How should state policymakers approach e-cigarettes?
One of the questions of economics teaches you to ask is ‘compared to what?’ Someone might tell you that a job paying $10 an hour is bad, but any reasonable…
When Governor Walz showed interest in working with Minnesota Hospitality to work out a reopening plan, business people in the hospitality industry sighed relief. However, that relief was short-lived when their reopening was met with some heavy restrictions like limited capacity and the requirement that restaurants only do outside seating. These restrictions have been loosened but are not gone completely, and businesses are suffering for it.
Just recently Surly Brewing has announced plans to permanently close its restaurant, bar, and event center citing unprofitability which has been partly a direct result of these restrictions. Worse yet, it is no the only establishment to permanently close. And Other establishments face the risk of closure in the upcoming months if working conditions persist. As reported by the Star Tribune,
“Today is another dark day, in a dark year,” said Surly owner Omar Ansari. “This space is built for a lot of people, for socializing and getting together with friends. That’s not the way the world is working right now. There’s a pandemic going on, and there’s just no way for places like ours to make it in a COVID world.”
The announcement that Surly’s 350-seat beer hall, beer garden, pizzeria, events center and retail store all will close came a day after Butcher & the Boar in downtown Minneapolis closed its doors.
“In the last 24 hours, two groundbreaking hospitality businesses have been forced to close as this industry continues to collapse,” said Liz Rammer, chief executive of Hospitality Minnesota. “We’ve already seen other permanent closure announcements ramp up, and we fear this is just the beginning as we face the coming lean fall and winter months.”
A survey done by Hospitality Minnesota found that 40% of hospitality businesses in the state are in danger of closing by the end of the year under the current working conditions.
This has mostly been due to the fact that new restrictive rules have reduced potential revenue for the hospitality industry. And this is already an industry that stayed closed the longest. The hospitality industry worse still, faces slow winters and relies on the summer to make money. But these restrictive rules are preventing establishments from making money and the summer is almost over.
When the mammoth Surly facility reopened in June under new restrictions, its capacity was severely reduced to a fraction of the 1,800 people that the fire code allows indoors and out. Ansari said that the results initially looked encouraging.
“We were busy,” said Ansari. “But despite all of the hard work of everyone on the team, when we ran the July numbers, we discovered that we weren’t profitable. We didn’t make any money this summer. That’s how restaurants work, they make their money in the summer so they can make it through the winter.”
On-site food and beer sales are down 82 % over last year
Smaller breweries have really suffered due to the coronavirus since it is hard for them to properly social distance in their beer halls, Bennet McGinty said. Some brewery owners in Greater Minnesota have told her that they are operating with taprooms 25 to 30% full instead of the allowed 50%.
Going into the colder months when breweries won’t be able to use their patios, business will get even worse, Bennet McGinty said. Taprooms are critical for many brewery operations and can account from anywhere from 20% to 100% of a brewery’s sales if they haven’t secured distribution, she said.
“Even with distribution, a loss of sales in a taproom may still be a significant loss for a brewery,” she said.
Many breweries were already just one to three months from closing for good earlier this year during the state mandated closure of bars and restaurants, Bennet McGinty said.
Some breweries like Bauhaus Brew Labs were forced to pour hundreds of gallons of unsold beer down the drain. An attempt at a state bill to get reimbursement for breweries’ dumped or spoiled beer didn’t gain much traction.
Going forward, Ansari said the plan for Surly is to focus on brewing.
“That’s the core of our business,” he said. “We need to focus on where Surly started, which is the brewing business. … We have to stay whole. That’s the reality.”
By invoking “indefinitely,” does that mean that Ansari sees a time when the five-year-old facility will reopen?
“I guess when COVID is over,” he said. “But I’ll be honest and say that I haven’t had a lot of hope in the last few weeks. Until people can gather — because that’s the way that this place is designed — we can’t keep losing money.”
Research has come out showing that there is no evidence suggesting lockdowns affect Covid-19 outcomes. I have written before that
When compared to its neighboring states, Minnesota had the most restrictive shutdown rules. Yet Minnesota has fared worse compared to its neighboring states. Minnesota currently has the highest unemployment rate among the neighboring states. And Minnesota’s Covid-19 death rate is only slightly less than that of Iowa and more than that of its other three neighbors.
It is time that the state stops this economic suicide and let businesses operate more efficiently.