LATEST ORDER HAS OWNERS PUTTING EATERIES ON ICE
Ongoing uncertainty, lack of government support cause some restaurants to go on hiatus to control losses
For two months last spring, Jamie Minotti and Mark McLarry kept the doors closed on their new San Marcos restaurant-brewery complex My Yard Live because of the COVID-19 pandemic. Fortunately, the partners and their staff survived the shutdown, thanks to a CARES Act federal loan and expanded unemployment benefits.
But this time around they may not be so lucky. Last week, a new state health order restricted San Diego County restaurants to takeout-only service in a bid to keep people home during the alarming surge in COVID-19 hospitalizations. But carry-out service was only a fraction of sales at My Yard Live, an experiential, family-friendly venue with a fenced children’s playground and an outdoor concert stage. So Minotti and McLarry decided to shut down for now in what they are calling an indefinite hibernation.
Even if the health order lifts in late December to allow the resumption of outdoor dining, Minotti said there are too many other reasons to keep the doors closed, at least for a while. Winter is coming, the ever-changing health regulations over the past nine months have depleted reserves and eroded diner confidence. And this time around, there is no federal stimulus package to carry the partners through.
“When that three weeks is up, we’ll have a hard decision on whether the climate of customer confidence has changed enough for us to reopen,” Minotti said. “It’s not about whether we can (open for) business or not any
more. It’s 100 percent about confidence.”
Hibernate or die?
My Yard Live is one of dozens of sit-down restaurants countywide that have gone into hibernation mode this past week. Some owners say they’re planning to keep their doors closed until the end of January, mid-February or even into early spring. Owners say they can’t operate successfully under the current restrictions and they’re exhausted by constantly having to revamp their menus, service plans and staffing as health orders change from month to month. The cooler winter months are coming, making outdoor dining less hospitable. CARES Act funding ran dry months ago and a follow-up Heroes Act stimulus bill remains stalled in Washington, D.C.
On Wednesday, the Puffer Malarkey Collective announced it has ceased operations at its Herb & Wood, Herb & Sea and Animae restaurants and laid off all workers for a period that could last up to a couple of months, depending on when partial indoor dining can return. Trust Restaurant Group’s owner said it may be two months before he can reopen his higher-end restaurants. Good Time Design, which runs seven local restaurants and bars, will indefinitely hibernate The Presley, a mostly outdoor restaurant it opened five months ago at Liberty Station. And last week chef/ owner Travis Swikard canceled the long-awaited opening of his Callie restaurant in East Village, saying he’s putting Callie “to sleep for a little bit” because it’s too risky to open a new venue in such an unstable environment.
In a statement Wednesday, Puffer Malarkey partners Chris Puffer and Brian Malarkey said they’re both disheartened and enraged that they had to send their workers away without any financial support and they urged lawmakers to act swiftly before it’s too late for thousands of restaurants and millions of hospitality workers.
“Well, this is it,” they wrote. “We wish we could continue to operate, if only to provide a steady paycheck to our employees ... We’re battening down the hatches and closing the doors .... We will be back, don’t worry. This will pass. But we think it’s in our best interest to close until conditions improve.”
A rising failure rate
At the beginning of the pandemic, California Restaurant Association officials projected that as many as 30 percent of California restaurants would close without significant government aid. The CARES Act approved in late March kept the wolves at bay for a while, but most of the program’s forgivable Paycheck Protection loan money had been spent by restaurateurs by October.
Sharokina Shams, vice president of public affairs for the state’s restaurant association, said now it seems that the 30 percent estimate may be too low. A member survey released Monday by the National Restaurant Association — which reported the permanent closure of more than 110,000 restaurants since March — found that 43 percent of California restaurateurs said it’s unlikely they’ll still be in business six months from now without a federal relief program.
“I should add,” Shams said, “if we were to put those findings in front of our members, I think they would chuckle at the ‘six month’ timeline set out in the question. Some have said they’re unsure they’ll make it to the end of the year.”
San Diego restaurants are not unique in hibernating this winter. Over the past two weeks, restaurateurs in most of the nation’s major cities outside the Sun Belt have begun announcing planned closures until the snows thaw in the spring. Last week’s outdoor dining ban in parts of California has also led several restaurant owners in San Francisco to announce hibernation plans.
Shams said she has heard about restaurants going into hibernation, but only rarely.
“The challenge is, yes, you can close your doors and walk away for a while, but your restaurant’s rent and other bills will still need to be paid,” Shams said. “So, not surprisingly, most restaurant operators scramble to hang on to what they can, even if it’s very limited avenues for serving their guests.”
A double-edged sword
In response to the statewide closure order, a handful of San Diego restaurant owners announced on social media that they plan to defy the new order and keep their doors open, including The Village in North Park and two businesses in Escondido, Hunsaker at Vincent’s restaurant and Koffie coffeehouse.
As a struggling owner himself, Minotti says he feels deep empathy for their situation. Based on sales for the nine months My Yard Live was open before the pandemic hit, it was on track for first-year revenues of $5 million. Since then, it has been in free fall.
But Minotti is more acutely aware of the deadly threat of COVID-19 than most restaurateurs.
On May 20, his beloved 106-year-old grandmother “Nin” died from COVID in a Connecticut hospital. He wasn’t allowed to visit her before she died, surrounded only by hospital workers in hazmat suits. What stung him most were well-meaning but thoughtless comments from colleagues who said Nin’s age had put her at high risk for the disease, and at least she’d had a good life.
“She lived through both world wars and the Great Depression. She had a boyfriend, went to casinos and had a phenomenal quality of life. But COVID took her,” he said.
Minotti said the decision to delay reopening My Yard Live is an acknowledgment of the danger COVID represents to his staff and customers. He said every time Gov. Gavin Newsom would announce bad news in the fight against the disease this year, foot traffic at My Yard Live would slump. And with all the pandemic news lately especially grim, reopening too soon would be foolhardy.
Though he’s sympathetic to restaurant owners trying to stay af loat by bending the rules for onsite dining, Minotti said these operators are encouraging diner misbehavior and make it hard for the business owners trying to toe the line.
A rough ride
One of the biggest criticisms of the new takeoutonly order is that it came about so quickly that restaurant owners had little time to adapt. It also failed to take into account how takeoutonly service is usually only profitable for smaller, quickservice outlets like pizzerias and Chinese restaurants. It also deeply impacts restaurants that relied heavily on alcohol sales.
Just one of Good Time Design’s seven local restaurants and bars — Lucky’s Lunch Counter in the Gaslamp Quarter — is now open. Since January, the company has gone from 550 employees in San Diego to just 15, according to Chief Operating Officer Heather Kline. If not for its four stilloperating venues in Nashville, Tenn., the company might have crashed long ago.
“It’s been a rough ride,” she said. “We run on very slim margins even during our busiest times of the year. Right now, it’s killing us.”
Kline said her company could run through the rest of its funds in just three months from paying the fixed costs on closed locations like Bub’s at the Ballpark, Moonshine Flats and The Blind Burro. These costs include rent, payroll and health insurance, point of sale, pest control and janitorial services, equipment rental and maintenance, building insurance and property taxes.
Kline said there is one positive side to hibernating the company’s restaurants. It’s more predictable to plan a budget without the uncertainties of openings, closings, hiring and layoffs.
“In order to control our losses it’s best to go into hibernation mode. At least then we know how much we’re losing every month,” she said. “If we can control our expenses, we can last a few more months.”
Innovating among chaos
CH Projects has more than a dozen restaurants and bars in San Diego, most of them now in hibernation. Since the pandemic began, chef/partner Jason McLeod said the company has been operating at 30 percent to 40 percent of revenue most of the year, “and it’s hard to make money even at 100 percent.” Because the company has been shaving down its staffing and inventory all year, McLeod said the latest shutdown order was less costly than the one in March, when they lost $300,000 in food inventory in their suddenly closed kitchens. But he said this shutdown has been more painful emotionally This one definitely hurts,” he said. “To look those employees in the eyes again and say goodbye? A lot of companies when they close can give dates when they’ll reopen. It’s so hard because we don’t have those answers.”
To survive the next few weeks or months, CH has diversified its services. Although its Little Italy restaurants Born & Raised, Morning Glory and Craft & Commerce aim to reopen when outdoor dining is permitted again, McLeod said the company is doing strong takeout business at its quick-service Under Belly ramen bars and newly opened Fortunate Son Chinese takeout eatery, which is now serving takehome drinks from Polite Provisions, the shuttered CHowned cocktail bar next door. CH’s 2-year-old Raised By Wolves retail store has also been a boon for sales. And this week the company will convert its Ironside Fish & Oyster restaurant into a combination market and takehome meal kit location with items from both the Ironside and Born & Raised menus.
When will it end?
Trust Restaurant Group has put two of its restaurants, Trust and Cardellino, into hibernation and is doing takeout from the two others, Fort Oak and Rare Society steakhouse. Over the past year, chef/owner Brad Wise said he’s trimmed the company’s payroll from 200 to 20. One of the bright spots this year was the opening of its Wise Ox butcher shop in North Park, which as a retail outlet has been able to stay open, and is doing well.
Wise said he’s often asked by customers when Trust and Fort Oak will reopen. He’s preparing for an eightweek closure. He believes unauthorized Christmas gatherings will spark another surge in COVID cases, which could delay the lifting of health orders well into January.
“We’re preparing hopefully for Valentine’s Day where we could do outside dining,” Wise said. “There’s no guarantee, but if we put our minds to something we at will end achieve of the it. tunnel. I do see We a light just .“have to get there.”