This article is part of Owning the Future, a series on how small businesses across the country are coping with the coronavirus pandemic.
Azalina Eusope cries every day. “But the food comforts me,” said the 41-year-old chef and owner of Azalina’s, a Malaysian restaurant business in San Francisco.
“Ten years ago, my business started off in a survivor mode,” Ms. Eusope said. “I was selling food under a tent at the farmers’ market. As a newly single mother, I needed income. I prepared the food, and at 4 o’clock in the morning, with my kids sleeping in the car, brought it to the farmers’ market and set up.”
Fast-forward to March 15, when the coronavirus quarantines hit. “Now I’m back in survival mode,” she said.
Restaurants have been one of the hardest-hit businesses. A recent report by McKinsey & Company predicted that of the more than 650,000 restaurants that were in business in 2019, about one in five — or more than 130,000 — will be permanently closed by next year.
Independents, like Azalina’s, “will bear the brunt of the closures, both because of attributes that make most independents more vulnerable in this pandemic (minimal off-premise presence, limited digital capabilities, low emphasis on value-based menu items) and because of their unfavorable economics (thin margins and poor access to capital),” according to the report. “Independents’ share of U.S. restaurant locations could fall from 53 percent in 2019 to 43 percent in 2021.”
“It is devastating,” said Bonnie Riggs, a researcher and former restaurant industry analyst for The NPD Group’s food-service division. “In all my 40-plus years of reporting, we have never experienced anything like this, and no one knows what the impact will be on consumers and the consumer mind-set.”
Ms. Eusope is a fifth-generation street vendor. She grew up on Penang Island off the coast of Malaysia and moved to San Francisco with her then-husband in 2001. “I was so far from my family, and I didn’t speak English very well,” she said.
So she turned to her childhood mamak cuisine, a style from Muslim Indians, for solace. Her version of the style’s dishes includes laksa, a lemongrass curry noodle soup; hokkien mee, made with turmeric noodles and vegetables, a variety of curries served with coconut rice; and ayam masak merah, simmered chicken with green tomato chutney.
After she was divorced, “I was thinking, how am I going to survive here in the United States with no savings and no financial stability,” she said. “I was a stay-at-home mom. I thought about the food I grew up watching my mother, my father and my grandmother make, and I kept making it for me and the kids. Those foods brought comfort and sometimes the sense of hope that it is going to be OK.”
Ms. Eusope’s footprint has grown steadily from that food market tent to include a kiosk in the Market Square food hall, retail grocery sales and a catering business that she runs out of a 20,000-square-foot commissary kitchen, which includes a 7,000-square-foot hydroponic garden. Last year, she opened Mahila, a 2,100-square-foot full-service restaurant. She has 70 employees, the majority of whom are women. Construction is underway for three more restaurants.
“Restaurateurs are survivors who build their businesses to be an anchor in their communities,” said Sean Kennedy, executive vice president of public affairs for the National Restaurant Association. “Throughout this national public health crisis, small and independent restaurants across the country have been creative and resourceful in pivoting their business models to keep their doors open.”
Ms. Eusope’s biggest concern is her employees, whom she did not lay off. “Without my employees, I can’t be where I am today,” she said. “I need them. I can’t betray them. In the long run, they will be there for me.”
Instead, she asked some of the managers to take small pay cuts to make it possible to keep everyone on the payroll. “I didn’t want my employees and their families to worry,” she said. “I come from a very poor family, and I know what money means.”
A multipronged business model has allowed her to improvise and generate revenue. She shifted from the corporate event catering business that vanished in the pandemic to selling packaged sauces and noodle meal kits to local grocery stores and directly to consumers, which she had not done previously. And, like many restaurateurs, she increased curbside takeout orders via online ordering.
As a result, her employees are preparing daily meals from ingredients grown in the hydroponic garden and food supplied by farmers whom Ms. Eusope has continued to buy from. She donates the meals that are not sold to community homeless shelters and food banks.
Ms. Eusope chops and cooks alongside them. “I don’t want to get rusty and lose the momentum,” she said. “I come up with creative new dishes. For the restaurant, which is open five days a week, and the food hall location, we change our menu weekly and are selling an average of 150 meals a day.”
She has also devoted down time for employee education and training. “We are cross-training our staff to know different aspects of our day-to-day production,” she said. “Hot-line cooks are learning pastry. Wait staff are now able to do minor prep. Our dishwashers are able to help our farmers with the hydroponic vegetables.”
Ms. Eusope applied for several financial assistance grants, but none have come through. “I don’t want a loan that will keep putting me in the hole,” she said. “That’s stupid. I have to take care of myself. I can’t spend the rest of my life paying off my debt.”
She also started a GoFundMe campaign. About $15,000 has been raised toward a goal of $25,000.
Ms. Eusope has renegotiated her leases. “One landlord has been very kind and forgiven rent,” she said. “The other landlord wants at least 50 percent.”
Nonetheless, the financial picture is troubling. She said the company had been healthy before and had a safety net, but she also took some money out of her personal savings.
“We have lost a lot of money, and still continue losing money,” Ms. Eusope said. “At the beginning, it terrified me, but I have decided to surrender to the circumstances and continue running my business.”
Ms. Eusope is persisting with the last stages of construction for the next locations and planning to open them by December. “It’s a big risk, but I am going for it,” she said.
She expects Mahila, to reopen for dine-in customers on July 15. Seating will be only by reservation and at half occupancy. The menu will be limited and the prices lower. “This will help with inventory and less waste, and our takeout will be a simpler menu, as well,” she said.
Ms. Eusope is nervous, but optimistic about her business. “I am not a big-name Michelin-star restaurant,” she said. “We have a good following of people. They have been buying food and supporting us. Some customers bring me flowers and tell me how much they love our food and are so grateful we are still doing this. That feeling of being appreciated is priceless. It makes me want to work even harder.”
TAKEAWAYS
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Consider crowdfunding. Online fund-raisers can provide a source of cash. These grass-roots efforts build customer loyalty and allow your regulars to feel as if they are doing their part to support your business.
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Slim down the menu. Consumers have adjusted to lower prices during the pandemic. These new behaviors will require restaurants to make menu and pricing adjustments, McKinsey & Company said.
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Offer continuing education and training for staff. Survival will rely on a lean mode of operation. The ability of employees to handle multiple tasks and tackle co-workers’ jobs, if necessary, will provide more flexible staffing.
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Strengthen digital outreach. An easy-to-navigate online-ordering presence has been a salvation for many restaurants. “Even before the pandemic, restaurants were facing downward pressure on same-store sales, escalating labor costs and labor shortages and needing to adapt to tech-savvy consumers, said Damian Mogavero, a restaurant industry consultant.
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Control overhead costs. Rent concessions may be vital to keep a business from closing completely. Working with a landlord to negotiate rent that has accrued while closed can be a lifeline.
