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As Restaurants, Retail Owners Brace For 'Absolute Disaster,' D.C. Passes Relief Bill

Geoff Dawson, the owner of major D.C. bars including Penn Social and Franklin Hall, says he is preparing to lay off about 90% of his 300 employees. 

With the the District forcing bars and restaurants to close to help stem the spread of the coronavirus, Dawson tells Bisnow he can only afford to retain a small number of staff as he tries to save enough cash to reopen the bars and rehire people after the crisis is over. The rent payments due at the end of the month, he said, present another problem.

"I don't know that we're going to be able to [pay rent] because rents are a lot of money, and there's not a lot of available cash," Dawson said. "We've started talking to our landlords ... We agreed to give it a week and see how it's going and what the government is doing."

The inside of Franklin Hall at 1348 Florida Ave. NW.

Mayor Muriel Bowser announced Monday bars and restaurants would no longer be allowed to serve customers inside, and they would be limited to takeout and delivery offerings. The city also mandated the closure of health clubs and theaters. Maryland Gov. Larry Hogan announced similar restrictions Monday, as have several other states across the country. 

The D.C. Council Tuesday unanimously passed emergency legislation aimed at supporting the District's small businesses and workers. Bowser said during a press conference Monday she would sign it as soon as it reaches her desk.

The emergency bill expands unemployment protections and provides a three-month delay for property tax payments from hospitality businesses and sales tax payments from all businesses that collect them. It also allows bars and restaurants to serve beer, wine and cocktails in closed, to-go containers, a practice that is typically not legal.

"I am well aware the potential economic damage to individuals and businesses is far greater than the relief this bill provides," Council Chair Phil Mendelson said during Tuesday's hearing on the bill. "I do not expect this bill is the final and last act. We will continue to look for relief. I have to caution when our revenues are expected to plummet, we have our own limitations as to what we, the District government, can do." 

The hospitality industry, which includes hotels and restaurants, provides roughly half of D.C.'s $1.6B in annual sales tax revenue, D.C. Chief Financial Officer Jeffrey DeWitt said during the hearing. Nearly 14% of D.C. employees work in hospitality, he said, and he said industry-wide layoffs could bring D.C.'s unemployment rate from 4.9% to the 15% to 20% range in the near future. 

The Seventh Street corridor in Chinatown, one of D.C.'s most restaurant-filled neighborhoods.

Surveying of the restaurant industry last week found a nearly 50% drop in sales, DeWitt said, and he expects Monday's restricting of in-house service will lead that number to increase significantly.

Landlords that own restaurant-occupied buildings are concerned about what this could mean for their tenants' ability to pay the rent. 

Douglas Development Managing Principal Norman Jemal, whose company owns a large portfolio of retail buildings with concentrations in the Chinatown and Ivy City neighborhoods, said he is concerned about coming rent payments. He hopes the government and banks will provide flexibility on tax and loan payments.

"This is an absolute disaster," Jemal said. "The effects of this are going to be devastating on everybody, and there will be nobody that is unaffected or unhurt by what is happening right now."

Peterson Cos. President of Retail Paul Weinschenk, whose company owns Maryland's National Harbor and a host of other retail properties in the region, said he thinks the retail tenants that were already facing financial challenges could be unable to pay rent.

"This situation is unusual, and there will be some tenants who may find they don’t have all the resources they wish they did," he said. "I expect some are going to struggle at the beginning of the month, and others that are capitalized will continue to do the things they need to do, and we’ll see what happens."

Weinschenk said Peterson is looking into ways to assist tenants that are unable to pay rent, but it has yet to finalize any agreements. He also said the company is working to help tenants transition to offer more takeout and delivery services. 

"We're working across our portfolio to figure out ways of helping facilitate carry-out and a a curbside delivery program," Weinschenk said. "In Silver Spring, we've got an area with a nice concentration of restaurants and we're going to set aside a curbside pickup area. If you're an operator of one of those restaurants, we're going to help make it possible for your customer to drive up, grab their order and keep going."

An aerial view of National Harbor, Maryland

Rappaport President Henry Fonvielle, whose firm owns retail buildings and brokers retail leases, said he continues to work through what this will mean for the small businesses that make up D.C.'s retail scene. He said he hopes customers will continue to order takeout from their local businesses to help them survive.

“I have spoken to many landlords and tenants, we are all navigating this disruptive moment in time together," Fonvielle wrote in an emailed statement. "The unprecedented closure of businesses due to social distancing has been implemented at breakneck speed."

ANXO co-owner Jason Burnett operates a cidery and full-service restaurant in Truxton Circle and a tasting room in Brightwood, plus another production facility. He said ANXO stopped in-house service on Sunday. It is still selling cider to go and shipping to customers, but he said it would be lucky if that captures 10% of its normal revenue. 

The company is most focused on holding onto as many of its roughly 40 employees as it can, but he said there will be layoffs. He said it also has coming rent payments and debt service payments, and it is in talks with its landlords and lenders about their flexibility to defer payments.

The ANXO Cidery at 300 Florida Ave. NW in Truxton Circle.

"I have reached out to all of our landlords, and advised them of [the] situation and offered to engage in conversation about how to work through this together," Burnett said. "So far all landlords who have responded to us have said they absolutely understand and have been very good to work with."

Roadside Development Managing Director Richard Lake, who owns several D.C.-area retail properties including Shaw's City Market at O, said Monday he had yet to hear concerns from retail tenants about rent payments, but he expects to hear some issues soon. 

"Retailers and restaurants are definitely going to have impacts on their lives and the workers who work there," Lake said. "We're coming up with strategies on how we can help them get through this. Everyone is going to have to work together to get us all through this. Banks, retailers, customers, employees and employers, we're all going to have to think beyond ourselves."

Dawson said three of his restaurants — Franklin Hall, Church Hall and Tall Boy — will continue making food for Uber Eats delivery. But he said that will barely make a dent in his revenue problem. 

"If we can sell a little Uber Eats and somehow keep a few people employed that will be a bonus," Dawson said. "It won't be any meaningful revenue at all."

He said his company will try to retain enough kitchen jobs to make the delivery food, and he will keep his salaried staff employed. He said he keeps cash reserves, but cutting back on costs as much as possible will be necessary in order to try to get the businesses back up and running once things begin to improve.

"We will have to cut back most of our staff and preserve cash, because once it comes back, we're not going to go from zero to 100," Dawson said. "We're going to limp our way back to business, and we're going to need to have some funds on hand to make it work."