Snoqualmie’s small businesses feeling squeezed
January 12, 2011
By Dan Catchpole
Lunchtime at Isadora’s Café in Snoqualmie was busier than usual the week after Christmas. Regulars pulled up chairs on the restaurant’s well-worn wood floors to get a last meal before Isadora’s closed with the new year.
For the owners, Jody and Michael Sands, the decision to close the doors after two years was a long time coming.
“It was heartbreaking, absolutely heartbreaking,” Jody Sands said.
She had learned a lot about the restaurant business while waiting tables at the café in the mid-‘90s. Owning Isadora’s had been a dream come true for the Snoqualmie native.
Like several other independent owners of food service businesses in the Valley, Sands endured the economic recession in 2008 and 2009, but couldn’t overcome the lagging recovery in 2010. Squeezed by anemic revenue, rising costs and no available credit, these merchants either closed or sold their businesses.
Even though the Great Recession technically ended in 2009, the economy has continued to limp along. The recovery so far has been fueled by increased productivity from existing workers, rather than new hires.
“Job growth has been slower than molasses,” said Arun Raha, Washington State’s chief economist.
For many businesses, that means their customer base hasn’t been growing. In addition, people are still saving more and spending less, especially on non-essential goods and services.
That has not been good news for the Snoqualmie Valley’s businesses, most of which offer non-essential goods and services, especially food. Snoqualmie has 37 businesses which sell food, according to Bob Cole, an economic consultant for the city.
“From the beginning, I could see we were going to have a problem,” Sands said.
When she took over Isadora’s in December 2008, Sands changed the menu — keeping the mainstays, while adding dishes to cater to a wider crowd. Over the next couple years, she worked to increase traffic with more live music, an open mike night and small stage theater.
She had enough people coming in through the door to keep the lights on from day to day, but not enough to provide any security for the future.
Several owners of retail and food businesses in downtown Snoqualmie said that customer traffic was down this summer, the peak season for many stores, during work on the city’s downtown revitalization project. The work included tearing up one side of the commercial area’s main street.
“Between the economy and all the construction they did last year, we put so much money into it, we just couldn’t keep it going,” said Kathy Twede, who recently sold the Choo Choo Café at the Snoqualmie Falls Candy Factory.
Her husband, Kyle Twede, owns Twede’s Café in North Bend.
Both Twede and Sands said that the downtown work will benefit the city in the future.
The city’s primary role in boosting the local economy is providing and maintaining infrastructure to support businesses, Cole said.
“I love this town, this community, and I’m really excited to see it blossom. Unfortunately, we’re going out at the beginning of this,” Sands said.
Independent restaurants are having difficulty getting credit to get through the lean times. Twede couldn’t even get overdraft protection for her restaurant. It had been easy to get 10 years before when her husband opened Twede’s Café.
“Nobody’s willing to shell out money like they used to,” she said.
To maintain a positive cash flow, Twede cut back her employees — from six to two — and increased her own hours.
To get credit, businesses have to show that they can make a profit and pay off their debt.
For small businesses struggling to stay open in a small market, it becomes a Catch-22: They need credit to keep afloat and eventually turn a profit, but they have to show they are profitable to get credit.
“They don’t have the business plans that a banker would be interested in,” Raha said.
Typically, smaller restaurants lack resources and expertise available to larger businesses, said Arnold Shain, founder of the Restaurant Group, Inc., a consulting firm.
“Smaller restaurants are more on the line of being chef driven, and while that is appealing to many people, it is somewhat one-dimensional in operational knowledge required.”
Restaurants must succeed in many areas: cuisine, branding, service and management, atmosphere, and systems and control.
“If one or more of these legs is longer, shorter than the other than the chair either leans or falls over,” Shain said.
But the state has been seeing some positive signs for restaurants across the state, Raha said. “After two years of eating at home, they’re getting sick of it.”
Hope for the future despite obstacles
Some business owners see a brightening horizon. A few doors down from Isadora’s, Hilary Shemanski just bought Koko Beans, a struggling coffeehouse, in December.
“I feel fortunate, actually,” she said. “It feels like I got in at the right time.”
One benefit to her location is its low overhead. Koko Beans is a coffeehouse in a comfortable shoebox with room for a handful of tables.
“As cute as it is, it’s obviously not working because I’m the fourth owner in three years,” said Shemanski, who has lived in the area since 1998.
She thinks she has the missing ingredient: high-end beer, which she plans to add by mid-April. It will still be a coffeehouse, though.
Shemanski hopes that will help her capture more of the tourist market while maintaining the store’s local regulars.
But even after the economy recovers and business picks up, Shemanski has discovered a long-term obstacle that business owners must put up with: permits.
“Going through the permit process, it almost fizzles out your creativity. You come in with all these ideas, and then you find out there’s a form for everything,” she said.
Currently, she is trying to get a license to serve beer and looking into getting a license to serve prepared foods, such as sandwiches. But the costs of permits can add up for small businesses.
So can other small costs, like customers using debit or credit cards rather than cash, she said.
Each time a customer uses a debit card she has to pay 25 cents. Credit cards with rewards programs are worse; they can cost her up to 7 percent of the total purchase, she said.
Despite the obstacles, Shemanski is confident she’ll succeed.
“If you do it right, you can make it,” she said.
Dan Catchpole: 392-6434, ext. 246, or firstname.lastname@example.org. Comment at www.snovalleystar.com.