San Diego Union-Tribune (Sunday)
Local businesses wonder if they can outlast COVID
On-again, off-again reopenings are taking a huge toll on restaurants, bars and gyms
As the county’s public health officer last week methodically reeled off the latest COVID-19 case rates, it quickly became clear that business owners’ greatest fears of yet another shutdown of indoor operations would not be realized.
“We made it through a nail-biter here today,” county Supervisor Jim said of the news that San Diego had escaped having to leave its red-tier reopening status for the state’s most restrictive purple tier. “It’s kind of a small victory.”
But was it? After six months of navigating the dips and surges of the novel coronavirus and nervously monitoring California’s ever-changing rules for what is and isn’t safe to reopen, local restaurants, bars and gyms are questioning how much longer — if at all — they and their employees can outlast the pandemic.
Since March, they’ve weathered a cycle of govdesmond ernment-mandated closings and subsequent reopenings, as the state wrestles with the challenge of containing the COVID-19 contagion without crushing local economies. The latest set of rules, guided by a Byzantine color-coded system tied to positivity rates, covers more than three dozen business sectors, with some able to widely reopen once the virus substantially recedes and still others limited to
operating at no more than half their original capacity.
While businesses like hair and nail salons, retail stores and shopping centers can continue to operate indoors — albeit at reduced capacities — even under the state’s most restrictive guidelines, restaurants, wineries, bars, gyms, movie theaters, and some personal care services like tattoo parlors cannot.
And as San Diego moves into cooler weather, making street-side dining and outdoor workouts less appealing, and federal loan assistance is exhausted, the future feels more perilous for those businesses.
“Let’s face it, as bad as the pandemic has been on people and their health, it has been equally devastating or even more so to a lot of small businesses,” said Greg Cox, who chairs the county Board of Supervisors. “The one concern I have is we really have to guard against a kind of yo-yo effect where this week we’re in purple (tier) and then we have to close things down for three weeks and then open them back up and close them back down. That not only is not going to protect the public health but it will have an adverse impact on any ability to recover from this economic crisis.” The Cohn Restaurant Group, San Diego’s single biggest independent restaurant operator, currently has been able to keep all but two of its 23 local dining venues open for a combination of indoor and outdoor service. That indoor service, though, is limited to just 25 percent of a dining room’s capacity.
Come October, once the company runs out of the more than $560,000 in loan money it received from the federal Paycheck Protection Program to help cover wages and rents, it’s very possible the company will have to close a few more eateries, founder David Cohn said. Since being allowed to partially reopen, the company has hired back about 1,200 of the 1,800 employees it initially had to lay off, said his wife and co-founder, Lesley Cohn.
“As we enter the fall and winter months, our restaurants cannot survive on 25 percent (capacity) even though we in California do have the ability to serve almost year-round outside,” Lesley Cohn said in an interview last week. “Based on the current color-coded system, it will be difficult to reach 50 percent occupancy, and we’re frustrated that there’s no current state plan to get beyond 50 percent. How is that sustainable?
“Unfortunately as of today, everything we’ve built over the past 38 years is in jeopardy.”
Tensions in the business community have been building in recent weeks, to the point where a week ago some owners threatened to defy state mandates, as signs initially pointed to even tighter restrictions, prompting some owners to say they would continue operating indoors if faced with a shutdown.
Ben Clevenger, who owns two East County restaurants, said he was prepared to keep his Eastbound Bar and Grill in Lakeside open for indoor service if San Diego County had moved into the purple tier that would have barred dining inside.
“We believe the metrics have to be changed,” said Clevenger, who is also president of the San Diego chapter of the California Restaurant Association. “This back and forth, it’s been too much and we’re tired of it. We understand the severity of the virus. We’re all about the sanitation but we don’t think the numbers are increasing because restaurants are open to 25 percent capacity. It’s stressful telling your employees, ‘We’ve got hours for you,’ and then saying, ‘Sorry we’re getting shut down again and we’re going to take your hours away.’”
Coming closures
While there already have been some permanent business closures related to the pandemic, experts predict in the months ahead a tsunami of shutterings amid a virus that shows no signs of a rapid retreat.
Yelp, the crowd-sourced ratings website for restaurants and other small businesses nationwide, reports that between March 1 and Aug. 31, more than 1,900 San Diego County businesses formerly listed on the site have permanently closed. Since it began tracking temporary and permanent business closures in March, Yelp found that 61 percent of all the restaurants that closed temporarily across the country have transitioned to permanent closures. For bars and nightclubs, it’s 54 percent, and for fitness centers, 43 percent.
While there are no recent stats for restaurant closures alone in San Diego County, as of July 10, there were 226 eateries in San Diego
County listed as permanently closed since March 1. A recent report from the National Restaurant Association offered an even more sobering statistic: Some 100,000 restaurants nationwide are already out of business due to the coronavirus. In California, the restaurant industry’s trade group predicts that eventually, 30 percent of restaurants will close permanently.
As San Diego’s economy continues to reel from the abrupt shutdown in March, the losses have been staggering, even as the county has seen some recent signs of improvement. As of early August, there were an estimated 250,000 San Diegans without jobs — five times more than at the beginning of the year, according to the San Diego Association of Governments.
The county’s gross domestic product is now forecast to decline between $10 and $15 billion, said SANDAG economist Ray Major. That’s a 4.5 percent drop, which he says effectively erases all of the gains of the last two years. The leisure and hospitality sector, which includes the $10 billion a year restaurant industry, has been especially hard hit.
“This is going to fundamentally change the restaurant scene in San Diego,” Major said. “If you ran a deli in a downtown highrise, for example, and depended on those office workers to patronize you, that’s completely dried out. The person who ran the deli in our building downtown has told me they’re not going to make it. They ran through their life savings.”
One of the more surprising casualties of COVID-19 is the North Park gastropub Tiger! Tiger! The popular beer bar and restaurant permanently closed Sept. 18. Owners of the 9-year-old restaurant bar say they couldn’t see a path forward in the limited-seating, uncertain times the industry is facing.
The ownership, however, will continue to operate its Blind Lady Alehouse, as well as Panama 66 at the San Diego Museum of Art.
Co-founder Clea Hantman, who launched Tiger! Tiger! with her husband Jeff Motch and Jenniffer and Lee Chase, declined to comment for this article but they posted a message on their Facebook page.
“COVID-19 did us in,” they said. “Running a restaurant historically has razor-thin margins. Attempting to run a restaurant in the middle of a pandemic with mounds of debt piling up is nonsensical. We tried many different paths for this business over the last six months and each one took us down a dead end. With the end of our lease approaching fast, we all really believe we had no other choice.”
Gyms: Surviving on 10 percent capacity
Fitness centers, hit with one of the most stringent caps on occupancy under the state’s new tiered system, face especially challenging economics, given that they can only fill their buildings up to 10 percent of their total capacity. While many, if they have the space, have expanded to outdoors, it isn’t a sustainable solution, say some.
You wouldn’t know it by talking to him, but Junior Leoso is in a tough spot. The 40-year-old owner of specialty fitness gym Pacific Beach Training took on a new, much pricier lease in March for 2,500 square feet of indoor workout space.
Shortly thereafter he was forced to close his doors and become extra resourceful.
And with no adjacent usable outdoor space available to him, his creativity has continued, meaning in-person classes were replaced by online classes and later supplemented with outdoor classes at not-so-nearby parks.
Currently, the gym can serve no more than 12 people per class inside the facility. To pay the bills, Leoso has needed to lean heavily on his side business, Dedicated Dads, a hybrid fitness and mental health program for fathers that has thrived online during the pandemic.
“If we don’t reopen the doors, or we can’t go full bore and advertise by the new year, which is only three months away, we’re going to be in big trouble and will have to really reassess what the plan is moving forward,” Leoso said.
“We can’t sustain it on 10 percent capacity.”
Five blocks east, The Movement Warehouse has fared far better for one simple reason: ample outdoor space.
“We’ve never done better,” said gym owner Michael Hamanaka, who added that memberships shot up when he reopened with outdoor classes. With access to 3,500 square feet of turf and limited competition, Hamanaka was able to sign on a record 45 new members in July.
He even raised prices knowing that his high-intensity weight-lifting gym was pretty much the only option in town. The Movement Warehouse is in a relatively cushy spot, with Hamanaka’s business far more immune to frequently changing government restrictions that have simultaneously crippled his friend Leoso’s similar-but-different fitness venture.
“I think I sound OK because I’ve definitely had my nights of kicking and screaming, and trying to figure this stuff out. Now it’s about survival,” Leoso said. “It’s about doing everything we can and only worrying about the things we can control.”