Until this week, Chris Day managed Kon-Tiki, a tropical-themed bar and restaurant popular with the after-work crowd in downtown Oakland. On Monday night, that all changed, as the Bay Area came under a shelter-in-place order meant to curb the spread of the coronavirus.

Day, 36, along with most of the staff, was laid off immediately.

“You just feel abandoned by the rest of the world,” he said. “But our federal government doesn’t even want to pay for ventilators for sick people, so obviously we’re not very high on the priority list.”

While state and local officials grapple with stemming the exponential increase in Covid-19 cases and life in California has all but ground to a halt over the last week, food service workers and business owners have been some of the first to suffer the immediate impacts.

The UCLA Anderson Forecast this week announced the arrival of recession – which, it predicted, would hit California harder than the rest of the US. California’s restaurant industry is the largest of any state, with over $70bn in annual revenue. “It’s a fairly large sector,” said the forecast’s director, the economist Jerry Nickelsburg. “We’re expecting in the leisure and hospitality sectors, net job loss of about 100,000. So big numbers.”

And the impact of immediate economic loss and greater uncertainty is sending ripple effects across the supply chain.

The shattered state of the restaurant industry is an early economic indicator as the state and the nation slip into a recession the depth of which is still entirely unknown.

Low wages and high risk

As everyone was laid off at Kon-Tiki, the owners helped their now former employees apply for unemployment benefits.

“I’m lucky enough to have support from my girlfriend and my family right now,” said Day. “If I didn’t have that or if this lasts more than a couple of months, I could be on the street.”

Food and drink service is a particularly low-wage, high-risk job sector, with higher rates of mental health and addiction issues, and a large proportion of undocumented workers. Workers who rely heavily on tips for their income may see a shrunken unemployment insurance safety net, as many don’t claim those tips as part of their taxable incomes.

A worker prepares to-go orders at Creekside Pizza and Taproom in San Anselmo, California. Photograph: Justin Sullivan/Getty Images

While hundreds of thousands of other hospitality workers wait to see if they too will be laid off or furloughed, some immediate aid projects are aiming to fill the gap. The Restaurant Workers’ Community Foundation, One Fair Wage Campaign, the California Restaurant Association Foundation and United States Bartenders Guild have all launched loan or aid programs to help.

But for Day, they just don’t add up.

“The people who support this industry are amazing. But in the end, it’s a Band-Aid,” he said. “And it’s not sustainable for something that’s going to go on for a couple of months.”

Like some other local small restaurants, Kon-Tiki is continuing take-out and delivery dinner service with a skeleton crew, aiming to salvage what income it can in uncertain times.

Sequoia Vennari is hoping take-out will keep her breakfast and lunch cafe Sequoia Diner afloat in East Oakland. But that meant the wrenching decision to let go nine of her 15 employees. “We’re just trying to think strategically because we know that this is not going to be over in two weeks – it’s probably going to be a couple months,” said Vennari.

The diner is prepping for the week as normal, and then taking consumer demand day by day. “Breakfast is one of those meals that people can just slap together at home but that’s our main revenue. People might not be as willing to throw down on a big breakfast as they were before,” she said.

Nancy Chung, owner of the Wooden Nickel pub in San Francisco, laid off her seven cooks and bartenders on Monday, dividing the cash and food she had on hand between them.

“What I worry about the most for myself and my employees is just not being able to pay rent,” she said. “Even if there’s no eviction and rent is deferred, everybody lives paycheck to paycheck. How will they be able to pay that back when they’ve had no income this whole time?”

Chung and other restaurant owners are not optimistic about insurance bridging the gap, as many insurers rejected claims over the 2009 H1N1 outbreak that also saw small restaurants shuttered and hurt by government order.

Chung also isn’t optimistic about zero-interest Small Business Association loans as a lifeline. “You’re just digging yourself into a bigger hole. The likelihood of crawling out of not being open for a few weeks and then to put debt on top of that?” she paused. “But it’s what we’re going to have to do.”

The ripple effects of struggling restaurants

While small bars and restaurants flounder, the essential shuttering of California’s hospitality industry has sent ripple effects across the supply chain, from people who service and repair kitchen equipment to those who clean restaurants and linens or treat for vermin. And the businesses that themselves support food and drink service are faltering.

Restaurant employees wearing masks look on while waiting for customers in the Haight Ashbury area of San Francisco. Photograph: Josh Edelson/AFP via Getty Images

Shares in the Texas-based food distributor Sysco foods were down nearly 60% over the last month. A Sysco representative declined to comment. Shares in the Pennsylvania-based food and facilities servicer Aramark were down nearly 75% over the month, suffering a 25% drop on Wednesday alone.

“Our employees, if the operations are closed, typically are not paid,” Aramark’s chief executive, John Zillmer, reportedly told investors last week.

Julie Figueras is the northern California sales representative for the artisanal spirits importer and producer CNI Brands. Based in Sacramento, Figueras has not yet seen the local shifts that Bay Area and Los Angeles businesses are experiencing, but the larger liquor supply chain has already seized up.

“Obviously we’re not selling anything, which affects our ability to reach our sales goals – as a supplier, bonus structure is a huge part of your income,” she said.

Bars pay their distributors, which in turn pay importers like CNI, which in turn pay the people who make the products.

“We’re already in conversations with producers overseas. They’re sitting on tons of product that’s just collecting dust. They’ve already paid all that money and they’re just waiting for us to say OK, we’ll take another palette,” said Figueras. “It’s so crazy how far just closing bars and restaurants really affects business globally. It goes all the way up.”

California’s small restaurant scene is dominated by a farm-to-fork ethos, and the small growers that have built their businesses on selling directly to restaurants are now reeling.

The closed Scoma’s restaurant in Sausalito, California. Photograph: Eric Risberg/AP

Dirty Girl Produce, a 40-acre organic farm in Santa Cruz, is reworking its business model to compensate for the loss of restaurant business, and starting a new produce delivery and pick-up service direct to consumers – relying on some of those shuttered restaurants as new distribution hubs.

“Half of what we do is distributing what we grow, and we’re changing that half overnight,” said Joe Schirmer, the owner. “A lot of people don’t go heavy in the winter, but we’ve moved our business so we grow year round so we keep people working. We do have a lot going on right now, and a lot of food to sell. The farm workers are allowed to go to work, and they have to. People need food.”



A plea for government support

The Los Angeles restaurant owner and consultant Adam Weisblatt is hoping small businesses can rally behind not just a common cause, but a common message and organization, in seeking the relief they so desperately need from government.

“I don’t know how many restaurant owners there are in America, but there’s certainly tens of thousands more than there are CEOs in the airline industry or the cruise industry that are trying to get in on stimulus from Washington,” he said. “So how do we get in on that? I don’t know yet.”

Weisblatt wants to see immediate support for undocumented and low-wage workers, intermediate support for small businesses to keep them afloat to an eventual reopening, and long-term support for change in how government treats small business.

“All these people say small business is the heart of America and it matters so much. But when it comes to actually helping us, there’s no support, there’s never been support, and now it’s worse than ever.”