Inflation 'a bigger disease than COVID' for some LI small businesses

For the Texicana Grill, the darkest days of the pandemic weren't the worst of times.

Sales during the 2020 period increased compared with 2019 because the Bellmore restaurant stayed open and offered meals-to-go, reliable home delivery and contactless payment when others could not, said founder and chef Steven N. Scopelitis.

But two years later, on May 1, the Texicana Grill closed permanently, done in by runaway inflation as well as a scarcity of avocados, chicken and other staples. The eatery, with eight employees, had operated since June 2007.

“It’s definitely worse now than before,” when New York State shut down all nonessential activity in March-June 2020 to slow the coronavirus’ spread, Scopelitis said. “I’ve been through adversity before, like during [superstorm] Sandy in 2012, but I was always able to make money. Not this time,” he said.

Inflation is more damaging than COVID-19 for nearly six in 10 small businesses in the state, according to a poll of about 800 of them that was conducted in May by the networking website Alignable.com. Five in 10 entrepreneurs said they are worried that inflation could force them to close their business for good in the next six months.

The difference between this year and 2020, experts said, is that small businesses are facing multiple hurdles simultaneously: inflation, supply-chain disruptions, the labor shortage, and now rising interest rates. There was one all-consuming challenge two years ago: surviving the state-imposed lockdown.

The lockdown, and the pandemic in general, caused people to rethink how they work, shop and go about their daily routine. Small business owners are still scrambling to adapt.

A limousine service in West Babylon is having trouble finding chauffeurs. A cafeteria in an Islandia office building has too few customers as many of the building's tenants continue to allow their employees to work from home. A Greenport fish market has stopped its weekend sales trips to Connecticut because with soaring gasoline prices, it's no longer worthwhile.

Costs beyond control

For Scopelitis, the 2020 lockdown turned into a boon because his Merrick Road restaurant was already established at takeout and known for the fresh ingredients (vegetables from Scopelitis’ garden and no frozen chicken) in its burritos, rice bowls and empanadas as well as handmade ice cream. Unlike some competitors, the Texicana Grill had in-house delivery personnel. 

“I was managing until the Ukraine-Russia war started [in February], which caused gas prices to surge and the price of everything else to go up,” he said. “I kept raising my prices, but I still couldn’t keep up with what I was being charged.”

Scopelitis reported that frying oil went from $22 for three gallons to as much as $60; avocados, from $45 for a case of 48 to $99, and chicken, from 99 cents per pound to $4.06. In addition, his landlord raised the rent 8%.

'Each month, I was making less and less money.'

- Steven N. Scopelitis, pictured in 2017 in his restaurant, Texicana Grill in Bellmore.

Credit: Marisol Diaz-Gordon

“Each month, I was making less and less money,” he recalled. “It got to the point where I said to myself, ‘If I’m working this hard to make nothing, I should pivot and go to work for one of the big restaurant chains.’ ”

The Texicana Grill is among the 20% of small businesses that won’t survive the current economic conditions, predicted Lenny Buchholtz, co-chair of the Long Island chapter of the business mentoring program, Service Corps of Retired Executives. The program's 60 volunteers counsel about 3,000 local entrepreneurs each year.

Buchholtz said "a shakeout is taking place," where companies that were struggling before the pandemic are succumbing to the blows of inflation, cracks in supply chains and unfilled jobs. "For people who were struggling, it's gotten much worse and many of them are going to fall by the wayside," he said.

Inflation casualties

Statewide, 1% of small businesses have shut down because of inflation, according to the Alignable.com poll of 778 business owners that was conducted on May 7-22. A further 1% said they planned to close.

More than half of the New Yorkers in the survey said they are worried that soaring inflation could drive them out of business by year-end. 

The pessimism was most pronounced among beauty salon owners, artists and performers and restaurateurs — each with about 70% saying they are worried,  according to the poll, which has a margin of error of plus or minus two percentage points.

“Inflation is a bigger disease than COVID was for small businesses,” said Alignable spokesman Chuck Casto, adding that 54% of entrepreneurs reported their costs climbed more than 25% but only 19% said they’ve fully recouped the increase by raising consumer prices.

Inflation will continue unabated for another year or more because of supply-chain disruptions and the war in Ukraine, which has accelerated fuel prices and is projected to cause a shortage of wheat and other grains, according to economic forecasts for Long Island and the nation.

“We’re going to be in a period of elevated inflation for the next year and a half before prices level off in 2024,” said John A. Rizzo, an economist and Stony Brook University professor.

Help wanting

For some small businesses, finding help is a bigger obstacle to overcome than paying more for supplies.

Executive Ground Transportation, a limousine service in West Babylon, is always hiring.

'Staffing is definitely the biggest challenge for us.' 

-Douglas Schwartz, president of Executive Ground Transportation in West Babylon

Credit: Morgan Campbell

“Staffing is definitely the biggest challenge for us,” said Douglas Schwartz, who started the company in 1996 with an initial focus on business travelers. “Each individual ride needs an individual chauffeur, and with [ride orders] higher than they’ve ever been, it’s a struggle.”

He continued, “We’re constantly marketing, interviewing, doing background checks and license checks [of the prospective employee’s driving record] — whatever it takes to try and capture new employees.”

The limo service, which has a workforce of about 60 people, introduced flexible schedules because some chauffeurs only want to work a few hours per day and to avoid employee burnout. It also is signing up school bus drivers to work until students return to the classrooms in September. 

The number of trips that Executive Ground makes has increased because Long Islanders have resumed nights on the town in Manhattan, weddings and other family celebrations, and vacations that require transportation to and from the airport.

Leisure activities now account for 75% of the company’s total trips, a change from 2019 when business travel accounted for two-thirds of the trips, Schwartz said, adding that business travel will rebound eventually.

“It’s much harder to operate today than it was during the pandemic,” he said. “We had no business during the pandemic, but we were able to pay our rent and expenses, to keep things alive because the government was showering us with money” via Paycheck Protection Program loans, COVID-19 Economic Injury Disaster Loans and other relief initiatives.

No more aid cushion 

The PPP ended last year and the COVID EIDL closed in May. New York State is rolling out two limited programs, but the lion’s share of pandemic relief has ended.

That’s a problem for firms that haven’t recouped their 2020 losses or opened in late 2021, according to Janine Nicole Dennis, chief innovations officer at the business consulting firm Talent Think Innovations LLC in Wheatley Heights.

'We're being hit with multiple factors that just seem insurmountable.'

-Janine Nicole Dennis, chief innovations officer at Talent Think Innovations LLC in Wheatley Heights

Credit: Steve Zaak

She said, “This isn’t the first time that we’ve gone through inflation. But now, we're being hit with multiple factors that just seem insurmountable,” she said.

Dennis and others advised small business owners to review their operations with an eye toward changes in customer behavior and ways to boost sales and reduce expenses.

At Johnny’s Bites cafeteria and catering, owners Rhonda and John Cambria are seeking more catering orders and offering to rent their commercial kitchen to food trucks and other food-related businesses. The couple said they need to make up for sales that aren’t taking place in the 50-seat cafeteria because the office building where it’s located is still sparsely populated.

'The work-from-home movement is really hurting us.'

 -Rhonda Cambria, who owns Johnny’s Bites cafeteria and catering with her husband John

Credit: James Carbone

Ex-customers working from home

“The work-from-home movement is really hurting us,” said Rhonda Cambria. “Businesses have moved out of the building and the ones that are here have 80% of their employees working from home. When we opened in November, we thought [office personnel] would be back Monday to Friday and we would have an automatic audience,” she said.

The 180,000-square-foot office building at 2929 Expressway Dr. N. in Islandia is home to nine tenants, including a medical practice, law firm, building maintenance company and a branch of Investors Bank spread across three floors. However, only 11.4% of the building's 807 parking spots were occupied in the late morning on Thursday, according to a Newsday survey.

Besides the dearth of office workers, inflation is taking a toll on Johnny's Bites, which has four employees and is known for its comfort food like stuffed meatballs, chicken pot pie and turkey chili.

Chef John Cambria reported that chicken has gone from $70 to $80 for a 40-pound case to more than $120; bacon, from $60 for a 25-pound box to $95, and eggs, from $30 a case to up to $45. Brisket got to be so expensive that it was dropped from the menu.

“We waited the longest time to raise our prices because we didn’t want to lose the [cafeteria] customers that we have,” he said.

Small businesses across Long Island face strong headwinds, with discouraged owners starting to think their comeback summer was a mirage. But most vow to carry on, according to Eric Alexander, founder of the advocacy group, LI Main Street Alliance, which represents 45 downtowns that are undergoing revitalization.

“This was going to be the breakout summer where they made back some of the money that they lost,” he said. “Then along comes this crazy inflation-supply chain-staffing problem and folks are disheartened. However, I’m not hearing a lot of people saying, ‘I’m going to close.’ ”

Fishermen vs. economic tides

In Greenport, commercial fisherman Nate Phillips said he doesn’t know what the future holds except that he and his family have no intention of giving up their way of life.

Phillips, a fourth-generation fisherman and manager of the family-owned Alice’s Fish Market, cited soaring gas prices as one of the reasons why he’s no longer selling fish at two farmers’ markets in Connecticut.

“The ferry [from Orient Point to New London, Connecticut] has gone up, my fuel costs have gone up and I’ve had trouble finding staff — it’s enough not to make it profitable to do,” he said.

'We have to pivot ... We will get through this.'

-Nate Phillips, commercial fisherman in Greenport

Credit: Randee Daddona

Phillips also is paying more to make deliveries to the New Fulton Fish Market Cooperative in the Bronx, where fish is sold to restaurants and others. The cost of each cardboard packing carton has risen $2 and fuel for his father’s fishing boat, The Illusion, is $900,000 per year, or double what it had been, he said.

“The cost of doing business is constantly going up,” Phillips said, standing outside the fish market and packing house that his parents purchased in late 1996 and now has nine employees. “We have to pivot. That’s what we do in the fishing industry. We will get through this,” he said.

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.