What will it take for local restaurants to recover? Famed Peninsula brewer Dan Gordon sounds the alarm after closing in Palo Alto
In Q&A, Gordon Biersch co-founder on why he decided to close, the Catch-22 of federal loans and the fate of Bay Area restaurants
Dan Gordon permanently closed his eponymous restaurant in Palo Alto after the coronavirus shutdown “accelerated” economic pressures already impacting the restaurant.
Gordon and Dean Biersch opened the original Gordon Biersch brewery and restaurant on Emerson Street in 1988. They sold the business years ago, but Gordon returned to Palo Alto to open Dan Gordon’s in 2016 with Steve Sincheck, owner of the Old Pro and Local Union 271 in downtown Palo Alto (and Gordon Biersch’s first-ever bar manager).
Gordon announced the restaurant’s closure at a remote Palo Alto City Council meeting on Monday evening, urging the elected officials to do their part to help small businesses recover from the disruption of business during the Bay Area shelter-in-place order.
“If you want us to have open storefronts in the next nine months, you’re really going to have to start being proactive and working on brainstorming what you can do for the business community locally to give them an incentive to want to reopen and hire people,” Gordon said. “It’s really a tragic scenario.”
In an interview shortly after the meeting, Gordon spoke bluntly about the ripple effects the coronavirus will continue to have on local restaurants and what it will take to help them survive.
This interview has been lightly edited and condensed for clarity.
Why did you decide to permanently close Dan Gordon’s?
Dan Gordon’s is done, and I don’t think you’re going to find anybody willing to reopen any restaurant in Palo Alto for a long time.
Nobody knows when (social) distancing is going to be removed and even then, psychologically, unless there’s an antibody test and a vaccine, nobody’s going to go out in masses. All the reserves are depleted. I don’t think anybody in Palo Alto city government cares, honestly. When I listened in to the City Council meeting, I didn’t hear a single word about how to revive the downtown or when it would open up again. Their priorities seem to be so misguided.
When Santa Clara County made the announcement that there can’t be any large gatherings…. every large restaurant in Palo Alto — there aren’t a lot of them but Dan Gordon’s is one of them — you’re not going to run with spacing that requires only 25% occupancy. When you combine extraordinarily high labor costs compared to any other city, it’s a no-win situation — and you throw in high rents.
When you start combining every element, why would you want to reopen when you can declare bankruptcy and go somewhere else?
Even if they do open up the question is, will any small business operator want to open up and want to put themselves at really serious potential financial risk? You have to come up with a lot of money to open. It’s not as expensive as the first time around but about 75% of what it was.
How did takeout go at Dan Gordon’s?
We tried it for a week and then gave up. We were doing a couple hundred dollars. It didn’t even cover the cost of one cook, let alone inventory. The only blessing was it was a way to not have to write off a lot of the inventory. The remainder of inventory was given away to the staff to clear out everything.
The worst thing ever was when you had to say goodbye to dozens of employees.
DoorDash, UberEats — they’re great companies. Right now they’re (reducing or) not charging any fees to restaurants. But you can’t make it off that. It just doesn’t cut it.
Did you sell the business?
There’s no one that wants to buy a business right now. There’s nobody that’s insane enough to buy a restaurant in Palo Alto. Even before COVID, more places were closing than opening.
The forecast right now is anywhere from 20% to 30% of restaurants will not reopen in Palo Alto. Out of 16 people (restaurant owners) in my circulation list, I’m aware of five that aren’t going to reopen in Palo Alto.
Did you apply for a small business loan through the federal Paycheck Protection Program (PPP)?
Here’s the problem with PPP: You have to (hire back) 75% of the staff and 75% of payroll (by June 30) to have it forgiven, otherwise it’s a loan. The labor costs for restarting, no matter what — there’s not going to be 75% of 2019’s average sales. Once again you’re in a losing scenario where you’re not going to be able to qualify and nobody wants to go into further debt. You’re already going to have to go into debt to open the place and you’re going to have operating losses. What good is PPP for a restaurant unless there’s a deferral on it where you could possibly wait six or seven months and then reopen when you know there are enough people feeling comfortable about going out into a crowded bar or restaurant? That’s the big ‘what if’: When are people going to return to any sense of normalcy? I don’t think it’s going to happen by June 30.
With threat of Stanford University possibly not reopening for the fall and no sports, the devastation of downtown Palo Alto is tremendous. I don’t think that many people understand the financial impact of Stanford on the Palo Alto community. It’s a huge engine. Not only people coming to town, (but also) visiting university teams — they go out, they spend money downtown.
How are you feeling personally after so many years in the restaurant industry?
I’m very, very fortunate that this was a labor of love and it wasn’t my livelihood. The production brewery is where I earn my living. But for all my colleagues and friends that this is all they have, the restaurants in Palo Alto … this is tragic. This is all they have. I’m super concerned. How are they even going to survive these 30 days?
Are you worried that chains will bounce back more quickly than local mom-and-pop restaurants?
Cheesecake Factory bailed on leases and rent. It’s not paying rent at any locations this year. Palo Alto is not a chain town. It’s mostly independent operators. Chains will take this as an opportunity to thin out their weaker performing locations or unprofitable locations. They’re much more brutal and ruthless than an independent operator. The restaurant group I founded, Gordon Biersch restaurants, they’re only keeping their profitable locations.
What will the local dining scene look like in three, six months?
There are a lot of ‘what ifs.’ It’s going to require a lot of things to happen. Landlords are going to have to be very patient and partner with restaurants to get them up and going. I think the city needs to fully consider the ridiculous minimum wage levels and give breathing room for at least a few years to reflect the state minimum wage … Most of these great restaurants people want to go to haven’t been making money and now they don’t see how they’re possibly going to make money over the next nine months. You’re talking about investing in a reopening and covering operating losses for an indeterminate amount of time — at a minimum six months, but probably nine months.
No prudent, seasoned restaurant operator or owner is going to reopen unless they’re really sure that the city is going to pop back. I haven’t heard the city talk about anything solutions-wise about how to get business up and running. That’s their civic duty.
What’s next for you?
I’m not going to do any more restaurants. The only reason I was involved with Steve Sincheck on Dan Gordon’s was because it was the original Gordon Biersch. My major role right now in the restaurant biz is trying to come up with and help my friends figure out strategies (for) how to survive. That’s the only reason I called in (to the City Council meeting) tonight.
I have no skin in the game. I have no financial stake. That’s already gone. But I’ll do whatever it takes to make sure my restaurant friends and colleagues don’t suffer. And they’re all scared beyond belief because there is no bailout scenario that currently works.
The way Palo Alto is trending as a whole — the coronavirus may have just accelerated the economic issues of Palo Alto for small businesses downtown. But hopefully it will bounce back. It will bounce back. It’s just a question of when, and without knowing when, it’s going to be very difficult to justify any investment in the city.
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