To save America’s restaurants, Congress needs to help the food service distribution industry
We all have a favorite place to eat. For some, it’s a popular chain restaurant providing the quick comfort of an affordable and consistent menu. For others, it might be a family-owned diner where they know your order by heart, or the fancy restaurant where you celebrated a special event. All these places have one thing in common: a well-stocked pantry of food items. The same goes for the lunches our school children eat, the foods prepared for our elderly family members living in senior centers and meals for hospital patients and healthcare workers, many toiling on the frontlines of the COVID-19 crisis. The preparation of these meals would not be possible without a vibrant supply chain of food and products provided by family-owned companies like mine in the foodservice distribution industry.
Since the economic collapse brought on by the coronavirus, restaurants and schools have had to pivot. Some restaurants were able to adapt their menus to take out only, and; public schools are offering grab and go meals for students who need them. Likewise, many food service distributors-vital partners to these entities-have switched up their business model. But despite their greatest efforts, these changes will not be enough to survive. Restaurants need federal economic relief – and so does the foodservice distribution industry that supports them.
Food service distributors deliver 225 million cases of food and supplies to more than 1 million professional kitchens across the U.S. safely and efficiently each and every day. Prior to the COVID-19 crisis, food service distribution was a $303 billion industry that employed 350,000 people. While we support the health and safety of all Americans, mandated government closures and stay-at-home orders have had a drastic economic impact on our industry. Food service distributors have experienced revenue losses between 60 and 90 percent since mid-March. Even as reopening begins in many states, the food service distribution industry expects to lose up to $24 billion in revenue through mid-June. Additionally, the industry estimates that as many as 15 percent of restaurants will close permanently, leaving distributors with uncollectable accounts receivable balances, which pose a significant threat to the financial viability of the overall food service industry.
Our industry’s financial challenges do not stem from lack of hustle. When the mix of supply chain needs of restaurants and schools changed overnight, we responded. After all, our success is tied to theirs and vice versa. A change in demand has caused many items to be thrown away by operators, distributors, suppliers and producers. And, we can’t even give the food away; at one point our local food bank was unable to accept any further perishables.
Food service distributors serve as the bank for America’s restaurants – we are critical to getting the economy up and running again.
We are asking Congress for support in the form of tax credits to offset uncollectable debt. Sadly, despite every innovative effort to stay open, the harsh reality is that many food service customers may not reopen after this crisis. Those who do are facing significant limitations on cash flow because much of the outstanding accounts receivable on distributor books uncollectable. Providing tax credits for this outstanding debt will provide us the liquidity to continue to extend the trade credit our customers will need to get back in the game as the economy restarts.
My grandfather and his brother founded Martin Bros. in the 1940s, a business that they initially ran from the back of their truck. Never in my lifetime have we had to take such measures to ensure the safety of both our products and our people. We are committed to keeping our customers and our employees safe. But we are very worried now.
It’s not just a matter of wanting to be part of America’s recovery. To help America’s restaurants reopen, we need to be part of the recovery.
Brooks Martin is the president and chief operating officer of Martin Bros. Distributing.