Small businesses feel the brunt of shutdown in Silicon Valley and beyond
Tony and Alba's co-owners Al and Diana Salciccia-Vallorz helped shred cheese for their restaurant's pizzas and other menu items. A new proposal would help restaurants and other small businesses reopen when shelter-in-place restrictions ease by offering services outside. Photo by Katie Lauer.

    Hospitality, cafe and restaurant businesses and workers are being hit the hardest by the shelter-in-place orders, according to a new survey and report of more than 86,000 people across the country.

    Legislators and chambers of commerce have sounded the alarm about the impact of the pandemic-related shutdowns across the country on small businesses, but the report, released by Facebook and the Small Business Roundtable on Monday, sheds new light on how hard some small companies have been hit.

    “Now more than ever, it is crucial to raise awareness about the struggles that small businesses are facing in response to the economic turndown from the COVID-19 pandemic,” Rhett Buttle and John Stanford, Small Business Roundtable co-executive directors, said in a statement Monday. “Despite these setbacks, we are proud of the small business community’s resilience.”

    Among hotel and eatery workers, more than 90 percent said they don’t have any paid time off, including sick leave, in a survey of 86,000 United States small- and medium-sized business owners, managers and employees. Only 18 percent said they have access to health insurance.

    The report shows that some industries have been hit harder than others, and a small number have seen sales improve. But the data, which comes from an April survey, show the majority of small businesses are facing dire straits in different ways due to the pandemic closures.

    Graphic courtesy of Facebook and Small Business Roundtable.

    That report, though it tallies national data, aligns with what Silicon Valley businesses are experiencing, said Matt Mahood, president and CEO of The SVO, Silicon Valley’s largest chamber of commerce.

    “Restaurants, bars and hotels are absolutely hurting,” he said. “Their business went from thriving to near-nothing, unless they have a phenomenal take-out business, but everyone had to recreate their operating scenarios.”

    The San Jose Downtown Association estimates roughly 6% of downtown’s 1,628 businesses are fully open, officials told San José Spotlight last week.

    Nearly one-third of small- and medium-sized businesses surveyed across the nation have shut down in the past three months, but when isolating the data for only hotels, cafes and restaurants, that number shoots to 43 percent, according to the report. More than 60 percent said they shut down because of government orders.

    Meanwhile, about one-third of shuttered companies said they don’t expect to re-open and just 7 percent of owners and managers said they had business interruption insurance.

    The data showed “personal businesses,” or those that provide their own goods or services for their personal income — like people who make their living crafting goods and selling them on online marketplaces — were generally doing worse than small businesses across the board.

    “This is just the beginning of the pandemic’s impact on the small business community – it will be long, deep and abiding,” Sheryl Sandberg, COO of Facebook, said in a statement Monday. “We want to work with the Small Business Roundtable and all of you to understand, and help other people understand, what small businesses are going through. We are committed to supporting them through the entirety of this crisis, which makes this report and this data even more important over the long run.”

    The survey of small businesses was planned before the coronavirus pandemic hit the U.S., according to the report. Facebook last month announced a $100 million small business grant program, including $15 million set to go to the Bay Area.

    Graphic courtesy of Facebook and Small Business Roundtable.

    Retailers ready to reopen

    Before the novel coronavirus, restaurants were king in retail, with the industry edging out grocery shopping spending in recent years as young people flocked to hip or picturesque fast-casual dining spaces.

    But data from Joint Venture Silicon Valley’s Institute for Regional Studies shows that the Bay Area’s restaurant sales dropped by 25 percent in late April compared to the same period in 2019. Grocery shopping, meanwhile, jumped 26 percent compared to the same week 12 months earlier. Those numbers were tallied about a month after the region issued its shelter-in-place order.

    On Monday, Bay Area health officials announced that some restrictions would begin to ease on May 22, allowing for more curbside pickup for “nonessential” retailers and re-opening some manufacturing businesses. Restaurants have been able operate throughout the shutdown, but customers can’t dine inside.

    The move to loosen local restrictions comes two weeks after California Gov. Gavin Newsom did the same statewide, but allowed regional leaders to move slower or faster if they could meet specific requirements. Bay Area health leaders chose slower.

    But San Jose leaders this month got a head-start on an initiative, known as “San Jose Al Fresco,” to allow retailers and restaurant owners to use public and private spaces outdoors allowing for more space to browse and eat when on-site dining and shopping is allowed again.

    Mahood supports the San Jose Al Fresco plan, but said it is only a start.

    “We need to find new ways for (restaurants) to operate, to get them out into the sidewalks, get them out into the streets, get them out in the alleyways and break down the regulatory burdens to do that,” he said. “But it can’t just be the city of San Jose, it is going to have to be the cities throughout Santa Clara County.”

    Graphic courtesy of Facebook and Small Business Roundtable.

    Other impacts

    Of the companies that have closed in recent months, 45 percent said they’d rehire the same workers when their doors open again and 59 percent of those surveyed said they were at least somewhat optimistic about the future, though restaurants, hotels and cafes were less optimistic.

    But how companies will reopen is still unclear, the data shows.

    Forty-one percent of owners and managers intend to use their personal savings to reopen, but 39 percent said they don’t know where they’ll get the money. In the Western region of the U.S., 65 percent of businesses said they are already struggling with company finances.

    The survey by Facebook and the Small Business Roundtable asked owners what single thing could help them most. A majority of those that had closed said they want the government to let them re-open. Overall, 45 percent said no-interest loans or some kind of financial assistance would help.

    Graphic courtesy of Facebook and Small Business Roundtable.

    Mahood said he’d put two initiatives high on the list for local leaders looking to help small businesses: greater consistency about what kinds of companies can open, and to move faster in opening businesses. But even as some retailers prepare to re-open for curbside pickup, Mahood isn’t optimistic that the change will make a big impact.

    “I think we are going to see a lot of businesses close down in due time,” he said. “You’re already seeing examples of larger businesses not surviving, like Macy’s, J.C. Penney, Specialties … some are filing bankruptcy and others are just going to be closed for business. These are all canary in the coalmine examples of what is likely going to continue to happen.”

    Find the full report and see more charts here.

    Contact Janice Bitters at [email protected] or follow @JaniceBitters on Twitter.

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