As loans fade, restau­rants fear ‘ex­tinc­tion’

San Francisco Chronicle - - FRONT PAGE - By Janelle Bitker and Justin Phillips

Bay Area restau­rants strug­gling to sur­vive mul­ti­ple crises — in­clud­ing low cus­tomer turnout due to smoke­filled skies and lim­ited in­door din­ing op­tions be­cause of the pan­demic — have yet an­other hur­dle to over­come: dwin­dling fed­eral aid at a time when it’s needed most.

At the cen­ter of the loom­ing dis­as­ter is Paycheck Protection Pro­gram fund­ing, which restau­rants will have com­pletely ex­hausted by Novem­ber, with no ad­di­tional fed­eral aid on the hori­zon. The fed­eral loans are in­tended to help busi­nesses keep work­ers on pay­roll, and thou­sands of be­lea­guered Bay Area restau­rants used them to sur­vive the pan­demic’s ini­tial shut­down or­ders, but have now al­most used them up. Ac­cord­ing to one lo­cal restau­ra­teur, the sit­u­a­tion could present “an ex­tinc­tion event for restau­rants” if more restau­rant­spe­cific aid

doesn’t ar­rive soon.

Pim Techamuan­vivit is try­ing to make the math work when it comes to us­ing her PPP loan to keep her San Fran­cisco restau­rant Nari open, but it’s a strug­gle, and she feels time is run­ning out.

Techamuan­vivit spent roughly 70% of her PPP fund­ing within a few weeks of re­ceiv­ing it this sum­mer. It helped her make ends meet for a brief time, and en­sured that dozens of her em­ploy­ees re­tained health in­sur­ance. But now more bills are on the hori­zon, no new rev­enue is com­ing in, and there is no clear time­line for when op­er­a­tions at Nari can re­turn to nor­mal.

The cir­cum­stances are dire but fa­mil­iar in the Bay Area. At the time, the loans were a glim­mer of hope. But for many, that money is gone, and now the in­dus­try ap­pears as though it’s re­turn­ing to the pre­car­i­ous po­si­tion it was in dur­ing March and April, when the lo­cal food scene was quickly col­laps­ing.

Restau­ra­teurs and in­dus­try ad­vo­cates say that busi­nesses will likely close this fall un­til there’s more gov­ern­ment fund­ing or the pan­demic ends. Some clo­sures will be tem­po­rary, but other restau­rants will likely never re­open.

“Noth­ing has got­ten bet­ter,” said restau­ra­teur Lau­rie Thomas of the Golden Gate Restau­rant As­so­ci­a­tion, an or­ga­ni­za­tion ad­vo­cat­ing for restau­rants in San Fran­cisco. “Hon­estly, it’s about to get worse.”

Most lo­cal restau­rants that ap­plied for PPP right away re­ceived their loans at the end of April, mean­ing they’ll run out by Novem­ber.

The vast ma­jor­ity of those were small loans — $150,000 or less. Agree­ments stip­u­lated that the money pri­mar­ily be used for pay­roll and var­i­ous other ex­penses within 24 weeks if restau­rants wanted to have 100% of the loan for­given. The $349 bil­lion pro­gram be­gan in March and ran out in two weeks. An ad­di­tional $310 bil­lion in fund­ing was ap­proved in April, and when it stopped ac­cept­ing new ap­pli­ca­tions on Aug. 8, about $130 mil­lion re­mained, money which has yet to be re­pur­posed.

For Nari, Techamuan­vivit re­ceived $220,000 in PPP fund­ing. She has been pay­ing about $14,000 per month in health in­sur­ance costs for her em­ploy­ees, most of whom she had al­ready laid off or fur­loughed due to the pan­demic. Add in some op­er­a­tional costs and Techamuan­vivit said she’s cur­rently left with less than $30,000 — just enough to keep pay­ing for staff health in­sur­ance a lit­tle longer.

Mis­sion Dis­trict restau­rant Prubechu will soon run out of its fed­eral loan dol­lars, too, and co­owner Shawn Ca­ma­cho is brain­storm­ing what to do. Novem­ber marks the start of cold, rainy weather, which might make out­door din­ing — an­other sav­ing grace for Prubechu — im­pos­si­ble. Ca­ma­cho said he’s try­ing to find a so­lu­tion for wet nights on the pa­tio; oth­er­wise the com­bi­na­tion of no out­door din­ing and no fed­eral aid could be dire.

“Once that goes, the bucket starts leak­ing again,” Ca­ma­cho said of the PPP funds. “If we go through an­other lock­down or busi­ness doesn’t pick up, we’re ei­ther tread­ing water or sink­ing.”

Techamuan­vivit’s flag­ship restau­rant, Kin Khao in San Fran­cisco, is tem­po­rar­ily closed. It’s lo­cated near Union Square, where dur­ing the pan­demic, she said, there has been lit­tle foot traf­fic. Techamuan­vivit is plan­ning to open a fast­ca­sual ver­sion of Kin Khao in the city’s more lively Dog­patch neigh­bor­hood, in hopes of gen­er­at­ing enough rev­enue to prop up her mini­em­pire long enough to sur­vive the pan­demic.

Quince owner and restau­ra­teur Lindsay Tusk is ad­vo­cat­ing for the fed­eral Restau­rants Act pend­ing in Congress, which would pro­vide $120 bil­lion in re­lief for in­de­pen­dent restau­rants, but it’s un­clear whether the bill will even get a vote.

“Come the fall, if we don’t get this Restau­rants Act fast, I don’t see how the ma­jor­ity of restau­rants will be able to stay open much longer,” said Michael Tusk, who, with wife Lindsay, owns San Fran­cisco’s Quince, Co­togna and Ver­jus. “It’s go­ing to be very bru­tal.”

The out­look for the restau­rant in­dus­try’s fu­ture has been bleak for months. In July, the restau­rant re­view site Yelp re­leased data show­ing that more than 2,000 busi­nesses in the San Fran­cisco­oak­land-Hay­ward area had al­ready per­ma­nently closed dur­ing the pan­demic. More than 300 of those busi­nesses were cat­e­go­rized as restau­rants, and the num­bers have since grown.

Mean­while, the PPP pro­gram has been an im­per­fect so­lu­tion for restau­rants from the be­gin­ning. Some ran out of the funds long ago and have had to make cuts.

San Fran­cisco Mex­i­can restau­rant The Lit­tle Chi­huahua was one of the few lo­cals to re­ceive the loan on the first round in early April, when busi­nesses had to use all the funds within eight weeks. The loan al­lowed the restau­rant group, which op­er­ated four lo­ca­tions at the time, to re­open and get staff work­ing again, but ul­ti­mately it wasn’t enough to sus­tain all the restau­rants. The Mis­sion Dis­trict lo­ca­tion closed per­ma­nently in Au­gust.

For oth­ers, the com­mu­ni­ca­tion around the use of the loan has been so con­fus­ing that they haven’t spent it. Funky Ele­phant, a tiny Thai restau­rant in Berke­ley run by the hus­ban­dand­wife team of chef Su­p­a­sit Put­tikaew and Nan­chaphon Lap­tanachai, got a loan in May but waited un­til July to start us­ing it, in part be­cause ev­ery­body they spoke with at the bank gave them dif­fer­ent in­for­ma­tion.

Even though restau­rants can use 40% of PPP on ex­penses un­re­lated to pay­roll, such as rent and util­i­ties, Lap­tanachai is wor­ried about the rules chang­ing again or act­ing on bad in­for­ma­tion, per­haps forc­ing Funky Ele­phant to pay back some of the loan. That’s not worth the risk, so she’s us­ing the loan only for pay­roll — which isn’t much at this point.

Many of her staffers don’t want to come into work be­cause of their health, she said. In­stead of re­hir­ing ev­ery­one, she and her hus­band have been work­ing mostly by them­selves. She’ll some­times bring on a dish­washer or line cook to help on busy nights.

Other restau­rants never got a loan at all due to con­fu­sion. San Fran­cisco’s Chicken as Cluck restau­rant, which ap­plied for PPP fund­ing early on, was told it had al­ready sub­mit­ted an ap­pli­ca­tion by the U.S. Small Busi­ness Ad­min­is­tra­tion. Ac­cord­ing to owner Bua Van­it­sthian, a busi­ness with a sim­i­lar name also ap­plied to re­ceive a loan and the con­fu­sion ul­ti­mately kept them from be­ing able to se­cure fund­ing.

Berke­ley Ja­panese restau­rant Fish & Bird Sousaku Iza­kaya was told in June that it had been ap­proved for the money, but the lender asked for more doc­u­ments, and then more doc­u­ments, and went weeks with­out re­spond­ing to emails, ac­cord­ing to owner Yoshika Hed­berg. Then, on Au­gust 13, Hed­berg got an email stat­ing the dead­line had ex­pired, and the lender wouldn’t be able to get Fish & Bird a PPP loan un­less Congress passed an­other round of fund­ing.

Hed­berg had been count­ing on that loan, as the restau­rant has been get­ting busier but cur­rently can only af­ford to have two peo­ple on pay­roll. “We’re in limbo, wait­ing for the gov­ern­ment to get their act to­gether,” she said. “We’d re­ally like to staff up, but we can’t right now.”

As Techamuan­vivit con­tin­ues co­or­di­nat­ing the open­ing of her fast­ca­sual ver­sion of Kin Khao, she said she’s keep­ing a close eye on her fi­nan­cial stand­ing, even if there is lit­tle she can do about it. The forth­com­ing restau­rant ven­ture could be a boon for busi­ness, but get­ting it up and run­ning is cost­ing money. And un­der­neath it all is her con­cern for her staff, whom she hopes to re­hire in full after the pan­demic, be­ing left with­out work or health care if she runs out of money.

“None of us ex­pected this to last so long, and now there’s just not enough money to see how we can stay open,” Techamuan­vivit said. “No­body re­ally knows what to do next.”

Scott Straz­zante / The Chronicle

Pim Techamuan­vivit plans to open a fast­ca­sual ver­sion of her flag­ship restau­rant, Kin Khao, in the Dog­patch neigh­bor­hood.

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