Closing a Restaurant in Tampa Bay
Closing a Restaurant or Bar in Tampa Bay?
The COVID-19 virus has wreaked financial havoc for bars and restaurants in Tampa. On March 17, 2020, the Governor ordered all bars to be closed temporarily, and restaurants could only provide take-out services. Many business owners decided to close down completely. This was of course a very difficult decision. Some of these restaurants and bars were able to reopen at limited capacity, but others did not.
Here are some important common questions to consider when closing a restaurant or bar in Tampa.
Q: I have no revenue at all because we’re closed. What about my lease?
A: While some commercial landlords such as Publix have been somewhat proactive, most are still expecting you to pay rent on your commercial lease even if you are closed. We even heard from one client whose landlord threatened to terminate the lease under the “must stay open” clause even though the Governor ordered them to close. While evictions may be halted, if you default on your lease you will fall behind on payments which could lead to an eventual eviction. Best advice? talk to your landlord about options if you want to stay open. If you are closing, it is often advisable to turn over possession peacefully and take pictures of the condition of the building. However, there are exceptions to this advice and you may want to consult an attorney.
Q: We are still operating but barely. Should I apply for the CARE payroll loan?
A: It seems like a good option, if you have been paying your employees the right way. There is also the SBA’s new Disaster Relief loan which should be forgiven for up to $10,000. For the PPP (paycheck protection program) you need to go to your SBA-approved bank and apply with supporting documentation. The Disaster Relief loan has a simple online application at www.sba.org. If you receive both grants, a portion may not be forgiven.
But beware of some other programs such as the Florida emergency bridge loan. While it’s interest free for the first year, the default interest is 12% if it’s not repaid at the term date. We generally advise against borrowing more money if you are already struggling financially, especially if you are a high risk business such as a bar or restaurant.
Also beware of scams and con artists. Don’t give personal information to anyone who is not verifiable. If you are in doubt as to whether an opportunity is real, contact us for a free evaluation.
Q: Is it ok to sell gift cards if we’re not sure that we will stay open?
A: This is a no-win. Many established and new restaurants sell gift cards during the crisis so that they can continue to pay their employees. While this is very noble, the sad truth is that some of these establishments will not reopen, and customers will be angry. In the past we have fielded angry calls from customers who are upset that they cannot redeem a $50 gift certificate that they bought days before our client closed its doors.
Our advice? It’s only fraud if you know that you will not be honoring the gift card when you sell it. Trying to do every last thing possible to stay in business and pay your employees is, in our opinion, a good deed. If you end up closing your doors, expect that good deed to be punished by some self-centered people who ignore the gravity of your financial losses. They will be upset that they cannot use their $50 gift card for a pizza. Heartbreaking as this will be for your customers, they are the least of your problems in an overall dissolution strategy.
Q: A company offered to loan me $50,000 for working capital. We are definitely closing the business, but I could really use the money for personal expenses until I get a job. Is it ok to borrow the money?
A: Using a business loan for personal expenses is never a good idea. In this case, taking a business loan while knowing you are closing the business would be fraud. Don’t do it. On the other hand, if you are trying to stay in business, take advantage of the legitimate SBA loans and grants.
Q: What is the difference between Chapter 7 and Chapter 11?
A: If you’ve made the decision to walk away, a Chapter 7 bankruptcy is a dissolution of the business and a liquidation of all assets. Any equipment with liens on it goes back to the secured creditor. A trustee steps in and handles any money that’s still left in the business bank account. If you are reopening and back on your feet but with debt issues caused by the pandemic, a Chapter 11 bankruptcy gives you court protection from creditors and an opportunity to restructure your debt.
Q: Will a business bankruptcy affect my personal credit? Also, will I be able to get a job afterwards?
A: A business bankruptcy will not appear on your personal credit. Also, a bankruptcy in general will not affect your employment. This is true even for certain industries like financial planning, and for government workers with military and civilian security clearances. However, if creditors are suing you or if you have judgments against you, that may be problematic for some employers.
Q: My wife and I personally guaranteed some loans. Will we have to file bankruptcy too?
A: Hopefully not, although there is definitely risk here. We try to avoid personal bankruptcy for our clients, but it may be a good option. It depends upon many factors such as your income, assets and non-business debt.
Q: About the personal guarantee…will we lose our home?
A: Unless you have pledged your home as collateral for your business debts, it should be safe from creditors in Florida. There are some exceptions to the homestead protection.
Q: We’ve decided to close completely. Does this mean I can’t reopen another similar restaurant?
A: Of course not! Although you are feeling financially devastated, you are not a failure. You did not cause this crisis. Bankruptcy is a fresh start and there is no “badge of shame.” If you want to set up a new restaurant after closing down though, you need to take certain steps and avoid big mistakes. Do not transfer any assets into a new business entity without speaking with an experienced attorney.
Q: What about our liquor license?
A: A 4COP license should retain its value despite the COVID-19 shutdowns. Do not transfer it without speaking with an experienced attorney. A liquor license in Chapter 7 is handled a certain way.
More questions? We are here to help. Call us at 813-288-0303 or use our Contact Form to schedule a consultation. We are offering no-cost consultations to restaurant and bar owners during this difficult time. During social distancing, we are using ZOOM meetings as well as telephonic conferences. You can also email us with questions if you prefer.