Help should soon be on the way for food distributors to restaurants and professional kitchens in the United States that have suffered financially from the impact of Covid-19 pandemic, as Congressmen Darin LaHood (Republican-Illinois) and Jimmy Panetta (Democrat-California) have introduced the Providing Liquidity for Uncollectible Sales (PLUS) Act. The bipartisan legislation provides tax relief to offset uncollectable debt incurred as a direct result of government-imposed shutdowns. It is supported by the International Food Distributors Association (IFDA), the National Fisheries Institute (NFI) and the United Fresh Produce Association (UFPA).
The US foodservice distribution industry collectively experienced more than $12 billion in uncollected debts as restaurants and other facilities closed their doors in response to the global pandemic and were not able to pay their distributors. Seafood vendors reported approximately $2.2 billion of debt owed to them, fruit and vegetable distributors hold an additional $5 billion in such debt, and broadline foodservice distributors reported more than $5 billion of debt.
“The PLUS Act would provide tax credits for uncollectible accounts receivable, ensuring that distributors can continue to provide assistance to their restaurant customers,” said IFDA President and CEO Mark S. Allen. “I applaud Representatives LaHood and Panetta for their commitment to the foodservice distribution industry, a vital part of our economy.”
“Family-owned seafood businesses support restaurants by providing fish on credit, but now are stuck with billions in debt owed them by these customers,” said NFI President John Connelly. “This legislation will significantly help revive a complex system that brings seafood from water to table. If we don’t have functioning distributors bringing seafood to market, fish will simply rot on the dock, effecting everyone from boat owners to restaurateurs.”
While many of the provisions of the CARES Act provided critical assistance for foodservice distribution companies, it did not account for the biggest issue they face: large, unpaid debts owed to distributors for food that restaurants could not use due to Covid-related shutdown orders. Tax credits for this $12.2 billion in outstanding debts will provide the liquidity distributors need to continue to extend credit to their restaurant customers and help them get back on their feet as the economy restarts.
Foodservice distributors themselves suffered more than a 50 percent decline in sales due to the global pandemic, making it difficult to provide the financing their customers depend on to run their businesses; jeopardizing restaurants’ ability to purchase food and ingredients. Without restaurants and other places where people eat out, the economy will be missing a significant part of the $1 trillion food-away-from-home economic driver. The PLUS Act provides a solution to this complicated and critical challenge for the food supply chain.
“Produce foodservice distributors absorbed a devastating blow with the spring shutdown of the restaurant and hotel industry. The impact of lost inventory and unpaid bills is not recoverable,” said UFPA President and CEO Tom Stenzel. “I commend Representatives LaHood and Panetta for introducing the PLUS Act, a helpful solution to an insurmountable challenge for produce foodservice distributors and the companies on both ends of their business agreements.”
Foodservice distribution is a crucial part of the food supply chain, delivering fish, fruits, vegetables, meat, and other products to restaurants, schools, hospitals and long-term care facilities. Distributors provide not only food supplies but the essential financing their customers need to purchase these products. Restaurants buy their supplies on payment terms that allow them to generate revenue before the bill comes due, normally 30 to 60 days after delivery. In the aftermath of the sudden and near complete closure of the food-away-from-home channel, sales plummeted, customers were unable to pay their bills and distributors were left with more than $12 billion in debt.