The COVID-19 pandemic has hit South Dakota restaurants harder than just about any other industry in the state. Six months into the pandemic, with the state economy mostly open for business, restaurants across the state are still struggling to make ends meet and keep their doors open as patrons and employees worry about spreading the potentially deadly coronavirus.
Since the pandemic began, nearly half of South Dakota’s restaurants experienced at least a temporary closure — often for as long as six weeks — and more than two-thirds laid off employees. Due to COVID-19, South Dakota restaurants have missed out on as much as $90 million in revenue, according to the National Restaurant Association, forcing some to close for good.
Signs of the slowdown are visible across the state. In Rapid City, the upscale downtown eatery (kol) — opened amid great fanfare in 2015 after a $1.3 million investment — announced its closure in early August as federally funded pandemic business relief efforts such as the Paycheck Protection Program ended. In Sioux Falls, the RedRossa Napoli Pizza restaurant on Western Avenue, owned by WR Hospitality, announced an indefinite closure, citing local construction and the pandemic as reasons for declining business. In all, South Dakota’s restaurant industry is likely to shrink between 5% and 10% before the COVID-19 pandemic runs its course, said Nathan Sanderson, executive director of the South Dakota Retailers Association, which serves as the restaurant trade association. The loss could have profound economic and social implications, particularly in small towns that often struggle to maintain one or two sit-down dining establishments even in the best of times.
Restaurants are social hubs for communities of all sizes and their success or failure can be an indicator of a community’s overall financial health. In small towns, a restaurant can serve as a wedding venue, host a bull sale or prompt a local mayor into a friendly conversation with the town curmudgeon all in a single day. South Dakota’s restaurants serve as touchpoints for immigrant communities to gather and enjoy a taste of the old country or to introduce people to new foods.
More than two dozen municipalities in South Dakota passed ordinances that shuttered all or part of local restaurants and bars. Many ordinances remained in place for weeks.
“In some cases, restaurants closed down in the middle of March and reopened in the middle of June. That would be three months. That’s a full quarter of the year, and restaurants are the kind of business that aren’t going to get that business back,” Sanderson said.
From the middle of March to roughly the end of May nearly all of South Dakota’s restaurants saw their business drop. Traffic at sit-down restaurants in South Dakota had dropped by more than 50% by the end of March, according to the Minneapolis Federal Reserve Bank. By the middle of April traffic at sit-down restaurants had fallen by 65%.
“We were the first industry to be shut down at the state and local level and we’re going to be the last to recover,” said Sean Kennedy, executive vice president for public policy with the National Restaurant Association. “We’re the second-largest private sector employer in the country and the restaurant industry has lost more jobs, and more revenue than any other industry in the country.”
About 75% of South Dakota’s restaurants laid off some staff, resulting in some 18,600 people losing their jobs and winding up on unemployment, according to the association.
Restaurant owners in many South Dakota communities and across the country are facing dire financial predicaments that may linger for months or more, Kennedy said.
“This is really an 8.0 magnitude earthquake, that’s been going on for six months now,” he said. “But unlike an earthquake, it shows no signs of ending, and a lot of restaurants are on the verge of giving the keys back to the bank and shutting down for good.”
Losing restaurants could devastate small towns already struggling to grow, and closures could lower the quality of life in mid-sized and big cities, Kennedy said.
“Restaurants are really the cornerstone of somebody’s community,” Kennedy said. “Not only are they an economic driver, but they are cultural or social drivers. That is such a critical part of the culture and losing that is really scary and it’s something that is going to take many years to bring back.”
Patron visits to South Dakota restaurants didn’t recover to pre-pandemic levels until the beginning of July, according to the Minneapolis Federal Reserve. But then, the dining public, still wary of crowded indoor spaces, retreated back to their homes as the state saw a surge in new COVID-19 cases beginning in mid-July.
Dempsey’s Brew Pub and Restaurant in Watertown was just beginning to claw its way out of the massive hole left in its revenue stream by the pandemic when the summer surge of COVID-19 cases hit, said owner and head chef Sean Dempsey.
“We went from being a place that was doing $120,000 to $150,000 a month down to like $42,000,” Dempsey said.
By mid-June, things were almost back on track, but by the end of July, customer visits slowed to a trickle. Through the middle of August, Dempsey said, he’d seen business fall off even more, and some of his staff even needed to be tested for the disease.
“Thankfully, no one has tested positive,” Dempsey said.
If someone on his staff had tested positive, as has occurred at other South Dakota restaurants, the effect could have been devastating to the business that employs roughly 48 people. Dempsey said revenues had fallen as much as 80% in March and April, so any ground that can be made up before the end of 2020 is critical.
One of the biggest concerns for all businesses in South Dakota right now is what to do when an employee tests positive for COVID-19, Sanderson said. There isn’t much guidance from state government on how a business should handle an employee testing positive, though some cities have passed ordinances requiring the use of guidelines published by the federal Centers for Disease Control and Prevention.
The CDC doesn’t necessarily recommend the closure of a restaurant that has an employee test positive. Instead, the employee should be told to stay home for up to 10 days after testing positive or until after their coughing and sneezing goes away. Co-workers who had close contact with the employee also should be sent home for up to 14 days to monitor themselves for symptoms.
The CDC recommends that a business wait 24 hours before sanitizing any areas where the employee worked if they were at work within seven days of testing positive for COVID-19. If the employee hadn’t been at work for at least seven days, normal cleaning routines are all that is needed, the CDC says.
The small central South Dakota town of Faulkton was without a sit-down restaurant in 2012 when septuagenarian Dottie Huss bought a then-bankrupt restaurant and asked her son, David Huss, to run it.
David Huss re-christened the restaurant as the Dot T, named for the P-51 Mustang fighter his father flew during World War II. In response to the COVID-19 pandemic, Faulk County shut down indoor seating at non-essential businesses, including bars and restaurants. Huss had to lay off his seven employees and paid $3,000 worth in monthly loan payments, utilities and other bills without much, if any, revenue coming in.
Huss wound up paying many of the Dot T’s bills using his salary as a Faulk County Sheriff’s Office dispatcher and from his part-time job as the county Veterans’ Service Officer.
“The town needs the restaurant,” Huss said. “If you want to sit down and have a steak and a drink, there’s really no other place to go.”
At Black Hills Bagels in Rapid City, 2020 was looking to be another banner year for growth and profitability, said co-owner Debra Jensen. She and her husband, a musician, have owned the bagel shop on Mount Rushmore Road a few blocks south of downtown for almost two decades and have seen their sales consistently grow. Jensen gave up her job in broadcasting to focus on the bagel shop.
The Jensens had made other smart moves that allowed them to forge ahead amid the pandemic. The Jensens had invested in a delivery vehicle and bought a second location on Haines Avenue, a busy road not far from the Rushmore Mall. The second location also had a drive-through window.
But what really saved Black Hills Bagels was its foray into the wholesale business. Those grocers, Jensen said, were having trouble finding enough bread products for their shelves from their usual suppliers.
By the end of May, Black Hills Bagels had lifted itself out of the crater that COVID-19 had dug into its revenue stream. By the end of August, sales were actually higher than they’d been at the same point in 2019.
Many South Dakota restaurateurs are optimistic about the future despite what has become a long-term threat to their livelihoods, Sanderson said. Some owners have radically changed their business models to accommodate more socially distant dining preferences. Others have boosted their online presence and begun offering takeout and delivery services. A few restaurants even started selling groceries.
“It’s amazing how optimistic business owners are right now,” Sanderson said. “I think small business owners are resilient, optimistic people.”