SF restaurants in 'dire situation,' $62M small business program will be critical for recovery

75756A5E-120A-4932-810C-2FD980DB785E

While local health officials are seeing slight improvements in coronavirus numbers, the Bay Area’s stay-at-home orders are continuing well into January, leaving restaurants barely surviving through takeout orders, if open at all.

Laurie Thomas is the Executive Director of the Golden Gate Restaurant Association and member of the San Francisco Economic Recovery Task Force, and she joined KCBS Radio’s “Ask an Expert” on Wednesday to help gauge the state of the restaurant industry across the region as the coronavirus continues to take its toll on the local economy.

“It’s a pretty dire situation right now,” she said.

As of December 7, 2020, Thomas said that about 50% of the restaurants that were still open had to just rely on takeout or delivery, adding that the exact numbers are murky because there’s “no good way to really calculate” who is open permanently, who is hibernating and who will get more financial relief.

Thomas herself owns two small neighborhood restaurants in the City of San Francisco and shared just how costly running a restaurant during a pandemic can be.

“We tried to stay open with one of them (Rose’s Cafe) from December 7,” she said, adding she finally closed it to “hibernate” on January 10. “We lost over $22,000 in that four-week period just trying to do take-out and delivery.”

Thomas emphasized that with the total amount of the fixed costs (rent, electrical, gas, garbage and water), that it does not “make sense to sell a couple of hundred dollars to a thousand dollars per day, pay some of your staff even if it’s only four or five people and run more negative.”

Before the COVID-19 pandemic, Thomas said that there were roughly 60,000 employees in the city and county of San Francisco that were tied to the food service category, which includes restaurant workers, bars with food and cafeteria workers. Just before the December 7 orders, the industry had an estimate of about 35,000 of those 60,000 workers back employed.

“If you stay open for takeout or delivery, at best, you kept 10%,” she said. “So we estimate that over 25,000 people were laid off.”

But restaurant workers are not the only ones directly impacted by stay-at-home orders.

“Many of us in the Bay Area buy from our local farmers, from our local fishermen, our local wineries, and when you close a restaurant, it’s not just the employees of the restaurant,” Thomas said. “I think the numbers from across the United States are 11 million employees work in the independent restaurant area, and another 5 million work as vendors and suppliers. The music just stops.”

Thomas said she knows the renewal of the emergency unemployment insurance will help some of those employees, but knows that not everyone is eligible to receive that money. She and her colleagues are concerned about the families in the industry, the loss of jobs, the loss of health insurance and food insecurity, as well as the “extreme emotional toll” it’s taking on people.

San Francisco recently just announced a $62 million program that starts this week to help small businesses. Thomas said that the help from that program is on a case-by-case situation.

“I’m very supportive of it and was fortunate enough to be consulted along the way with this,” she said. “So we’re very thankful that the mayor and hopeful that the Board of Supervisors of course will make this happen.”

Thomas said the additional money is critical.

“Part of it’s going towards straight up grants—$12.4 million of that—so about 25% of that new money,” she explained. “That will be based on the number of employees, and that is a real recognition that we need to get these businesses having some hope of reopening to reemploy their workforce we just talked about. So that’s extremely positive.”

The second part of it, $50 million, will be for loans and will follow the Small Business Association guidance, which Thomas said opens up which restaurants are able to take it, including the mid-range restaurants that couldn’t qualify for loans and grants from the city before.

“I know people that got the first round of PPP back in the Spring who weren’t able to really take advantage of it because they were completely closed,” she said. “And in order to qualify for the forgiveness, you have to spend over 60% on payroll. So it had a lot of strings attached to it that have caused issues.”

The second round is available for what Thomas said is “a more limited amount of folks” and can be used for more expenses like vendor costs, beyond payroll and rent. She added that the industry is still advocating for more grant relief specific to restaurants that will not be “a loan-type, complicated program.

Thomas broke down the costs of running a restaurant, saying that in the best of times, for every one dollar in revenue, restaurants keep three to five cents and is less in places like San Francisco.

"Over 50 cents of that dollar that you spend in a full-service restaurant goes to our labor,” adding that the city has (“rightly so”) one of the highest minimum wages around at $16.07 an hour. “And then employers are mandated to spend another two to three dollars—depending on their size—per hour on healthcare. So a lot of their costs are labor, health insurance, then of course our leases and rents are very high.”

Thomas said that there is not “really a lot of money” in the restaurant business pre-covid.

“Then you layer on the cost of building outdoor spaces, to spend money on the masks, and the additional sanitizer, which is priced like gold,” she said. “Private businesses can’t run a deficit. We’re not the federal government.”

Getting customers back indoors to dine, Thomas said, is ideal, but safety guidelines, the risk of transmission and the cost of well-ventilated spaces will make it an expensive endeavor when the time comes. She and her colleagues say they are willing to work with state and local health officials to get it to happen.

“Without indoor dining at some level, none of us will survive financially,” she said.

Thomas said that restaurants and small business owners in San Francisco seeking help are welcome to email her at Laurie[at]ggra.org and can visit the City of San Francisco website for information and to reach out to the Office of Economic Workforce Development.