As CPAs and their restaurant industry clients work through one of the most challenging economic times in history, two leaders in the respective professions are using their common ground to promote a successful recovery.
Bill Pirolli, CPA/CFF/PFS, CGMA, is chair of the AICPA board and a partner at DiSanto Priest & Co. who counted the Rhode Island Hospitality Association among his clients for many years. Brian Casey, a Rhode Island restaurant owner and former chair of the board for the Rhode Island Hospitality Association, now is chair of the National Restaurant Association board.
Both proud Rhode Island natives see opportunities for CPAs and restaurant clients to work together to overcome the unprecedented challenges that the coronavirus pandemic has posed to the hospitality industry.
“I think having a strong relationship with your accountant was more beneficial at this time than ever before,” Casey said. “There was so much coming out of Washington and the SBA [U.S. Small Business Administration], it was overwhelming at the time.”
CPAs have helped restaurant owners work through the intricacies of Paycheck Protection Program (PPP) funding; provided counsel throughout the starts and stops of the SBA administration of the Restaurant Revitalization Fund (RRF); and given valuable strategic advice throughout the pandemic.
Pirolli said CPAs have done 20 years’ worth of advisory work in a year. Young people in the CPA profession have told him that they understand more than ever what the phrase “trusted adviser” means, because they have constantly been helping clients make critical decisions.
“It’s been overwhelming because this has all happened during filing season, and the RRF grant applications were due right in the middle of filing season,” Pirolli said. “So we’re a little bit exhausted on our end, but we’re coming out of it now and we’re going to throw open the curtains, and open the windows, and help our friends in the restaurant industry get through the summer.”
A substantial blow
The Oak Hill Tavern on Tower Hill Road in North Kingstown, R.I., is an old stagecoach stop with a rustic atmosphere in a building that has stood for more than 200 years and is owned by Casey. The chicken and the award-winning ribs there are slow-smoked in a wood-fired oven, and the weekends feature live entertainment by local performers.
Casey, who also owns a catering business called The Company Picnic Company, had an experience during the pandemic that was shared by many restaurant owners, as his businesses suffered a substantial blow. He said the first round of PPP money was a lifesaver, but he later regretted not applying for the full amount available to him because he underestimated the length of time for which the pandemic would affect him. He decided to close the restaurant temporarily in January and February during some of the pandemic’s darkest days.
He took the full amount available in the second round of the PPP, and his CPA adviser, Thomas Grennan, helped him understand and take advantage of the employee retention credit. But Casey’s businesses and some others in the restaurant industry continue to struggle with issues that include:
- Higher labor costs and scarcity of available employees.
- Dramatic increases in costs of supplies. Before the pandemic, Casey paid $1.50 per pound for chicken wings. In June, that price rose to $3.95 per pound.
- State taxes on PPP funds.
A survey by the National Restaurant Association, whose board Casey chairs, shows how difficult the pandemic has been for the industry. Based on the association’s survey of 6,000 restaurant operators and 1,000 customers, the survey shows that the industry ended 2020 with total sales that were $240 billion below the association’s pre-pandemic forecast for the year.
The eating and drinking place sector finished 2020 nearly 2.5 million jobs below its pre-pandemic level, and as of Dec. 1, 2020, more than 110,000 eating and drinking places were closed at least temporarily.
Casey fears that more restaurants will close for good once the PPP and other assistance money is depleted.
“The labor issue in the hospitality industry is horrendous,” Casey said. “Most restaurants are not opening at full capacity even though they’re allowed to. As an example, we’ve gone from seven days a week to five days a week of service, and out of those five days, we’re only doing lunch on three of them just because of staffing issues.”
During weekly meetings with his management team throughout much of the pandemic, Casey has joked that the restaurant leadership was “looking for quarters in the couch,” trying to find savings and strategies anywhere they could.
Casey and Pirolli said restaurant owners can employ a number of different strategies that can help them weather the storm, including:
- Reviewing contracts with all vendors, from suppliers to garbage pickup companies, to find opportunities for savings.
- Renegotiating with lenders and other business partners.
- Taking advantage of slow periods to literally clean house and perform needed maintenance.
- Implementing new technology, which could potentially save on labor costs.
- Decreasing the hours that establishments are open.
- Reducing the number of items on the menu.
The Oak Hill Tavern has removed some less profitable items from its menu, which it has been reprinting weekly to adjust its prices to reflect the volatile pricing of supplies.
“I’ve said it to many people that when we get through this, we will be better operators because of it,” Casey said.
Hope for the future
Along with the rest of the hospitality industry, Casey is looking forward to a hopefully not-distant end of the pandemic and the return of large numbers of lockdown-weary customers who are eager to get away from home.
Some of that rebound has already occurred, as Casey said that by early June the Oak Hill Tavern’s customer volume had reached 85% of its 2019 level even though it was open just five days a week. He said grateful returning customers have been gracious to staff with generous tipping.
“Once we reopened, people came out of the floodgates to say, ‘Thank you for reopening. We’ve missed you. Thank you for everything you’ve done for the community,’” Casey said.
That sort of goodwill presents an opportunity for hospitality businesses to regain their strength after the most difficult of times. As they do, CPAs will continue providing the helpful advisory services and technical support that helped the businesses survive.
Meanwhile, two industry leaders with humble roots who have known each other for years will help show the way at a critical time.
“We’re both local guys, and we’re dedicated,” Pirolli told Casey. “Rhode Island has a long history of providing leadership to many organizations and professions. So I think as a small state, I’m really proud of where we are and what we’re doing in these times.”
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.