Small Businesses Entrepreneurs Survive Bay Area Climate
Each morning around 1 am, Alex Sieu rolls, glazes, and bakes pastries for his shop, Dream Fluff Donuts. He has done this every day since 1984 in three different shops he owned in the East Bay, he says. Now, with only his wife and sister and one other employee by his side—alongside Bay Area’s high rent — Dream Fluff Donuts is Sieu’s last store standing.
In 2016, Sieu and his family renewed the lease on Dream Fluff located in Elmwood, Berkeley for five years instead of ten. Sieu says the future is unclear for his business. He is ready to keep going, but he also noted the shuttered doors around him: the places that used to be La Panotiq and A.G. Ferrari and Lululemon that have since vacated their premises. The shop needs to stay open longer and he had to expand his menu to accommodate for the hours after his donuts stopped selling. He remembers opening Dream Fluff for $2,700 a month. Today his lease rings up to $8,000.
Last month, the SF Chronicle wrote on the struggle for small businesses to survive in recent Bay Area climate. Increased rent and competition have been the death sentence for many independent stores operating today without outside investment, it read. This has left some wondering whether the time for small business entrepreneurs to succeed in the Bay Area has come to an end.
The SF Chronicle covered the closing of West Oakland’s Korean fusion restaurant, FuseBOX. FuseBOX, a mom and pop restaurant owned by Ellen and Sunhui Chang, opened five years ago. It abruptly shut down last month due to rent disputes.
“How can anyone survive in this industry?” former FuseBOX owner Ellen Chang said. “It would be hard-pressed for someone who isn’t a trust-fund baby, or made their wealth in some other avenue.”
Oakland’s Fusebox is not the only mom-and-pop store that recently closed shop in the Bay Area. East Bay Times reports that upward of 60 restaurants in the Bay Area have left since the start of this September. In 2014, 4,000 of San Francisco’s small businesses closed, according to the City Budget and Legislative Analyst’s Office. This was a record high.
Leanna Ma is a small business owner within San Francisco. Her father, a refugee from Cambodia, started their business, Homeskillet, in 1980. Leanne Ma took over after she finished college. Owning Homeskillet helped her father restart his life, Ma said, but owning Homeskillet now comes with problems like San Francisco’s high rent, wages and competition that he never experienced.
“We’re not rich,” Ma said, “my parents were much more successful. Small businesses owners today can put all of their love into their business and still struggle to survive.”
Doug Hewitt is a new small-business co-owner in Berkeley. “$500,000 is the rule of thumb — at least, that’s what I was told,” Hewitt said of the price he paid in 2015 to start his coffeeshop. “I had to be prepared to go all the way up to a million.”
Hewitt’s business, 1951 Coffee Company, doubles as a non-profit that trains refugees for employment in the coffee industry. Hewitt trains barista employees, not necessarily business owners. Hewitt said it would be a challenge for a refugee in this area today to raise the capital to start their own business. “Because they’re refugees, they have no credit,” he said. “They would have to figure out what the American credit system is — and then build some of it.”
But some argue that working as an employee is not enough to survive in the Bay Area today. Former FuseBOX owner Ellen Chang said four of her FuxeBOX employees were evicted from their homes, unable to survive off of minimum wage.
Minimum wage was just raised to $14 in SF late June this year, the highest in the country. Certain businesses would be affected by this incremental change, as Jim Lazarus, SF senior vice president of public policy at the Chamber of Commerce commented. “Initially, you’re going to have some impact on certain business not keeping the same number of employees and not being able to have the revenue to keep bumping up employees’ salaries,” he said, adding, “But… I don’t think the $14 increase is impacting the ability of business to grow in San Francisco.”
Up until this year, Hannah Hoffman was able to make ends meet with her small business, Doughnut Dolly. It started as a “lemonade stand operation” in 2002 and grew successfully from there. Hoffman eventually started a kickstarter campaign and obtained a bank loan to sustain her buildout into Berkeley, San Francisco, and Oakland. But now these shops are as empty as Doughnut Dolly and Hoffman’s savings accounts and even today Hoffman is devastated by her loss, she said.
Doughnut Dolly scraped by on a 5 to 10% profit margin for seven years, a tiny margin that Hoffman says is typical of the food industry today. Everything has become more expensive than when her parent’s generation worked in the food business, she explained. A casket of eggs can be sold for 40 dollars one day and 70 the next. She recalled troubling experiences and encounters with banks as a single, independent woman trying to obtain her loan. These factors, along with increasing rents and customers that are usually unwilling to pay the true price for their food, made it impossible for Hoffman to sustain Doughnut Dolly.
“Customers are not willing to spend more money to pay for our increases. Food is expected to be cheap, but labor is supposed to be expensive. It’s not a holistic fix. Small business owners take the brunt of that and we fail,” she said.
Hoffman still believes that small businesses are the foundation of economy, supporting community spaces, fostering community relationships and supplying superior products. She is still figuring out what her next steps are post-Doughnut Dolly . “There is no one challenge or one biggest challenge. I spent seven years of my life working 11 to 21 hours a day. As a small business owner, you’re the chief dish washer and the CEO. You scrub the toilet and you count the cash.”
But Alex Sieu, working his ten-hour shifts at Dream Fluff Donuts remains optimistic. His small donut business allowed him to provide a better life for his daughters, to take charge of his own resettled life, he explained, even when he spoke very little English and had no credit. “I love this country. The American dream is still alive to me. If you are willing to work hard, there is still great opportunity,” he said, his hand gestured around his store where the donuts lay temptingly on the counter shelves, the TV played the news in the top corner and a bell fixed to the wooden doors announced each new customer.
“We have a profound effect,” Hoffman said, “we employ people locally, we give charity locally and we help form relationships with people locally… We’re the heart pumping the blood into our communities.”
