Falling commercial real estate prices are hitting local budgets
A couple of weeks ago I wrote about a new study which found that working from home is here to stay. I concluded by noting that: If this holds for…
Saturday, November 28th is Small Business Saturday in the United States this year. But how many of our small businesses will still be around then?
The stay-at-home order (SHO) issued by Gov. Walz on March 16th and since extended to May 18th was not issued with the intention of crippling the economy, it was issued to mitigate a public health crisis. Nevertheless, the crippling of the economy is a not unforeseen consequence of it.
And Minnesota’s small businesses are being hit disproportionately hard. When the SHO was issued closing ‘non-essential’ businesses, Minn Post provided a helpful summary of what counts as an essential business:
While Walz’s order will close offices for a huge swath of Minnesota, many workers deemed essential may still report to their jobs. Broadly, essential jobs include:
Health care workers
Law enforcement and first responders
Child care facilities
Grocery stores, take-out restaurant service, farmers and other agriculture workers
Power, gas and water services
Wastewater treatment and other sanitation or public works
Critical manufacturing, such as iron ore mining
Transportation and logistics
Construction and some trades, such as electricians, plumbers and elevator technicians
Financial services, including workers at banks
So, a store like Target can stay open because it sells food. But it also sells sportswear – and is still selling it – while the smaller, dedicated sportswear store is closed by Gov. Walz’ order. As Dave Orrick of the Pioneer Press recently asked Steve Grove, Minnesota’s Commissioner of Employment & Economic Development:
I can go into Menards and buy a kite for my kid, but I can’t go into Hub Hobby and do the same. If Hub Hobby were open, it would accomplish more for social distancing, no?
Gov. Walz’ latest extension of the order to May 18th maybe provides some good news for Hub Hobby. As Fox 9 explains: “Under the updated order, starting May 4, some retail shops and customer-facing businesses could resume work by offering curbside pickup and delivery options.”
But it doesn’t help everybody.
Salons and barbers shops are still prohibited from opening up for customer haircuts but are being allowed to sell products as long they adhere to the curbside and delivery rules.
While the changes are welcome news for some businesses, some owners tell us the changes do little to help them make it through the pandemic. For the Waconia Barber Shop, the ability to sell products does little to help them.
“Being a barbershop, maybe just comparing a barbershop to a salon,” explained Josh Kirkpatrick. “Men don’t buy a ton of products. I have some, beard care stuff, shampoo, stuff like that but that’s not, that’s definitely not what drives my business.”
Kirkpatrick understands the governor is trying to keep people safe. But watching some stores do big business while he is forced to stay closed is frustrating.
“You walk into a grocery store or Target or Walmart, you’ll come in contact with far more people in a few minutes than I will see throughout a day here,” he said.
Kirkpatrick says he’s good on guidelines like sanitizing, social distancing, and masks. Same for Dawn Grohs, the owner of Mainstream Boutique in Chanhassen. She says she too is good to go and just needs the go-ahead.
“We wipe down everything, we’re ready to roll,” she said. “Actually, we’re getting masks tomorrow made by a local lady in St. Paul so we’ll have masks if people need them or they can buy them so we’ll be ready.”
Stevens, who operates 25 salons in the Twin Cities area, is still paying $80,000 a month in rent in addition to business loans and health benefits for his staff.
“It’s amazing how many costs you have even when your business is closed,” Stevens said.
The Star Tribune reported that Great Clips co-owner Brian Stevens:
…had worked with other salon owners to reach out to Gov. Tim Walz’s office to make their case for reopening salons and with the Minnesota Board of Cosmetology to come up with ideas on an industry plan.
“Every day [the order] goes on, it becomes less viable to open these salons,” Stevens said.
The Board of Cosmetology, despite overseeing an industry which has been shutdown, has not been furloughed. One wonders what it is doing these days.
Bars and restaurants, already hard hit, also saw little help from the extension. Gov. Walz:
“…didn’t tell me what are the health guidelines, or the conditions under which we could open on the 18th, or what would prevent us from opening,” said Mike Mulrooney, owner of Blarney Pub & Grill in Dinkytown and downtown Minneapolis’ Pog Mahone’s.
“I get that he doesn’t want a hard date out there. But we need that,” he said. “It takes about a week to order food and supplies, and our distributors will need to know.”
With Blarney shuttered and Pog Mahone’s offering only takeout, Mulrooney laid off all but two of his 69 workers in March.
He told Neal St. Anthony of the Star Tribune:
“We’ve lost $500,000 to $700,000 in revenue between the two businesses,” Mulrooney said. “And if school at the University of Minnesota is canceled in the fall, that will end small business in Dinkytown.
The stories keep coming. Kay Frandsen, owner of Wabi Sabi Shop furniture consignment store in Wayzata:
“I’d like to know if I can start letting my customers know that I will be open on May 18, but will the governor come back on May 14 and say there is further delay?”
Independent coffee shops are suffering:
Rick Boraas — CEO of Roastery 7, which delivers roasted coffee beans to independent shops across the region, including Royal Grounds — estimates that only about 10 of the company’s 165 customers have remained open during the pandemic.
“Nobody is making it financially,” Boraas says.
Last week, I wrote that Minnesota’s businesses are suffering from a lack of certainty. I cited research which finds “that about 60 percent of the forecasted output contraction reflects a negative effect of COVID-induced uncertainty.” These are the stories behind that.
There are steps Gov. Walz can take to reduce this uncertainty and its associated costs. As I said last week, ” the Coronavirus does not operate to a calendar. But our state government can make a move towards a measure of certainty by setting out benchmarks.” And he should stick to them. If he doesn’t, Small Business Saturday will have a pretty hollow ring this November.
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