about these government-run exchanges if they are covered by the Fair Labor Standards Act.

Those companies with fewer than 50 full-time-equivalent employees are not required to offer health benefits however, FLSA-covered employers must provide written notice to employees about government-run marketplaces. For those that decide to offer benefits, their plans need to comply with ACA rules, including a 90-day limit on waiting periods, which will take effect in 2014.  Tax credits are available in addition.

Amelia Levin

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