Small businesses represent the backbone of the American economy. They provide an opportunity for independent entrepreneurs to pursue something of their own craft which fosters product diversity that molds a region’s cultural identity. Densely populated cities, suburban communities and small towns rely on their small businesses to create a demand for a local workforce, increase a tax-base, and drive innovation. According to the U.S. Small Business Administration, 47.5% (58.9 million workers) of the United States workforce are employed by small businesses, and nearly 10 million of these small business employees work in the accommodation and foodservice industry — the second-highest employed industry (USA Small Business Profile, 2018). Consequently, the health of the national economy is dependent on the success of small businesses because many workers rely on them for employment.
During the 2008 Financial Crisis, small businesses across America were at risk of permanently closing. Unfortunately, MWBE’s (Minority/Women Business Enterprise) were less likely to survive than white-male owned businesses. A 2014 Census Bureau study found that about 60% of white-owned businesses that existed in 2002 “survived” until 2011, compared to 49% of Black-owned businesses. Similarly, 61% of male-owned businesses survived until 2011, compared to 55% of female-owned businesses (U.S. Census Bureau, 2014). As of a result, national unemployment peaked at nearly 10% and required government intervention to initiate an economic recovery.
Many of these small businesses helped drive the economic recovery. For instance, MWBEs added 1.8 million jobs from 2007 to 2012, while firms owned by white males lost 800,000 jobs, and firms equally owned by white men and women lost another 1.6 million jobs (Liu and Parilla, 2020). MWBEs were thriving post-economic recession and played a prominent role in economic recovery. However, the Covid-19 induced economic recession can wipe out the gains of MWBEs based on our previous understanding of the last economic recession. As our world and economy become increasingly uncertain, it is important to uphold the local business that is the inner fabric of the American economy.
In response to the Covid-19 Recession, the Federal Government intervened and implemented the Paycheck Protection Program (PPP), which made $359 Billion worth of funds available for forgivable small business loans. Forgivable loans under the condition that 75 percent of the loan must be used to cover payroll costs. This loan structure is not ideal because it only leaves 25 percent to cover rent and other operational costs. Additionally, this economic measure has failed to reach the vast majority of MWBEs. The fund was completely exhausted within 2-weeks, having reached only 10% of MWBEs. According to the Center for Responsible Lending, "Roughly 95% of Black-owned businesses, 91% of Latino-owned businesses, 91% of Native Hawaiian or Pacific Islander-owned businesses, and 75% of Asian-owned businesses stand close to no chance of receiving a PPP loan through a mainstream bank or credit union” (Cerullo, 2020). Banks like Bank of America, JPMorgan, Chase, and Wells Fargo prioritized larger loans and pre-existing customers during the first round of lending, leaving the majority of MWBEs without any immediate funding.
Since MWBEs were passed up in the first round of loans, the PPP leaves much to be improved upon. The Covid-19 pandemic has caused MWBEs to lose jobs, income, and wealth-building opportunities among these communities and for the economy overall (Liu and Parilla, 2020). What needs to be done? First, MWBEs need funding to cover costs beyond payroll, such as rent and operating costs. Second, more demand from everyday consumers will help prevent businesses from permanently closing their doors. Third, MWBEs require additional institutional support beyond receiving loans from banks to navigate the competitive and biased marketplace that in large part prevents these businesses from opening in the first place.
One non-profit that is fighting for economic equality through the promotion, training, and guidance of MWBEs in the San Francisco based organization, La Cocina. La Cocina, which translates to “the kitchen” in Spanish, acts as an incubator that helps female entrepreneurs from immigrant communities that often lack the resources to grow their small scale food operations. Caleb Zigas and Leticia Landa started La Cocina because of the intense barrier to entry in competitive markets like the San Francisco Bay Area. Zigas has stated, “The changing dynamic of San Francisco only makes that more extreme” (Cadigan, 2019). Low-income women of color are often excluded in the job market, and La Cocina provides an opportunity to move beyond wage labor to start their own businesses. La Cocina looks to nurture new businesses every year by offering resources for growth.
Nite Yun, the founder of Nyum Bai, a Cambodian brick and mortar that offers street food style dishes in Oakland, said “It was all just a dream. And for La Cocina to accept me, it meant that this could actually be a reality. Getting accepted encouraged me to pursue the dream with the support of the community. Being in that program definitely helped me refine the business vision. They have a lot of resources and so from that, I had the opportunity, I was lucky enough to work at various catering gigs and popups. That’s how it all started” (EBB, 2020). Businesses will work under the La Cocina infrastructure for 3-5 years and receive access to affordable kitchen space, technical training, market connections, and hands-on support with launching a new business. Eventually, partners will graduate and open a restaurant at their own location. In 2018 alone, 22 La Cocina graduate owned businesses created 152 full-time jobs in the Bay Area (Babür, 2020). This shows that a program like this is integral for underrepresented communities receiving the training to become economically liberated through the foodservice industry.
Despite the progress that La Cocina has accomplished, Covid-19 has prevented many restaurants, food trucks, and carts from earning their normal business margins. Within weeks of the pandemic, La Cocina's business sales declined by 80-100%, forcing businesses to close and lay off workers. Businesses like those under the umbrella of La Cocina need our support. Luckily, La Cocina has been proactive regarding its Covid-19 response by assisting partners through rent abatement and loan forgiveness, employee assistance, waiving kitchen fees, ensuring businesses are following proper safety measures, providing resources for funding programs outside of federal loans, and setting up a relief fund to provide further financial assistance. This offers hope that small independent restaurants owned by women of color can thrive in the competitive San Francisco Bay Area marketplace without the support of major restaurant groups.
On a national level, Congressman Earl Blumenauer, Oregon D-3, has released a white paper that recognizes the importance restaurants have in our society and the additional resources needed for them to survive. The Restaurants Act will make a $120 billion grant program to provide relief through 2020. This proposal seeks to address the initial shortcomings of the PPP by requiring that “...the first 14 days of funds will only be made available to restaurants with annual revenues of 1.5 million or less to target local small restaurants, particularly those that are owned or operated by women or people of color” (Blumenauer, 2020). In addition, it provides a holistic approach to fund the different aspects of a restaurant's expenses including payroll, benefits, mortgage, rent, utilities, maintenance, supplies (including protective equipment and cleaning materials), food, debt obligations to suppliers, and any other expenses deemed essential by the Secretary of the Treasury. Restaurants are deeply entwined within a region's culture and must be protected through programs of this magnitude to ensure a successful recovery for restaurants independently owned by women and/or people of color. With so many individuals and families experiencing financial and emotional hardships, it’s increasingly important that we unite behind MWBE’s to jumpstart economic recovery and put capital back into the hands of marginalized communities.
Babür, Oset. La Cocina Is San Francisco's Culinary Dream-Maker. 2020
Blumenauer, Earl. “The Real Economic Support That acknowledges Unique Restaurant Assistance Needed to Survive (Restaurants) Act of 2020.” White Paper, 2020
Cadigan, Hilary. “How Do You Start a Small Food Business in America's Most Expensive City? Ask La Cocina.” Bon Appetit 2019
Cerullo, Megan. CBS News. Up to 90% of minority and women owners shut out of the Paycheck Protection Program, experts fear, April 2020.
EBB, “Let’s Eat! A Conversation with Nite Yun of Nyum Bai On The Search For Self and a More Meaningful Life,” 2020.
Liu, Sifan, and Parilla, Joseph. Businesses Owned by Women and Minorities Have Grown Will
Covid-19 Undo That, Brookings 2020.
“Owner Characteristics and Firm Performance During the Great Recession.” US Census Bureau 2014.
“The United States Small Business Administration Office of Advocacy,” 2018 Economic Profile.