The city's industry needs federal stimulus and support to ward off a wave of year-end closures.
By Scott Weiner as told to Amber Gibson
Zagat Stories asked people in hospitality around the country what’s at stake for them in the 2020 election. Scott Weiner is cofounder of the Fifty/50 Restaurant Group, operating more than a dozen restaurant and bar concepts in Chicago. Weiner is also on the board of directors for the Illinois Restaurant Association.
Everybody is already talking about the fact that the restaurant industry needs stimulus. The lobbyists in Washington that I’ve been talking to believe there’s a 55 percent chance the Democrats are going to sweep the Senate, keep the House, and take the executive branch with the presidency.
If the Democrats sweep, there will be so much stimulus that follows after the lame duck period. Similar to what is known as Modern Monetary Theory, you will see a tremendous amount of federal money flood the economy. Looking at what that means for the restaurant industry as a whole, but also in Chicago, is huge. The states will be bailed out, there will be a national increase to the minimum wage, and hospitality will also get stimulus. The government will also devalue the dollar by providing this much stimulus and propping up workers and business, and ultimately what is going to happen is inflation. If you raise the minimum wage at the same time, that’s going to further increase inflation because labor costs will increase along with economic velocity.
Chicago restaurant prices will begin to look a lot more like New York over the course of a year or two. That is not a bad thing because wages will increase. I think that in Chicago, wages may not go up as much, but across the country workers will earn larger paychecks. Food costs will definitely go up as production and harvesting goes up. If the guy who is picking the tomatoes is making more money, grocery stores and restaurants will soon follow with increased prices.
Ultimately it will save restaurants and probably help local retail, because the extremely unsustainable rents in areas of Chicago like Fulton Market, Randolph, and the Gold Coast will be more viable as rent and occupancy become a smaller percentage of their total sales. If restaurant menu prices unilaterally increase, then sales will increase, and the cost of a rent or mortgage as a percentage of sales will go down. Instead of 10 percent, maybe it’s 6 percent, and that’s a more viable business. I believe inflation is the only way to save real estate in unaffordable markets, and a Democratic sweep is the best and fastest way to get there. I’m looking at the elections from that perspective. We will go more into national debt, but the cities and states won’t be in as much debt because the federal government will bail them out.
The national election is the biggest thing right now. Unfortunately there are no major local elections here in Chicago. It’s mostly just judges that are on the ballot. So there’s nothing in this current local election that’s going to have any major effect for our restaurants that I can see, and I’m unsure how Governor JB Pritzker’s proposed tax amendment will really affect business.
The city of Chicago is dependent on the state to solve structural financial issues, and the state of Illinois is dependent on the federal government, because Illinois is broke. There’s really nothing the city or state can do without the federal government to help them other than raising taxes to solve their problems. What the city specifically will continue to do, what cities across the country have shown, is that if the federal government is not going to raise wages or fix inequality, they’re going to try to do so. They’ve been very pro-worker, which is great, but the only way they’ve been able to change is by hurting small businesses. The real culprits behind inequality, such as Amazon and the massive hedge funds that tear apart our neighborhoods, have been able to use their outside capital to further exploit our cities without the same burden as local and small businesses.
Over the course of a couple of years, Chicago restaurants will become more sustainable. We will have a little bit more normalcy once restaurant prices catch up to the inflation. I compare it to when Franklin Delano Roosevelt was the president and enacted the New Deal, because over the course of many years, inflation went up.
The other big thing that I think happens if the Democrats sweep is forgiveness of student loans to a certain degree. If we are able to forgive student loans, that means that the people most willing to go out and enjoy restaurants and bars are going to have a lot more free money to do that with. And they’ll be wanting to do it because they’ve been locked up due to COVID and bottled up due to heavy student loan debt, which forces them to spend less on entertainment. The 20- to 35-year-olds want to get out and interact and have fun, and they were a bigger part of the Chicago bar and restaurant economy 15 years ago. If Joe Biden is able to follow through with forgiving student loans, that will create a big boon for restaurants and bars across the country, but especially here in Chicago where it costs more to live. But it only happens if there’s a Democratic sweep.
If nothing happens at the federal level, it will be really bad for the city of Chicago. I think gridlock is the worst thing that can happen for local economies, but it’s the best thing that can happen for these companies that make up the S&P 500, and especially for those that show true monopolistic behavior. The only thing worse would be not knowing the outcome of the election on November 4.
The big thing locally that the Illinois Restaurant Association is lobbying for is to make it easier to operate during COVID. We need the city to allow more than 50 socially-distanced people in a room, and to match the state when it comes to COVID restrictions and dining laws. We’re in constant communication with the mayor and deputy mayor, along with scientists and doctors. We’re just fighting for survival and keeping the state’s largest employer—the restaurant industry—viable.
One other thing, and this is my speculation—there are a lot of restaurants out there afraid to announce to the press that they aren’t reopening because they are afraid of how it may affect their PPP forgiveness. Nationally, 450,000 small businesses have been wiped out. They’re gone, and that was avoidable if our federal government wasn’t so worried about politics and the stock market, and more worried about the real economy, workers, and small businesses. I think there are another 600,000 small businesses waiting to announce that they are permanently closed until they can at least make sure the PPP money is forgiven. I can tell you 100 restaurants and quick-service places that are closed and are not reopening down in the Loop, but they aren’t telling anybody to avoid being on the hook for even more debt.
I think inflation will solve a lot of the issues that we have in our industry. If there’s a Democratic president but they don’t control Congress, then I think we’re in for another four years of gridlock, and problems and inequality will only get worse. It’ll keep things the way they are, which isn’t benefiting anyone but the Amazons of the world. I’m sure there may still be bailouts, but they’ll be band-aids, and we’ll all wake up in a few years to realize that there is no local economy left, and we all work for the monopolies.