Petaluma restaurant owners adapt to survive

Waseem Khan watched the news at the beginning of March with a growing sense of dread. A small business owner, Khan had invested a significant chunk of his savings into the franchise restaurant Apple Spice, which he planned to open in Petaluma.

Then the coronavirus pandemic spread to the U.S. and businesses everywhere were forced to close, plunging the country into the worst financial crisis since the Great Depression. Despite the challenging business climate, Khan forged ahead through significant headwinds and this month opened the first new restaurant in Petaluma since the coronavirus shutdown.

As restaurants adapt to changing regulations and offer a takeout only menu, Khan realized his business model was actually well-suited for these times. Apple Spice has no dining room. The delivery-only restaurant provides fresh sandwiches, soups and salads on demand and has a sizable catering component.

“I had no other choice but to open. I had to pay rent,” Khan said. “We’re probably going to have a bumpy start, but we’ll get going and we’ll do fine.”

Gov. Gavin Newsom last week unveiled guidelines that eateries in the state must follow before they are allowed to reopen dining rooms. The rules include face coverings for all employees who interact with the public, disposable gloves for servers, daily temperature readings for everyone working in the establishment, disposable menus, and 6 feet of space between tables.

Even with these measures in place, restaurants in Sonoma County may not be able to open until its coronavirus cases start to abate, which could be at least two weeks away.

Restaurants in Petaluma, which make up a large piece of the local economy, have had a mixed experience during the shutdown. Some have been forced to close for good.

A new restaurant like Apple Spice is plowing forward, hoping to plant roots in an uncertain time. Long established restaurants like Dempsey’s are hoping to ride out the storm on a limited takeout menu. Some like Ray’s Deli closed briefly only to reopen with curbside pickup.

The last craft brewery

When Robert Moxley bought Dempsey’s Restaurant and Brewery four years ago, Petaluma was enjoying a craft beer revival of sorts. Lagunitas was still 50% locally owned - Heineken completed its buyout of the Petaluma brewery in 2017 - HenHouse had just moved to Santa Rosa, and Petaluma Hills and 101 North were gaining a cult following.

The two smaller breweries have since closed, leaving Dempsey’s as the only true craft brewery remaining in Petaluma. Established in 1991, Dempsey’s is the oldest brewery in Sonoma County.

During the pandemic shutdown, Dempsey’s, like most restaurants, has shifted to curbside pick up and delivery, but is only doing one-twentieth of its normal business, Moxley said.

“It’s been tough for us,” he said. “It’s completely shifted the economics.”

Dempsey’s has been particularly hit hard because the restaurant catered to downtown foot traffic and provided a riverfront dining experience where patrons could sip their craft brews on the patio. That experience is now gone, although beer fans can still fill up growlers and crowlers and order food from a limited to-go menu.

Moxley has had to layoff about 20 workers, and the staff is now down to three. He said he recently rearranged the tables to try and maintain 6 feet of space between them, one requirement to reopen, but he doesn’t think restaurants will be at full capacity until there is a vaccine for COVID-19.

“There’s a lot of apprehension out there,” he said. “It’s less of a legal question and more about when people are feeling comfortable going out.”

With the dining room empty, Moxley, who owns the restaurant with his wife, Sue Cho, had a chance to take care of some projects like painting the interior and giving the kitchen a deep clean.

Because of its prominent location and long established reputation, Moxley thinks Dempsey’s can weather the shutdown and make it out the other side.

“We’ll see how it goes,” he said. “We’ll try and build it back. We’re not planning on shuttering. We’re the only craft brewer in downtown Petaluma, that seems like it should work pretty well.”

Takeout and delivery only

Khan, a Petaluma entrepreneur, was looking for a new venture after a business opportunity on the East Coast didn’t pan out. He came across Apple Spice, a franchise chain with dozens of locations across the country but with no Northern California foothold.

He found the perfect Lakeville Highway location in the space formerly occupied Giacomo’s Ristorante, which closed last year after 32 years in business. Khan said he likes Apple Spice’s bread, which is baked fresh every day and forms the foundation of their nearly two dozen different sandwiches.

Khan originally planned to open at the beginning of the year, but it took longer than expected to obtain the necessary permits. As a result, he found himself opening a new restaurant in some of the worst economic conditions in the past 90 years.

“I started realizing that I’m opening when things are not going so well in the restaurant industry,” said Khan, who raised four kids in Petaluma.

But a delivery-only model is not hindered by restrictions on dine-in guests, Khan said. The restaurant offers delivery of boxed lunches with a minimum order of five or catered food for a minimum of 15 people. Apple Spice also delivers meals to first responders, including to Petaluma Valley Hospital and Petaluma police and firefighters, if someone sponsors a meal at applespice.com/petaluma-sponsorship.

“I never could have predicted that all restaurants would be delivery only,” he said. “But I’m glad that I picked this concept.”

Khan has hired seven employees, providing local jobs at a time when unemployment is skyrocketing. All of the employees wear protective equipment at work, he said.

Even with a favorable business model, a new restaurant typically faces considerable hurdles even in a good economy. Khan is well aware of the challenges he faces as a new small business owner. With bills to pay and payroll to make, he knows he can’t be in the red for too long.

“It’s a very scary time,” he said. “I didn’t know what was going to happen. I thought maybe we wouldn’t be able to open at all. But the delivery option gave us hope.”

The neighborhood pub

April to June is normally the busiest time of the year for Ray’s Delicatessen and Tavern. The Western Avenue establishment is just around the corner from the Little League fields at Petaluma Junior High and the traffic during baseball season brought Ray’s enough business to sustain it through the year.

But Little League shut down two weeks into the season, and eventually Ray’s did too, although only temporarily.

Co-owners Eli Schuepbach and Miranda Austin reopened last week after a two-week closure to take care of family issues and to transition to takeout only, Schuepbach said.

“We’re a neighborhood place,” he said. “A lot of our daily customers were coming in to get a sandwich and then hanging out for three hours, maybe having a beer and meeting a friend. It had a pub-like feel. That’s gone now.”

Besides being known for crafting giant gourmet sandwiches, Ray’s also had a bar and hosted live music, which is also on hold during the shutdown. Ten years ago, Schuepbach and Austin bought the Petaluma landmark that first opened in 1947.

When the shelter in place order was announced, Schuepbach launched a Go Fund Me campaign, knowing his business would feel the pain of a prolonged shutdown.

“We got into this for the love of the business,” he said. “Restaurant owners all know there are small margins.”

Ray’s has since hired back eight of its 24 employees. During the temporary closure, Schuepbach said they set up an online ordering system, which has saved time compared to ordering over the phone.

Despite the financial hardship, Schuepback is heartened by the support of Ray’s dedicated customer base. One customer left a $50 tip. Another paid for sandwiches with a $100 bill and told him to keep the change. The Go Fund Me campaign has raised more than $11,000 so far.

“We feel without a doubt the community wants us to be here,” he said.

While he plans on reopening Ray’s when it is safe to do so, the prospect of a shutdown with no end in sight is stressful, Schuepbach said. Ray’s was never supposed to be a takeout-only establishment.

“This is not a forever game plan. We can’t sustain a profit loss for six to eight months,” he said. “We didn’t get into this business to serve food in boxes and shove it under a door. However, we maintain hope that this is a just a place holder. Ray’s as a community center and neighborhood hangout is what we want back as soon as possible.”

(Contact Matt Brown at matt.brown@arguscourier.com.)