Small Business

NYC restaurants face mass layoffs as coronavirus cripples economic life: 'This is a crushing blow'

Key Points
  • Gov. Andrew Cuomo limited bars and restaurants to takeout and delivery only to limit the spread of coronavirus. 
  • The strict limitations are hitting the 300,000 people who work in the industry hard. 
  • Many restaurants and bars are letting nearly their entire staffs go.
  • Jobless claims have increased more than 1,000% in some areas in the state, according to the Department of Labor.
The Uptown Garrison and its sister restaurant Saggio had to lay off most of their staff
Spencer Kimball | CNBC

Restaurant and bars in the nation's largest city, world-renowned for its food and nightlife, are shutting down indefinitely and laying people off en masse as the state takes drastic measures to stop the spread of the deadly coronavirus.

Gov. Andrew Cuomo effectively closed bars and restaurants to the public across New York this week, issuing an order that limits them to takeout and delivery only, in an effort to stop people from congregating by enforcing "social distancing" in one of the states hardest hit in the U.S. by the virus. 

The governor took even more drastic measures Friday when he ordered nonessential businesses to send 100% of their workforce home. Restaurants and bars are still allowed to provide carryout and delivery services, which are considered essential, according to the governor's office. 

The number of people who have tested positive for the virus has surged in New York City this week with at least 5,151 confirmed cases as of Friday, according to Mayor Bill de Blasio. There are now at least 7,102 infections across the Empire State and at least 35 deaths, according to Gov. Cuomo.  

Virtually overnight, the social landscape of the city has transformed, the future of tens of thousands of small businesses have been placed in doubt, and the livelihoods of hundreds of thousands of workers have evaporated.  

These small business owners and workers are now looking to the city, state and federal governments to step in and provide assistance to help them survive the economic turmoil caused by a state-mandated shutdown in response to a pandemic that began half a world away. 

"Everyone is still walking around like it's Sunday morning, but the machine just stopped," said James Lee, the owner of three Manhattan restaurants, about the economic impact of the virus. "They've got to put a lot of oil into that machine," he said of the government's response. 

'Everyone was afraid'

Lee, 51, tried to keep at least one restaurant open. He reduced operations at 181 Cabrini, which he opened 12 years ago in the Washington Heights neighborhood of northern Manhattan, to a skeleton staff serving a limited menu. But after a single day, Lee realized that takeout and delivery couldn't pay the bills and keep the doors open. 

"The demand wasn't there," he said. "Everyone was afraid of delivery guys giving them coronavirus, people were afraid of takeout food, so it was like why bother?" 

Lee shut down Cabrini, Buddha Beer Bar and Buddha Taco Bar and laid off his entire staff — about 50 people.

James Lee tried to keep 181 Cabrini open, but demand wasn't high enough for takeout and delivery amid fears about the spreading virus.
Spencer Kimball | CNBC

"I've never had to do this," he said. "I've  fired people, but I've never had to lay people off." 

For the first time, Lee is not able to pay his quarterly sales tax on schedule, and he doesn't have the money to pay his food vendors. His employees come first and he still owes them a check for their last week of work. 

Though the future is uncertain, Lee plans to reopen and bring his employees back when the economic turmoil settles. Now he's looking to the government to help him survive what amounts to an indefinite, state-mandated shutdown. New York state is waiving interest and penalties on late sales tax payments for business owners like Lee. He is also going to apply for a zero-interest loan the city is offering small businesses that have lost 25% or more in sales. 

"I'll basically be working for government," Lee said. 

'These are human beings'

South of Washington Heights in Harlem's Hamilton Heights neighborhood, Andrew Castelli shut down his two bars — Penny Jo's and Uptown Bourbon. Carryout and delivery isn't viable for his businesses, which thrive on the live music and community at the bars.  

"You can't deliver live jazz or handcrafted cocktails," Castelli said. And aside from the financial considerations, he was just concerned about the safety of his dozen employees.   

"We were really wary to bring in staff and have them travel on public transit and ask them to interact with the public and possibly risk their health," Castelli said. 

He's trying to help his employees apply for unemployment insurance and is willing to do whatever he can to make sure they have food and shelter, even if it means dipping into his savings. 

Saggio, an Italian restaurant in Washington Heights, has shifted to takeout and delivery as many businesses shutter completely.
Spencer Kimball | CNBC

"These are human beings who I care deeply about and who I have literally shared my home with before," Castelli said. "I've given half of them personal loans in good times because they needed an air conditioner or something, so of course they know they can come to me in bad times." 

Castelli, 40, is worried that the shutdown caused by the virus could drag on for months and eventually the money will just dry up. He hopes his landlord, with whom he has a good relationship, will work with him on rent during this difficult time.

But the future depends on how the city, state and federal governments respond, he said. New York state has suspended both residential and commercial evictions for the next 90 days. The city is offering businesses grants to cover 40% of payroll costs for two months if sales have dropped at least 25%.

Castelli would like to apply, but only businesses with fewer than five employees are eligible. That effectively leaves out the entire bar and restaurant industry, he said. He's now looking into the zero-interest loan that Lee is applying for. 

'I'm incredibly stressed'

The strict limits imposed on the city's approximately 27,000 eating and drinking establishments during the public health crisis affect more than 300,000 people, about 7% of the overall workforce. And while it's still unclear how many people have lost their jobs this week, the phones are already ringing off the hook at the state unemployment office. 

Claims have increased more than 1,000% in some areas in the state, according to Deanna Cohen, deputy director of communications at the New York State Department of Labor. The volume has increased as the state waives the seven-day waiting period to receive benefits. The unemployment office received 475,000 calls on Friday alone, Cohen said.  

Kinsey Keck, 32, is applying for unemployment, but it's been difficult to get through to a representative due to the call volume. Keck lost three of her four jobs and 70% of her income almost overnight. Keck was not only laid off at 181 Cabrini, she also lost her job teaching after-school drama when the city school system shut down. A conference she was helping to organize for the New York City Arts in Education Roundtable was also put on hold.

The Grange in Harlem's Hamilton Heights, like all restaurants in NYC, is now limited to takeout and delivery only due to the coronavirus
Spencer Kimball | CNBC

Right now, she's living on savings and what she earns doing administrative work 15 hours per week for the Roundtable. Keck said she can probably sustain herself financially through May. 

"I'm incredibly stressed," Keck said. "It's very scary to not know and have no control over your life for the foreseeable future."

Lee offered to pay advances to Keck and his other employees. Keck declined because she knew finances were tight for Cabrini and there are other employees who need the money more. Lee said several employees left the city and went back to their homes in Pennsylvania, New Jersey, Missouri and elsewhere until the situation stabilizes.

He believes the federal government needs to step in and take measures "like in war time to get people the basics," including direct payments to individuals as well as rent forgiveness. U.S. Senate Republicans released a plan Thursday to issue one-time cash payments of up to $1,200 for individuals and $2,400 for couples with an additional $500 for every child. The payments start phasing out above $75,000 in adjusted gross income. 

"I've done 9/11,  I've done everything — this is way beyond belief," Lee said of the economic situation. 

'It breaks our hearts'

Many restaurants are still serving customers but are struggling to keep their doors open. The Grange, in Hamilton Heights, was serving takeout on Wednesday but it was slow. Business has dropped 80%, according to Danielle, a bar manager who declined to give her last name. She said 95% of staff was laid off, about 40 employees.  

Up the street from 181 Cabrini in Washington Heights, the restaurants Saggio and Uptown Garrison are staying open to offer carryout and delivery. But they laid off 80% of staff for the foreseeable future to make ends meet as they operate on 15% of normal revenue, according to Chris Irish, a partner in both establishments.  

"It breaks our hearts but we really have no other choice," Irish said of the layoffs. Carryout and delivery isn't a sustainable model over the long term, he said, but it at least lets him and his partners keep some of the staff employed. 

Saggio and Uptown Garrison can probably remain open for three months under the current circumstances, Irish estimated, but the situation is changing so quickly it's hard to plan.  

In Hell's Kitchen along 9th Avenue between 59th and 52nd Streets, at least nine restaurants posted notices that they were closed due to the virus. The area is normally one of Manhattan's thriving hubs of social life.

Daniel Assaf is trying to sell off Kashkaval Garden's fresh inventory before it spoils
Spencer Kimball | CNBC

Kashkaval Garden was open on Wednesday, but only to sell fresh food from its inventory before it spoils. The Mediterranean restaurant had turned into a makeshift neighborhood market, selling hummus, baba ganoush, Greek salad and wine until its stock runs out. Kashkaval lost 95% of its business and laid off a staff of more than 30 employees, according to Daniel Assaf, a partner in the business.  

Assaf, 45, realized the magnitude of what had happened to business when he looked at the spreadsheet of the restaurant's finances, which has been continually filled out since 2004. "It ground to a halt for the first time in 16 years," Assaf said. "It was always being filled out." 

Though Kashkaval plans to reopen, it won't be able to operate at a full clip right away, Assaf said. The restaurant's bank account has been drastically reduced and the business will need money to get up and running again. Assaf called for the federal government to take direct action to help small businesses. 

"If they bail out the airline industry, they better not forget small restaurants because this is a crushing blow," Assaf said.