• January 19, Boitson’s in Uptown Kingston, est. June 4, 2010.
• January 29, Tony’s Pizza on Broadway, est. 1937
• February 14, The Anchor, upper Broadway, announces plan to sell building
• February 18, Grainne in Uptown Kingston, est. November 2020
• March 4, Mollé Molé in the Rondout.
• March 18, Rainbow Drive-in, Port Ewen, est. 2001
• March 28, Lis Bar, in Midtown Kingston, est. 2017
A Polish tapas restaurant on Foxhall Avenue. A noisy joint on Broadway with a large central bar and unpretentious table service. A darkly lit dinner spot in the Stockade district with fancy wineglasses reflecting candlelight onto white tablecloths. Every time a page on the monthly wall calendar flips over, another restaurant in Kingston dies. Sometimes two.
It’s mostly the small restaurants that are dying. The corporate franchise restaurants and the fast-food outlets are for the most part doing fine…
When a restaurant closes, a disconcerting sort of hopelessness takes its place. Whoever once was a regular is cast adrift like a widower to face the unsettling prospect of new faces, new names, new ways of doing things. The next restaurant won’t be as good as the one remembered, though with the passage of time the regular may learn to love another.
Owning a restaurant
But who will consider the lovelorn loss of the restaurateur?
That the business has a challenging reputation is known. Popular anecdote holds that most new restaurants will close in the first year. Not so, according to Tian Luo and Phillip Stark, San Francisco area statisticians and naysayers.
Their study released in 2014 relying on 20 years of U.S. Bureau of Labor statistics found that about 17 percent of new restaurants fail. The same study pegged the median life span of a restaurant at four and a half years.
Perhaps that’s why the restaurant mortality rate in Ulster County feels so sinister. Except for Grainne, which opened during the pandemic, all the Kingston restaurants which closed had made it past their most vulnerable years.
Overhead is high
Nothing about restaurants is easy. Before the grill is ever heated or a champagne bottle uncorked, financial responsibilities begin to gnaw away at projected profit margins.
The costs of building ownership manifests first. Next come property taxes and school taxes. Building insurance must be purchased. If the building belongs instead to a landlord, the costs will be passed down to the restaurant owner all the same with the signing of the lease.
“Well, that’s one thing [a landlord] I didn’t have to worry about but I still had a mortgage and taxes,” says Maria Philippis, owner of Boitson’s, a chic neighborhood restaurant in the Stockade district for a dozen years.
“Maintenance of a building, you know. It still costs a lot of money to own a building, right? Now, I didn’t have the landlord, but I still have the bank breathing down my neck. They want their money. And the city wants $39,000 a year in taxes. The only thing you get with that is one day a week of garbage picked up. You have a restaurant, you need more than one trash pickup a week.”
Boitson’s served its last meal on January 19.
Taxes and insurance
During what is referred to as the pandemic real-estate boom, a regional housing market report shows that over the last two years housing prices jumped by 38 percent. They are still rising.
Though the prices for commercial real estate increased less, Kingston commercial buildings are taxed at non-homestead rates, higher than residential buildings. More expensive buildings translate to more expensive leases.
Should the establishment desire a convivial atmosphere, $4352 is the average cost of the initial liquor license across New York State. The license must be renewed every two years for an additional $2000 fee.
Liability and worker’s compensation insurance must be purchased. The former provides for the mishaps of a customer, the latter anticipates an unlucky staff member. And since there’s liquor on the premises, a bar owner of acumen and foresight adds a policy against assault and battery for an extra $1600 a year.
And then there’s business interruption insurance, which is compulsory, in case an act of God occurs (force majeure). A raging forest fire which starts off out in the hills and ends up consuming the buildings of a city would qualify. Or a citywide mandate closing public dining for health reasons would trigger payment for the inconvenienced policyholder.
And there are still the other taxes. Consider the cook, the dishwasher, the server, the bartender, the hostess. All have payroll taxes to account for.
And finally, when the cash registers start ringing, under New York State law, any nourishment processed or prepared for sale at a business, great or small — a bottle of champagne, a bowl of nuts — will be taxed. The business owner who has sweated and dreamed and worked for and fought and finally reeled in her catch must now drag it floating along the side of the boat for all the taxes and fees to feed on like Hemingway’s sharks.
Then you add Covid
“All those things were already a big burden for this business, and it’s a business that’s generally low margins. And then you add Covid,” explains Jonathan Rich, who with his wife owned the Lis Bar Polish tapas restaurant in Midtown Kingston. “That’s the thing, you poured a big global pandemic on top of a business that already is tough to operate in the best of times.”
Lis Bar served its last cocktail on March 28.
When the pandemic hit, the top-down directives of the state and federal governments were often confusing and contradictory, contentious and erratic.
“There was a building up, but then it just accelerated,” Phillipis recalled. “And after like, you know, opening, closing, opening, closing. Being a grocery store. Doing takeout. Being a bar with cocktails to go. Can’t do cocktails to go. Put your mask on. Don’t put your mask on. Just every day. And every day to not know who was going to show up for work.
“It was a guessing game. But can we open? Is the chef coming in? Is the dishwasher coming in? Are the waiters coming in? Are the bartenders coming in? Like who’s gonna work? And, you know, it’s not an easy way to do business. It just did my head every day.”
Problems of staffing
Jennifer Cruz decided to open her restaurant Grainne (gren-ya) in November 2020, in the midst of the pandemic. She opened at a toney address indeed, just across the street from the Kinsley Hotel on the corner of John and Wall streets in the heart of the Stockade district.
“Okay. So I used to say to people, it’s either dumbest thing I’ve ever done or the smartest because in a non-Covid world there would have been so many candidates for that space,” said Cruz. “I never would have gotten it. The competition for the space would have been fierce. So we grabbed it when we could. It’s a fairly expensive location.”
With years of industry experience previous to opening, Cruz thought she had a pretty good idea what she was getting into. “During the time that I was a restaurant manager, I always had a stack of resumés on my desk. 20 resumés a week. 30 resumés a week sometimes, coming across my desk. I’d never experienced a time when I’ve literally had zero resumés come across my desk, for months at a time.
“This was probably singing the same tune that everybody else has been singing, because I absolutely believe not being able to get fully staffed [went] along with the increase in price of other resources. You know, and then so, just as we were coming into the holiday season, Omicron hit my Thanksgiving and Christmas holidays.”
Grainne served its last grass-fed hamburger on a brioche bun on February 18.
Easier to stay home
Twin forces were at play here. One of the effects of the passage of the CARES Act (Coronavirus Aid, Relief and Economic Security) on March 27, 2020 by Congress and signed into to law by president Donald Trump, made enhanced unemployment benefits available to unemployed Americans for a year and a half. Restaurant workers who were paid over the table and had a paper trail of checks with taxes taken out to prove it were getting paid to stay home, sometimes at rates higher than what they would have been paid to go to work.
Republican politicos bemoaned the situation to television cameras when it became apparent that workers previously squeezed to accept employment at lower pay were holding off from returning to the workforce – bargaining, as it were, from a position of strength. In the rush to provide economic help, an ill-conceived stipulation in the bill was that they would lose these benefits immediately upon returning to work.
With tips and sales uncertain in a world ravaged by Covid, or a lower hourly wage only too certain for kitchen workers cooking or washing dishes, many restaurant workers decided to wait the situation out.
“Are you kidding me? It was great. It was one of the best times in my life,” remembered Jack Barrow, a cook who requested his workplace not be identified. “I was getting paid more on balance to stay home than I could count on before Covid. I had been working since I was 17. So 20 years. Didn’t have a choice. Nobody does, unless you’re born wealthy or you get paid enough to save. The only time different was after I would quit a job or whatever. Then I could stop and look around.
“But after the first two weeks the anxiety starts. You’re living off your savings. It can’t last. In America, without money, you have the right to enter into a subordinate relationship with a boss or you have the right to starve.
“So, yeah. It was a Covid holiday. Let the bosses starve. Let them figure out how to pay a living wage.”
It’s an open secret that many of the people who seek jobs in the back of the house in the restaurant industry are illegal immigrants. In New York City, for instance, the preponderance of immigrants from the south-central region of Mexico, the state of Puebla, comprise an unofficial back-of-house empire referred to as Puebla York.
Without that segment of the workforce willing to take lower pay for the same work, many more restaurants would go under. Farms and slaughterhouses as well. This segment of the workforce, wherever they may be from, was demonized especially during the Trump years.
Workers priced out
Housing costs are the second force which seems to enter into every calculus performed in the Hudson Valley these days.
“And before Covid, too, it was getting harder and harder, which I think was part of the housing-market issue,” a Kingston restaurant owner who asked to remain anonymous confirmed. “With this influx of wealth moving to the area, and the whole, you know, Airbnb. The high rentals just priced people out. There wasn’t a huge pool of workers in the first place, you know.
Also immigration, that whole thing, turned into a real problem finding the lower-wage guys, the dishwasher, the prep cook. Trump really cut down; and everybody got scared. You know, awesome.
“My guys were few and far between. And the good ones suddenly wanted more and more money. A farmer can’t find people to work the farm, so the food costs go up. And then, you know, the meat processing, every single industry gets affected.”
Every step of the way, the cost of doing business was rising, and the money coming in was dwindling.
The cost of everything
Chuck Boughton, owner of the Rainbow Drive-in in Port Ewen, spoke with a dazed gleam in his eyes, exhausted on the last night of his operation, elbows propped against the table in a booth while he talked.
“The bottom line is cost,” he said. “Cost of everything. And it’s not just one thing. It’s the corporations that are killing us. We can’t compete with MacDonald’s. With Burger King. They’re paying 15 dollars an hour.
“And then there’s rising food costs. And the utilities, you know the electricity prices jumped through the roof. And then I’ve got to pay the gas to pick up supplies. It’s everything. We have to raise prices 20 percent just to compete.”
After 21 years Rainbow Drive-in turned off the lights forever on March 18.
Insurance exclusion
It was around March 2020 that many restaurant owners discovered a little-noticed exclusion in their Business Interruption Insurance policy. An exclusion in coverage called “Loss Due To Virus Or Bacteria.” Through this clause, the business owner who had paid their premium on time, year after year, had been hung out to dry. It exempted the insurance companies from having to pay out. The small business owner would not see one red cent. Their general understanding of their policy did not see the devil in the details.
It was in 2006 that the ISO (Insurance Service Office), based out of New Jersey, introduced the virus exclusion endorsement for inclusion in commercial property policies.
An ISO circular released at the time states in part: “The specter of pandemic or hitherto unorthodox transmission of infectious material raises the concern that insurers employing such policies may face claims in which there are efforts to expand coverage and to create sources of recovery for such losses….”
The circular identifies “rotavirus, SARS, influenza (such as avian flu), legionella and anthrax” as examples that would fall within the Virus Exclusion, noting also that “the universe of disease-causing organisms is always in evolution.”
Well, insurance is a business, too. ISO, a subsidiary of Verisk Analytics, writes the rules which the industry adopts. To maintain its competitive edge, Verisk has acquired an array of companies, AIR Worldwide among them, a catastrophe-modeling firm. And like a casino, it’s a numbers game they play.
The odds were rigged
When small business owners realized what the exclusion did, it became obvious the odds were rigged. Their understanding of the game being played was incomplete, and they would have to look for aid elsewhere. Unlike in a casino, where games of luck are played by choice, in the State of New York, buy-in is compulsory. Business interruption insurance is mandatory.
“It was made clear that [the insurance company] was not going to be covering anything,” says Jonathan Rich. “They have some sort of fine print in there that says they don’t have to pony up for this kind of thing. That’s the entire purpose for their existence? Of course it is. That’s not how they look at it. Between what I have to carry for the building what I have to carry for the restaurant, shitloads of insurance. So business interruption insurance is one of them. Right?
“And I don’t carry that just because I feel like it. I carry it because I have to. That was one of the big ironies early in this. I mean, that’s what the insurance is even called. Interruption Insurance. Like, what’s more interrupting then a global pandemic that shuts down the universe? Pandemic, right. That doesn’t count. That’s pretty sleazy.”
Aid for financial distress
With the insurance providers seeking shelter under the language of the virus and bacteria exclusion, small businesses were compelled to seek relief elsewhere.
In the case of restaurateurs who owned their buildings, but were still making mortgage payments, under a process known as forbearance, payments on the loan can be temporarily suspended if the borrower can demonstrate a state of financial distress.
Under normal circumstances, banks are just as intransigent as the insurance companies.
On March 7, 2020, however, former governor Andrew Cuomo stepped in, signing an executive order declaring that all banks subject to the jurisdiction of the DFS [New York State Department of Financial Services] must grant a 90-day forbearance to any person or business with a financial hardship as a result of the pandemic.
For some of the restaurants, this was a 90-day reprieve.
Information publicly available shows that the majority of these businesses received loans in two installments made available through the Federal PPP [Paycheck Protection Program]. Some of these loans for relief paid out hundreds of thousands of dollars.
The loans were forgivable provided that the employee and compensation levels were maintained and the loan proceeds were spent specifically on payroll costs and other eligible expenses.
This was another fillip of the CARES act.
But these loans were no less immune to the constant downward financial pressures. The loans were only useful as a stopgap measure with which to buy time until things could return to some semblance of pre-pandemic normal.
“I think a lot of us thought, if I can just get through X period of time,” explained Jonathan Rich. “Alright, If we can just get through a few more months. And then it was, well, if we can get through winter and get into spring and summer, people will come outside, and all of the sudden staffing was the new issue. It’s that sort of rolling sense of, oh, yes, just around the corner, if we get around this corner, we’ll be through to more certainty. And it just continued to get prolonged.”
Business interruption aid
An article published in the Washington Post in January 2021 contained data released by the Small Business Administration in response to a Freedom of Information Act lawsuit. It discloses that the franchises of Subway, McDonald’s, hotel chains, auto dealerships and other big businesses received $15.6 billion from the government’s emergency coronavirus loan program for small business.
“Small business” here, is obviously a misnomer. “Corporate welfare” is the combination of words they were looking for.
At the time of this writing, a bill sponsored by New York State assemblymember Robert Carroll has been stalled in an Assembly committee ever since its introduction on March 27, 2020. If moved to the floor calendar and then passed both by the Senate and Assembly, it would be delivered to governor Kathy Hochul’s desk for her signature.
The bill would be a nightmare for the insurance companies, imposing virus coverage retroactively on insurers that had specifically excluded it.
Here is an excerpt.
“Every policy of insurance insuring against loss or damage to property, which includes, but is not limited to, the loss of use and occupancy and business interruption, shall be construed to include among the covered perils under that policy coverage for business interruption during a period of a declared state emergency due to the coronavirus disease 2019 (Covid-19) pandemic.”
If approved, the bill would be retroactive to March 7, 2020. It wouldn’t save the business already closed, but it would reimburse the owners pushed out of the business. And it would send a message that restaurants and bars are vital human infrastructure components essential to the character of a community.
Just last week, consultancy Laberge Group, hired for $105,000 by the City of Kingston, submitted a proposal to the Common Council recommending how to spend $17.3 million made available to the city through part of ARPA (American Rescue Plan Act).
Over a million dollars is suggested for the improvement of parks and greenways. Some $935,000 has been earmarked for support for and implementation of a program of manufacture and deployment of tourism signs around Kingston.
Perhaps the tourism signs can be built at the site of each closed restaurant explaining how important they were to the community before Covid killed them.
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