Will Small Independent Restaurants Go Extinct in San Diego?

Independent restaurants across the country are facing an uncertain future. The federal stimulus package has major flaws, with major chains scoring huge loans rather than the small businesses it’s purported to help. In California, a proposed plan by the state governor may require that restaurants reopen at half-capacity, a physical and fiscal challenge for smaller-scale neighborhood restaurants.

Beloved South Park spot The Rose had to temporarily close last month. Its co-owner Chelsea Coleman was recently hit with another setback after applying for local assistance through the City of San Diego’s Small Business Relief Fund (SBRF). She shares her experience here.

- Candice Woo

“....we have determined that your unfortunately business does not qualify for this grant because your company’s employees have been furloughed. The primary objective of the SBRF is to assist small businesses impacted by COVID-19 with retaining employees and sustaining continuity of operations.”

Last week, my business was denied access to the emergency relief grants made available through the City of San Diego. I am sharing my experience to highlight the particularly vulnerable position of owner-operated retailers in light of the city’s handling of this fund. Their process has been riddled with inconsistency and mismanagement from the moment the application went live. The few and ever-changing criteria shared by the city will effectively hang owner-operated/smaller businesses like ours out to dry.

Owning a small business is a lot of work and trying to find the words to express why it is important to save a business like mine has required many drafts and a few tears. Trying to write about this rationally is nearly impossible since my business isn’t just a rational pursuit — it’s my passion. There have been moments where owning this business has been soul-crushingly, back-achingly, grease-trap-overflowingly hard. I question if a “rational” person would do it as long as we have if it weren’t for passion. Nonetheless, I’ll try.

My business, The Rose, has been operating in South Park for ten years this October. It’s been mine and my business partner’s for six years this June. I’ve worked there for all 10. When we took it over, it was a 35-seat restaurant grossing $20k a month. We worked most nights by ourselves — I was in the kitchen and she was in the front. We didn’t take a day off for eight months and we lived off of tips with no paycheck for a year. We cried, we fought bitterly and — miracle of miracles — we made it. Six years later, we’ve created a business we’re extremely proud of. Our full-time employees have health insurance, 401k’s, and paid sick leave. We pool tips between front of house and back of house. All the things that I didn’t think were fair about restaurant dynamics coming from the perspective of a line cook, we have tried to address. We have won awards, hosted international wine festivals, and been featured in national publications. We were feeling so capable that two years ago we leveraged ourselves modestly in a move to expand and open a new, exciting, and whimsical concept scheduled for June. Bad timing.

When The Rose closed to the public on March 15th, we did so because, as a bar, we were mandated to, but also because we genuinely thought it was the safest option for our community and employees. We were worried about our employees so we set up a fund to support them. We helped them access UI benefits and continue to cover health insurance. Based on the information we had at the time, we trusted the business had help on the way and that we could afford this. Now, for various and equally frustrating reasons, none of that help has panned out and our bills keep adding up.

Small business is the backbone of the American economy, driving two thirds of net new jobs and forty-four of US economic activity. But over the past four decades, we’ve all been witness to the systematic redistribution of wealth in this country and stimulus efforts that step over small business and widen the gap.

The city of San Diego has an opportunity with the Small Business Relief Fund (SBRF) to address the needs of the most vulnerable in a town where the small business landscape is already more treacherous than most. If you look at the SBA’s map of California’s small business employment numbers, Southern California comes up short. Here, only forty to fifty percent of employees are employed by small businesses as opposed to sixty to seventy percent in the Bay Area or seventy to one hundred percent in Northern California. The regulations, the licensing fees, and the cost of real estate make it increasingly hard to have a successful small business in this region. The difficult landscape for small businesses in Southern California makes the city’s approach to awarding these funds even more frustrating.

Based on eligibility requirements posted to the city’s website, our business qualifies for this assistance, yet we have been denied. And the city is citing different criteria to different businesses as their grounds for denial. To one of my neighboring store owners, they say the requirement to receive the funds is maintaining one full-time equivalent active employee outside of the owner. To others (like us), they say that our business is simply not in line with their priorities. Their eligibility requirements are a moving target and myself and my fellow store owners have an overwhelming sense that we’ve been gaslit.

Between the typos and variations in their responses to each of us and the dysfunction of the original application process, my general impression is that the city has no clear game plan regarding these emergency funds. More troubling, however, is that the few and conflicting criteria they have named in their responses to us are misguided. By focusing on businesses with active employees, they are disqualifying small and owner-operated businesses that are most in need and have been mandated to close. According to the SBA, businesses with nine or less employees make up seventy-five percent of private sector employers. As of 2015 in California, minorities and women have twenty-five to thirty-five percent less employees than non-minorities and men. Nationwide, forty-six percent of African American small business owners are the only employee in their own firm. It doesn’t take much of a mental leap to conclude that the city’s focus on companies with more employees will also likely disproportionately affect women and minorities.

To add insult to injury, the city’s bait and switch hits extra hard for owner-operators and sole proprietors as most do not qualify for unemployment benefits. This means they are not only unable to pay business expenses, but they might not be able to make a car payment or buy groceries as well.

The crystal ball the restaurant industry uses to make decisions about its future is notoriously foggy. Add COVID-19 to the mix and the visibility gets even worse. With significant help from our amazing team at The Rose, my business partner and I were about to open a small, lively and hopefully very crowded, pintxos and gin bistro called Mabel’s. With little revenue coming in for 40 days, no loans approved, our landlords expecting payments, utility bills that don’t go away and no solid understanding of when and how we’ll be able to open, the future of our next venture is nothing but unclear. But that doesn’t mean we’re giving up.

We’re not the only ones fighting away the tears of disrupted ambitions and visions of our future. And many of us are dealing with heartbreaking loss. The small business community here in San Diego is resourceful and resilient and I hope and I am optimistic we will make it to the other side of this, but we can’t do it alone.

Courtesy photo

Which is why San Diego, my hometown that I love so very much, needs to do better. San Diego already ranks embarrassingly low in minority and woman-owned businesses among the largest 25 metro areas. The current approach will exacerbate that and have effects on our small business landscape for years to come. The city, in their response to this crisis, has an opportunity to support the small businesses that need it most, not crush them. Mandatory closures, access to unemployment insurance, and prioritizing the safety of our employees and communities are things all small bars, restaurants and retailers have had to confront. The city should reconsider their approach and do the right thing in supporting the small businesses that are already the most vulnerable.