Spring to Bring Brighter Days

Here’s March with its winds blowing in the first inklings of Spring.  Warmer, longer days, crisp and soft springtime light, and the restaurant industries annual thaw after an always too long NYC winter.  And this Spring is going to be a monumental rebirth of all things hospitality as vaccine distribution is ahead of schedule, occupancy is increasing and, after a year of scratching and clawing and battling, those who survived are finally getting a bailout.

PPP second round is hitting now, so there’s bank bump #1 and then we have the biggie (I highly recommend the Netlfix doc btw) coming with the Grant known formally as The Restaurant Revitalizations Grant found in the American Rescue Plan Act aka the Covid Stimulus Bill aka the what the F*%&  took you so long to act Act. 

The Bill is on the fast track to Biden’s desk and should be there next week.  He will sign, then the usual bureaucratic bugaboos will follow as they figure out the application process and then we try to decipher it and strategize how to win the battle for some of the dough.  That’s how I imagine it at least.  There will be 25 Billion available and every restaurant will want a piece.  It won’t be enough so we have to hope that a) we get ours and b) if we don’t and they run out, they will replenish it.

I would suggest talking to your PPP loan people and try to get as much detailed information together concerning 2019 and 2020.  State and Federal tax returns, PPP documentation, etc.  Might as well be ready with the data when the applications open up. 

For your nerdification, here’s Greg Scotto’s accounting take on the grants:

When I reviewed the bill, the tax implications of the grant were the same as PPP. This is a double benefit to restaurant owners; they will be entitled to forgiveness on the amount that is spent on eligible expenses (what is not spent will need to be returned). Additionally, the expenses are deductible and the forgiven amount will increase basis to the owners. The additional basis allows owners to take additional losses, have potential NOL Carrybacks/Carryforwards and or have additional cost basis in the event of a sale of members/owners interest, which could reduce a potential seller’s capital gains.

Of course, we will be keeping you up to date on this as information becomes available and we will break in with special editions of the newsletter when warranted.  We haven’t heard from our man on the scene in LA in quite some time so here’s Adam on the LA beat…

LA REPORT by Adam Weisblatt

As with most of the country, Los Angeles has experienced a brief run of (what now qualifies as) good fortune.  Cases have decreased, vaccinations are picking up steam, outdoor dining has resumed, and our (useless) mayor says that indoor dining is right around the corner. We haven’t seen even 25% capacity since last spring, so it feels like a big step.  Dare we be optimistic?

The answer, like most these things days, is complicated.  The entity that is the City of Los Angeles has repeatedly shown itself to be incapable of quality leadership, and most people still feel like we’re walking on a razors edge.  In particular, LA’s notoriously difficult health department continues to pull new rules out of their ass.  When we were recently given the go ahead to reopen outdoor dining, distancing requirements between tables extended from 6’ to 8’.  No reasoning was provided.  I can’t say that anyone is abiding, but enforcement is a real threat to every outdoor operation. 

All of that being said, there are a lot of positive signs.  For one, the city’s restaurants are starting to feel BUSY again. Driving through neighborhoods brings a revived sense of energy as patios are filling up everywhere.  The beach areas, especially, are rocking.  The less affluent parts of the city, still suffering the most from Covid, are slower, but still picking up. 

We’re seeing a lot of “Runway” opportunities, where (usually independent) landlords are agreeing to a 3-4 year period of particularly advantageous lease terms, before switching to a traditional 3% yearly increase.  I really hope we see some young folks with a ton of creativity getting scrappy and earning their own stripes.   

As for the future, LA is going to bounce back with a vengeance.  If we’re given a chance for some normalcy this summer, we expect gang busters business for any quality operator.  People are desperate to get back out there, and we’re still hoping for permanent approval of the Al Fresco dining program. Things are also spreading out across the region, as SoCal sees more and more quality operators move outside of the city.  The high desert area around Joshua Tree National Park and Santa Barbara wine country in particular, are seeing a huge increase in new businesses, opportunity, and visitors from around the state.  

The biggest thing to keep an eye on in LA, especially if you’re considering opening a business here at any point, is whether the LA city council will vote to remove parking requirements for the change of use process.  If they did remove that requirement, LA will present a magnificent opportunity to develop new spaces and get into favorable leases.  Only time will tell, but at least, finally, we may have some good news to look forward to.  

Love from LA,

AW

HL FIRM NEWS

HL has been very busy during this past year helping our clients open, close, fight, sue, raise money, and do whatever to just survive.  As the industry rebounds, our firm’s growth spurt has renewed and we have added a few fabulous attorneys and administrative personnel to our firm to keep up with the pace of new deals and action in the industry and so that we can continue to represent you with the speed, thoroughness, in-depth industry knowledge and customer service that you expect from us.

So, please meet Dannielle Parker, our new Director of Administration, Chris Miskolczi, associate attorney in our Real Estate Group and Sarah Siegel, associate attorney in our Corporate Group.  All very cool, experienced and highly competent.  You will love working with them and we are thrilled to have them join the firm.

BAR SHOTS

Here’s Giles Russell, HL client,  Founder/CEO at adash, and formerly Co-Founder of Two Hands in NYC:

Chefs across the globe have told us they don’t feel they are being fairly financially rewarded for the video recipe content they post on social media platforms (IG/TT/YT). adash is the solution to this problem. adash is an app where chefs who create video recipe content can post their video recipes and have their followers subscribe for a monthly fee to gain access to their recipe content.

We’ve built an app that will provide content creators with a reliable stream of subscriber revenue and also a percentage of revenue based on seconds watched. If you converted 1000 of your social followers to adash subscribers, you would make $144,000 a year in subscriber revenue.
Users are demanding a better platform to watch, follow and interact with their favorite chef content creators. adash includes voice controlled video recipes, so no more having to touch your phone with dirty fingers, amongst a number of other industry first tech features.

Now more than ever, chefs need new ways to make money outside of the 4 walls of their restaurant, which is why we’ve already got over 20 well known chefs with a collective following of over 3 million people, onboard and ready to launch on adash. 

Here’s a presentation with some more detailed information.  If you’re interested in hearing more, email me at [email protected]

PS. Cocktail content creators, this is for you too! 

www.adash.xyz

As Jerry and the boys like to say: March winds will blow all our troubles away.