As loans fade, restaurants fear ‘extinction’
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 FranciscoOaklandHayward 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.”