New restaurants and bars face harsh new realities: debt, layoffs and uncertainty

Bars are shuttered. Restaurants are closed or reduced to offering takeout or delivery services, leaving dining areas deserted. New restaurant and bar owners, many times hundreds of thousands of dollars in the hole when they open, have been left with severely reduced or no revenue. With rents and other expenses still due, many are losing money.

“It’s going to take a group effort between the company and landlords,” Velika Turner, co-owner of Derricks on Atlantic, said. “We will exhaust all of our options and continue to provide takeout and, very soon, delivery. And if we can get rent relief from the landlord, we should hopefully be able to make it.”

Derricks opened its doors in Bixby Knolls on Feb. 24, three weeks before Long Beach Mayor Robert Garcia announced the shutdown of all restaurant dine-in services.

The Texas barbecue joint is owned by six Bixby Knolls residents who live within one mile of the restaurant, Turner said. She said the group wanted to fill a gap in the area’s dining options. However, that dream is now in jeopardy, as it cost the owners around $250,000 to prepare the restaurant for its opening.

While longtime neighborhood and city staples such as Lola’s Mexican Cuisine have dedicated customer bases they can tap into to get through this difficult time, Turner said that new restaurants do not have that safety net.

“Just as we were getting to the point where we were having a good flow, word was getting out…  then coronavirus hit,” Turner said, noting takeout was never at the forefront of the original business model. “We instantly came up with curbside ordering and pickup. We’re trying to make it comfortable enough that people still want to come and aren’t afraid.”

Currently, the owners of Derricks are doing their best to keep the restaurant’s 25 employees working, which is not an easy task, Turner said. However, not every restaurant has been retaining employees. Jason Witzl, owner of Lupe’s De La Mar and Ellie’s, laid off 80 employees between the two eateries to make them eligible for unemployment.

In less than three years, Ellie’s has become an institution in the Alamitos Beach neighborhood. However, like Derricks, Lupe’s—a 200-seat restaurant Downtown—opened to the public on Feb. 24 and had not hit its stride prior to the prohibition on dining-in.

Witzl said he spent six figures preparing the restaurant to open, including all new furniture and a hand-painted mural. He explained that his reputation as a Long Beach restaurateur has aided his new location, as his loyal customer base has boosted takeout orders.

“The financial repercussions aren’t now, it’s what happens after this,” Witzl said. “What’s really going to be interesting is the recovery period for all of this. When we reopen and we have to put together two new opening inventories, it’s going to cost us $70,000 at least.”

Witzl noted that he has not yet spoken with his landlord about halting his monthly rent, but added that such assistance could be crucial to his and other businesses, and their ability to sustain operations now and in the future. The unknown impacts on his employer’s insurance due to mass unemployment claims adds to the murky waters of the situation, he explained.

With so many variables and so much uncertainty, Witzl said he fully expects some businesses, particularly restaurants, not to reopen when all is said and done.

While most of a bar’s inventory will not go bad during the weeks of mandated closures, their future is just as uncertain, explained Jim Ritson, owner of Bar Ya Sabes. Though it opened its doors in mid-November, several months prior to being forced to close, Ritson said he and his business partner and longtime girlfriend Sophia Sandoval invested over $250,000 to open the space – essentially depleting their savings.

“If this goes until March 31, we would be OK, it probably wouldn’t impact us keeping up with our bills. It would hurt. No doubt, it would hurt,” Ritson said. “If it goes two weeks additional to that, I think we’d be pretty tapped out of resources at that point. And if it gets to a two-month closure, . . . we’d be in serious financial trouble.”

Mayor Robert Garcia’s initial shutdown of bars and dine-in services began Tuesday and was to last through March 31. However, Gov. Gavin Newsom on Thursday announced a statewide “safer-at-home” order that leaves bars closed and dine-in services suspended “until further notice.”

Ritson is not new to the bar scene in Long Beach. He and Sandoval also are the proprietors of 4th Street Vine, and he is a co-owner of the Bamboo Club tiki bar. He said between the three bars, he and his partners have laid off 34 employees.

“It’s just a difficult reality right now. A lot of small businesses are trying to keep afloat. The blow is a little bit softer knowing we are all in this together,” Ritson said. “Every person I know is treading water, trying to figure out what to do, so it brings the community together in some weird way. It’s going to be a difficult couple of months for everybody.”

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Brandon Richardson is a business reporter, covering everything from real estate and healthcare to the airport and port to city hall and the economy. He is a Long Beach native who has been with the Business Journal since graduating from Long Beach City College in spring 2016 with an associate’s degree in journalism. He is an avid record collector and concert goer.
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