By Charity L. Scott 

One of the largest hair-salon companies in the U.S. said it can't afford to make payroll on Tuesday, more evidence of just how swiftly and severely the coronavirus pandemic has damaged businesses big and small.

Ratner Cos., which owns Hair Cuttery and other salon brands, has more than 700 locations and employs thousands of stylists. The chain closed all of its locations on March 21 but still owes many workers for shifts they worked before it shut down.

In a video to staff, executives said the closely held company simply doesn't have the funds to make payroll on April 7 and is unsure when it might receive any assistance from the U.S. government. While employees in some states have received some pay, Ratner doesn't have enough to issue paychecks to the rest of its workers.

"I know this is devastating news to hear," President Phil Horvath said in the video. "We took this extreme measure to ensure the survival of the company."

The Vienna, Va., company had borrowed funds to make its previous payroll payments on March 24 and had used any money that came in until the stores closed to pay for health-insurance premiums for the month of April, Mr. Horvath said. He said the company intended to pay staff what they are owed once it secured additional funds.

Ratner said it planned to seek assistance from the federal government but said it still was still waiting to learn details about the CARES Act, which created lending programs for small and large businesses.

"We don't know how much we'll get, when we'll get it or what we have to do to get it," Mr. Horvath said. The company didn't immediately respond to requests for comment.

The Federal Reserve has said it plans to launch a program, called the Main Street Lending Facility, that will help aid businesses that are too large to qualify for help from the Small Business Administration and too small to receive aid from lending facilities the Fed is creating for large, highly rated corporations.

The $2.2 trillion economic-relief package Congress passed last month directed the Treasury to work with the Fed on establishing a facility aimed at smaller firms, as well as states and municipalities, and provided $454 billion to the Treasury to backstop the Fed's losses.

Fed and Treasury officials are still finalizing the details of the program, and haven't said how it would be structured or which firms would be eligible.

Cynthia Cole, a stylist at a Hair Cuttery location in Frederick, Md., said she found out on Friday she wouldn't be paid the roughly $700 she is owed in her last paycheck Tuesday. Previously, workers were told that their paid-time-off requests wouldn't be honored, so many stylists chose to keep working until the salons were closed on March 21.

"We were trying to get everyone in before our doors did shut, so we were actually really busy at our salon," said Ms. Cole, who was furloughed and filed for unemployment benefits.

Company leaders issued new rules around how the staff should do their jobs in the midst of the coronavirus outbreak. "They gave us guidelines not to do beard trims, not to do waxing, and to work at every other station, which didn't make sense to me because we were still not six feet away from our clients," Ms. Cole said.

"Toward the end, people started getting scared of working," she added. "But since they weren't closed down, they knew that they would have to go in -- in order to get a paycheck that apparently they're not even receiving."

Ratner, which competes with publicly traded Regis Corp., had been struggling before the coronavirus outbreak swept through the U.S. Ratner said in January it was closing about 10% of its salons, citing increasing competition and rising operating costs.

"I'm truly sorry and heartbroken over how this has affected all of you, all of us," Ratner founder Dennis Ratner said in the video. He started the company with his wife with a single salon in 1974. "Unfortunately, the business was in a challenged-yet-improving state before we had to shut down. It's so devastating to be where we are today."

--Kate Davidson contributed to this article.

Write to Charity L. Scott at Charity.Scott@wsj.com

(END) Dow Jones Newswires

April 06, 2020 17:10 ET (21:10 GMT)

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