“Until this year I did not feel the recession at all – this is really weird” says Gopal “Paul” Sood. Paul runs the 23rd St Café in the North University Park neighborhood of Los Angeles and for five out of six years it has been a success. Since August Paul has at had to reduce manpower by more than half to keep his restaurant running “I only have two or three people working here now. Between three and six pm I tell them to go home, take a break, they see their kids after school.” What has changed?
One culprit is that his operating costs have increased. According to Paul “Utility rates have gone up” as well as commodity prices for basic food produce. Energy costs have increased steadily and water will only worsen due to the drought year. Paul also pointed out that it is harder for small “mom and pop” businesses because “we don’t get the utility tax breaks like the big companies.”
The government has tried to make access to capital easier to stimulate the economy by keeping the federal funds rate near 0%. If Paul has plans to expand then the question of access to capital through loans becomes relevant except contrary to the capitalist business model of continuous expansion Paul states: “I’m not looking to expand – but bank loans have high interest rates; so I’m holding back to invest.” His response may suggest that government policy meant to help the economy is maladjusted to helping small businesses.
Paul had found that his weekday clientele was down “50-60%” which he saw as the loss of working customers on lunch breaks due to the downsizing and disappearance of small businesses on Washington Blvd a few blocks away. “I know my customers, some were staff at the SEIU Union, I don’t see them anymore.” Paul knows he has a reliable core of customers that are USC students “I’m still busy Friday, Saturday, Sunday from the students still coming but it’s the business and maybe the local schools downsizing.” In fact it’s been a year of downsizing and pay freezes for the L.A. Unified School district.
New competition isn’t a problem either – “we are a neighborhood café not a ‘gourmet’ café,” referring to the “Nature’s Brew” café which opened up last year on S. Union Ave. Asking Paul what changes he might have to make he said “I don’t want to raise prices – when I’ve tried doing specials it doesn’t change the number of people coming in.” On the changing nature of downtown Paul replied that “23rd street is too far to feel the downtown revival…” and on USC’s impact on the neighborhood: “this is a low-income area and USC is creating their own market, only big companies are willing to pay into it” referring to the commercial spaces made available to by new housing constructions and the plans to renovate the University Village. Indeed rent for most of those spaces is in the ballpark of $10 per square foot while rent is about 2$ in older buildings that house local businesses.
The outlook isn’t entirely grim though as social media has been a source of new customers for Paul’s restaurant. “What really helps me are reviews on Yelp, I’m getting tourists from the science center and museums, even people going to LA Live.” Indeed the 23rd St Café gets 4/5 stars on Yelp. For Paul, this success is due to something the franchises don’t have: “I have specialty food – so I have a loyal following.”