If The COVID-19 Shutdown Didn’t Kill Your Business, Trying To Reopen Might

By Paul Roberts The Seattle Times

WWR Article Summary (tl;dr) Reopening can be a serious dilemma for many business owners who have to weigh safety measures with risk-taking efforts to get their businesses back up and running.

Seattle

Tom Fox, owner of Martini Cleaners in Burien, Wash., has doubts about the future of business casual.

Dress shirts, slacks and other office garb made up more than half of Fox's dry cleaning, pressing and tailoring business before the pandemic. Today, he sees only a fraction of that, thanks largely to COVID-related work-from-home regimens that have left office workers everywhere in sweatpants and T-shirts.

Like many businesses, Fox has limped along by cutting staff hours and thinks he can stay open at least through the end of year. But he has no idea whether that will be long enough for business casual to return to business as usual. "We could see this cultural experiment going on for the next couple of years," he says.

Anxieties like these are now standard operating procedure for business owners and managers, who know they face months of uncertainty until a vaccine or other treatment is widely available. That leaves them in constant fear of a COVID-19 outbreak among staff or customers, or another lockdown.

Even if COVID-19 is kept at bay, many businesses are bracing for months of lower revenue from health restrictions, consumer uncertainties, and the complicated economic ripple effects of stay-at-home and other social changes during the pandemic. Just last week, Amazon extended its work-from-home policy to early 2021.

Many businesses can expect only between half and three-quarters of their pre-COVID revenue through 2020, warns Thomas Gilbert, associate professor of finance at the University of Washington Foster School of Business. In some sectors, such as restaurants and hotels, expectations are even lower.

That means "businesses are going to have to watch their cost line like hawks to ensure survival through the end of the year," but without "making the experience unpleasant" for customers by cutting too deeply on service, Gilbert says.

Cost-cutting employers also run the risk of losing key staff they'll need when business returns. Fox, for example, worries about retaining his seven employees, some of them quite skilled. "Some of them are stretched pretty thin," he says.

Those fears are present in any downturn. But with the pandemic, many businesses must control costs, maintain service and retain staff while also effectively re-engineering much of their operations.

Much of that re-engineering has focused on safety.

When Rhein Haus Seattle, a beer hall in Seattle's Capitol Hill, moved last month into Phase 2 of Washington's four-step reopening strategy, restaurant staff had to master a welter of new safety protocols. Among these: daily temperature checks for staff, switching to compostable utensils and plateware, self-service ordering, and using specific floor routes to minimize close interactions with other staff, says Jeremy Walcott, who manages Rhein Haus Seattle for Seattle-based Weimann Maclise Restaurants.

But safety has also meant some tough choices. Although restaurants were allowed up to 50% capacity in Phase 2, the company took a more cautious approach, in part to assuage staff anxieties over COVID exposure, says Rich Fox, one of the operating owners at Weimann Maclise, which runs nine eateries in Washington state and one in Denver.

As a result, Rhein Haus Seattle, a 12,000-square-foot facility that can seat 439 customers, is currently limited to around 120, Walcott says. That's left staff at 10, down from 67 before the pandemic, and revenues at around 25% of their pre-COVID levels, he adds.

Like owners and managers at many other public-facing businesses, Walcott has very little ability to plan more than a few weeks out. During a normal July, Walcott would already be scheduling for Oktoberfest, New Year's, and other events that account for a large share of revenue.

This July, he's mainly trying to gauge whether the state will actually get to Phase 3, or if surging COVID cases will mean a return to Phase 1, when Walcott ran a takeout-only Rhein Haus with two other employees. "So, we're in limbo right now," he says.

If safety protocols are among the most visible changes in the way businesses operate, there are also less-obvious costs.

At Ophelia's Books, in Seattle's Fremont neighborhood, owner Jill Levine and manager Lisa Maslowe reopened the small shop after making fairly modest changes, including removing some bookshelves to allow social distancing, and limiting in-store customers to five at a time.

Harder to address, Maslowe says, is how COVID-19 has restricted the ability to browse for books, or the way it has cut down on tourists who once frequented the shop. Business is down 50% from last year.

Another pandemic casualty: the supply chain for the shop's best-sellers, used copies of recently published titles. The bookstore used to restock at the annual Seattle Public Library Friends of the Library sale (canceled), as well as at yard sales, which are still infrequent.

When customers do come in, "We really don't have as much inventory as we would have liked," Maslowe says, adding that the store is trying to compensate with items like T-shirts, and with more online sales. More than most downturns, the pandemic has interrupted the intricate, often invisible web that links businesses to the broader economy.

Lois Martin, owner of Community Day Center for Children in Seattle's Central District, says she and other child-care operators have suffered both from falling demand, as many parents work from home or have been laid off, and from capacity restrictions around social distancing.

Before the pandemic, Martin's facility averaged 37 children a day, she says. Today, the center sees 27 children on its busiest day, "so we're nowhere near our full capacity," Martin says.

Although she expects some recovery as more parents return to work, she isn't anticipating a quick rebound and may need to cut staff hours.

Martin considers herself lucky. For some local child-care centers, especially smaller ones that were already struggling before the pandemic, the constrained economics of COVID-19 could mean either bumping up fees and losing lower-income customers, or simply closing down altogether.

In King County, total licensed child-care capacity is down 26% since February, and one in three providers say they're at risk of permanent closure, according to Child Care Aware of Washington.

That's bad news for hundreds of Seattle child-care owners and employees. But it's a huge problem for work-from-home or laid-off parents hoping to return to their own jobs. "There's no way our economy can reopen without us being there," says Martin.

It's yet another illustration of why the COVID-19 recession is so complicated, and how a recovery could take much longer.

Martin says the sector won't be able to maintain sufficient capacity without substantial government assistance. She and other child-care operators are closely watching efforts by state and federal lawmakers, including a proposal by U.S. Sen. Patty Murray, D-Wash., to put $50 billion for the child-care sector in the next federal stimulus package.

That highlights yet another COVID-related businesses risk, government aid. Although many small businesses have received state and federal assistance, such as Paycheck Protection Program loans, many missed out.

Although policymakers will likely extend some programs, business still won't be able to depend on getting assistance. "Even if they start injecting money into the system, you don't know if you're going to be the one to get it, or if it's going to be your competitor," warns Jeff Shulman, professor of marketing at the UW's Foster School.

For many businesses, the response to so much uncertainty is extreme caution. Many are putting off all but the most essential expenditures. Others are reopening or ramping up operations as gradually as possible so as not to put too much capital at risk in the event of another shutdown.

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