Natale Servino, general manager of Servino Ristorante
Jeniece Pettitt | CNBC
Servino Ristorante, an upscale Italian restaurant in Tiburon, California, is a short drive or ferry ride from San Francisco, where scores of software and internet companies have emerged over the past decade.
Normally the 42-year-old restaurant, with picturesque views of the Bay, benefits from the thriving local tech economy. But with companies including Google, Facebook and Salesforce instructing their employees to work from home amid concerns about the spreading coronavirus, Servino has to figure out how to survive a looming crisis.
Corporate events in the banquet hall have all been canceled, said Natale Servino, general manager of the family-owned business. And there’s been a big dip in diners coming in from San Francisco.
“We’re certainly thinking about some worst-case scenarios or prolonged closures,” said Servino, in an interview at his restaurant on Thursday afternoon. “Our real concern is the hourly employees that come in and bring home compensation based on the amount of of hours they put in. In this industry, a lot of that is based on tips so they need customers coming in.”
Servino is one of the thousands of local small businesses grappling with the uncertainty of the COVID-19 coronavirus, which this week reached pandemic levels, according to the World Health Organization. Major sporting events are being canceled, giant conferences and festivals postponed and universities are going remote. President Trump halted travel from Europe and on Friday declared the coronavirus a national emergency.
Stocks suffered their steepest drop since 1987 on Thursday, before rallying to close the week, as investors feared the prevalence of “social distancing” will result in an economic shutdown.
For people with full-time salaried jobs that come with health coverage and paid leave, the current state of affairs is very inconvenient, and many retirement accounts are looking scary. But for those working at businesses like Servino, who are facing either dramatically reduced income or the prospect of having to find childcare should their kids’ school close, the potential impact of the coronavirus is dire. It may be hard to pay rent or put food on the table.
“This is not just about businesses,” said Kevin Chan, owner of the Golden Gate Fortune Cookie Factory in San Francisco’s Chinatown. “This is about the whole community…and people’s livelihoods.”
Golden Gate Fortune Cookie Factory
Jacob Jimenez | CNBC
Chan’s factory, with framed photos of celebrities like Golden State Warriors star Klay Thompson dotting the walls, was founded in 1962, and is used to seeing 500 or more people funnel through on a given day with lines wrapping around the corner. It’s also a popular destination for school field trips.
Since the middle of January, foot traffic has dropped between 75% and 80%, Chan said. Last week, CNBC spent two hours with Chan at the store, starting at its 9 a.m. opening. During that time, only a dozen visitors entered.
“The start of February was terrible,” Chan said. “Now, it is really dead.”
Lending a hand
As of Friday, the number of confirmed coronavirus cases in the U.S. had topped 1,700, and deaths exceeded 40. California had the third-highest number of cases by state, behind Washington and New York.
In Seattle, home to a sprawling tech industry and one of the nation’s worst outbreaks, Brent Beardall, the CEO of WaFd Bank (formerly Washington Federal), launched a $100 million lifeline program to small and medium-sized businesses that have suffered at least a 10% decline in revenue. The bank is offering a no-interest credit line for 90 days.
“We have restaurants where capacity and demand are down by 70, 80%,” Beardall told CNBC’s “Power Lunch” on Friday. “I believe if we can get through this, as quickly as demand fell off it will pick up again.”
In New York, Mayor Bill De Blasio announced a state of emergency and introduced a program with interest-free loans of up to $75,000 if businesses can show a 25% drop in receipts.
On Manhattan’s Upper West Side, Philip Binioris, owner of the Hungarian Pastry Shop, is more concerned about the longer-term challenges. He’s cut the number of seats in his cafe from 80 to about 40, following a mandate from De Blasio and Governor Andrew Cuomo that businesses with an occupancy of 500 or less reduce capacity by half.
Binioris, who’s been managing the restaurant for about eight years, said he normally serves a lot of students from nearby Columbia University, but much of that business could disappear now that the college has gone to remote classes for the time being. Another source of traffic is tourists, mostly from Europe, who come to the neighborhood to visit the Cathedral of St. John the Divine. Not anymore.
“It started gradually maybe a couple of weeks ago, but this week, I mean maybe like 5% of what we normally see,” said Binioris. “They’re gone.”
Binioris said that he will have to cut back on staff if the crisis is prolonged, but he’s not there yet. He’s worried at the moment about the health impact. He estimates 50% to 60% of his employees are eligible for paid sick leave, and he wants workers with symptoms to stay home. However, the potential financial stress on the business is dramatic.
“The complicated thing is, if they get sick, they’re going to have to show physician support for that illness. But if the hospital system is backed up to the point that they can’t get tested and they can’t get treatment, then how can I file my paid sick leave complaint?” he said. “I will honor their paid sick leave but it’s not going to be easy. It’s not going to be clear. Things are going to be very confusing.”
Companies selling sanitizer and marijuana
Not all local businesses are suffering.
A1 Market, a neighborhood convenience store in Alameda, California, across the Bay Bridge from San Francisco, is generating about 30% more revenue than normal, said owner Sam Min. He attributes much of the growth to historic demand for sanitizer products, which he can’t keep in stock.
Min said he’s been sold out of hand sanitizer for two weeks. Then customers turned to Clorox wipes, followed by sanitizing spray and then traditional Clorox disinfectant. (Clorox shares are up almost 2% since Feb. 20, while the S&P 500 has plunged 20%.) Min is expecting 15 cases of hand sanitizer next week, “but it’s not guaranteed,” he said.
Everyone that comes in has a coronavirus story to tell, Min said. And many patrons are telling him that they don’t want to go to large stores like Costco because of all of the traffic, preferring to get in and out the door quickly. He also said they’re coming for the toilet paper, which he’s been able to keep on shelves. A1 has almost an entire aisle of it.
The big stores “are completely out,” Min said. “We still have it and it’s selling really good.”
A1 Market in Alameda, California
Ari Levy | CNBC
Thirty miles away in Pacifica, a coastal town south of San Francisco, a very different kind of small shop is also managing OK.
“When things get stressful business tends to boost a little bit here,” said Matt Mikulecky, a buyer at Lytt Dispensary Pacifica, which was packed with cannabis shoppers on Friday afternoon. A “handful of customers” stocked up with 10 to 20 times the amount they normally buy, Mikulecky said, in case it gets to the point where they can’t leave the house.
“It’s for the bomb shelter basically,” he said. Lytt sells to medicinal and recreational customers.
With 80s music playing in the background and a mix of older retirees and younger hipsters perusing the store, Mikulecky focused on Lytt’s cleanliness. He said employees are trying to wipe everything down on an hourly basis and limit how much people are touching.
But while A1 Market and Lytt are the types of businesses that can manage through a health crisis, the broader economic picture is gloomy.
The cities of San Francisco, and Oakland both banned gatherings of more than 1,000 people through March 31, effecting largely sporting events and concerts. For Another Planet Entertainment, the news was devastating.
Another Planet is the concert promoter for venues including the Greek Theatre in Berkeley, the Fox Theater in Oakland and the Bill Graham Civic Auditorium and The Independent, which are both in San Francisco. The company had to postpone concerts for Third Eye Blind, Wilco, San Holo and many other artists. It’s trying to reschedule as many events as possible, but there’s no telling when activity will be able to resume.
“These are unprecedented times for the live music industry,” said Sherry Wasserman, co-founder and president of Another Planet, which is based in Berkeley, in an email. “Where we all for decades have gone under the premise of ‘the show must go on’ – we are now finding the need to shut our doors, shut the lights and tell folks to go home during the month of March.”
In a followup email Friday night, Wasserman said she’d just learned from the city of San Francisco that events with more than 100 people would be banned through the end of April.
Wasserman said there are thousands of part-time workers, ranging from ushers and ticket takers to security personnel and janitors, who count on these concerts for their livelihood. She’s not entirely sure what’s going to happen to them.
“We are working furiously through the process of what our options are to covering part-time employees,” she wrote. These are “people who depend on these shows to make their rent.”
— CNBC’s Jeniece Pettitt, J.R. Reed, Lauren Feiner and Lora Kolodny contributed to this report
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