North Bay restaurants in great peril as they try to survive coronavirus pandemic

There is perhaps no industry that has been hurt as badly from the economic fallout of the coronavirus pandemic than the restaurant sector.

Even before shelter in place and social distancing became commonplace last month, being a restaurateur in Sonoma County was not easy. Rising rents and two wildfires since 2017 on top of the struggle to retain workers in an area with a steep cost of living left many area restaurant operators with slim profits.

The pandemic brought with it an existential problem of trying to stay afloat on takeout and drive-thru receipts, after dining rooms were closed in mid-March. When local and state public health officials will allow in-person restaurant dining again remains undetermined.

The big question though is how many purveyors - from food trucks to Wine Country fine-dining establishments - will be knocked out by COVID-19?

The California Restaurant Association estimated as many as 30% of the state’s more than 90,000 restaurants could close unless more government financial help and regulatory relief are provided. Already, there’s been at least one high-profile local casualty: downtown Santa Rosa’s Bistro 29 closed its doors last month after owner Brian Anderson conceded that “we’re just not making it.”

Some restaurants have secured short-term payroll loans through the U.S. Small Business Administration’s Paycheck Protection Program. But the loans are only forgivable if they rehire the scores of workers they’ve furloughed. Problem is there’s not enough revenue from food carryout sales to warrant bringing back many furloughed employees. Many of the restaurant workers can earn as much or more money on the increased unemployment benefits, so they are reluctant to go back to cooking or waiting tables.

“In my opinion, it’s not really for restaurants,” Chris Frederick, managing partner of Third Street Aleworks in Santa Rosa, said of the SBA financial relief. “We decided against it.”

Frederick and his two partners just bought the longtime downtown brewery and restaurant last year to revitalize it and didn’t want to throw in the towel. Once the county’s original stay-home public health emergency order went into effect March 18 which essentially closed most businesses, they furloughed about 60 employees and closed for a week. The owners got together to plot a business strategy for the age of the coronavirus.

“We sat down at the table and asked, ‘What can we do to keep money coming in and to keep us afloat? What can we do to get staff to come back in?’” Frederick said.

They heard from customers before the shutdown about the difficulty getting certain foods with the panic buying at grocers, and the fears of grocery shopping and possibly contracting the virus. They also heard from their food vendors who worried about their own viability with restaurants closing. For the Third Street Aleworks partners, the temporary game plan became putting together and selling online grocery boxes. For a $20 box, there’s vegetables, fruit and other items from Andy’s Produce Market. A $35 box contains milk and other dairy products from Clover Sonoma. Customers also can buy toilet paper and spray sanitizer as part of the pick-up food service.

The results have been gratifying with about 3,700 boxes sold in about a month, Frederick said. The grocery box sales have complemented beer and other prepared food sold to go. It’s generated enough revenue to bring back three employees.

“I have been thoroughly amazed about how well it has been received by people,” Frederick said. “We received phone call after phone call from people who will start crying on the phone and thanking us for doing this.”

While inspiring, such ingenious and nimble moves are only short-term triage. Restaurateurs are keeping their eyes on what loosening of shelter-in-place rules will mean for them. That will be the next big step to determine their viability. On Friday, Sonoma County’s health officer allowed a handful of main outdoor business sectors to resume operations. The new shelter directive, which is indefinite, offers no meaningful encouragement for restaurant operators.

Gov. Gavin Newsom provided a preview last month during a press conference of what the restaurant business would look like in California, likely until there’s a vaccine for COVID-19. It presents new challenges for the industry. A restaurant employee would check the temperature of all customers, who will be required to wear face coverings, before they are seated in the dining room. To adhere to social distancing protocols, restaurateurs will have to remove half the tables from their dining areas. Waiters may wear face coverings and gloves when serving people, who will order from disposable menus.

“It’s going to look different at the other end of this, for sure. I’m sure social distancing will be in place for months,” said Daniel Gonnella, who operates the two Union Hotel Restaurants in Santa Rosa.

The question is whether operating at half capacity under social distancing rules is financially viable? Gonnella said he has a bar area where he might be required to space out patrons 6 feet apart. He then quickly did the math on the customer count. “I’ll have one bartender for 10 people. It’s just not economically feasible because I will have a bartender sitting around,” he said.

Operating with only 50% of dining space likely will be the death knell for many restaurants nationwide because they subsist on a formula of the average customer check spent per table combined with the number of customers who come through their doors each day, one national expert said.

“That is going to kill restaurants. They will not get enough people through,” said Stephani Robson, senior lecturer at the Cornell School of Hotel Administration. “There is only so much they (customers) will pay to get that check high enough, so they have to get the number of customers.”

In order to make it, restaurant operators will need to be creative in using seating space. Robson said high-back booths will make a comeback because they take less space than a regular table and will not present a clinical environment as using plexiglass dividers between tables would. “They will be able to get pretty much the same covers (customers) in as they had before and people will like it,” she said of booths.

Sonoma County restaurants have a geographic advantage with the temperate climate, so they could place more parties in outside seating, Robson said. “You have an advantage over many other restaurants in that you can use outdoor space,” she said of the North Bay.

Georgette restaurant in Sonoma had planned to open this summer, but those plans for the highly anticipated space now are on hold with a target opening toward the end of 2020, chef Casey Thompson said. She is part of a team trying to figure out if there needs to be any redesign of the 156-year-old residence typically known as The General’s Daughter that will house the restaurant.

The grounds are large enough to allow for much more outdoor seating, she said. But there were plans for an oyster bar where “you could sit at a barstool and where you slurp down oysters next to somebody you don’t know,” Thompson said. In addition, the design called for a bar at the front of the restaurant and a chef’s counter where ?10 customers would sit across with a view of the kitchen.

“Maybe it does become this outside restaurant in the beginning and the inside is more like a lounge,” she said. “That is definitely what we are going to have to look at.”

Local restaurants that make it back to serving people on their premises will have survived on to-go food receipts, but the business certainly won’t get any easier.

Gonnella was part of a group that recently wrote to the Santa Rosa City Council asking for a delay increasing the minimum wage to $15 an hour slated to go into effect on July 1. They wrote that the business climate is already shaky, which makes restaurants more vulnerable than other industries.

“Restaurants have encountered historic and significant challenges heretofore never experienced; the fires of 2017 and 2019, the PG&E PSPS power outages of 2019 and likely 2020, the pandemic of 2020 and, now, the minimum wage increase of 2020. Few restaurants could survive any one of those blows; it remains to be seen if any can survive all six,” they wrote to council members.

The economic ripple effects from an unhealthy - or much smaller - area restaurant sector would be significant. For example, the annual restaurant week alone in Sonoma County in February, which included 153 participating restaurants, generated $6.52 million in total local economic impact in 2019, with $289,440 in tax revenue.

As for restaurateurs, smaller hurdles also seem to keep emerging in this uncertain business climate clouded by the pandemic. Dustin Valette of the highly lauded Valette restaurant in Healdsburg noted a local produce supplier, nearby Bernier Farms, can’t find workers to pick lettuce. That means it doesn’t get picked timely and therefore the lettuce can’t be used with meal selections as he would prefer.

“That’s the hardest problem we are having right now. It’s just the ripple effects of this small, little minutiae that we take for granted,” Valette said. “A lot of the farmers we buy from have to have high volume to stay in business. Because a lot of restaurants are closed, we are not buying as much.”

Like others struggling, Valette reopened with carryout service and was able bring back 16 of his 37 employees. But he’s still operating in the red. “We would actually save money if we were to close the restaurant 100%,” Valette said.

Nevertheless, he plans to keep going because he thinks goodwill that he is trying to show - including offering a half-priced, three-course dinner for $39 on Friday - eventually will be repaid once the economy recovers, or things return to as close to normal as possible.

“We’re afraid that people are going to lose their jobs in the future, and we want to do our part. ... We are able to keep people employed,” Valette said. “And we are able to keep people happy and get people fed. That’s our little way of contributing.”

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.