Delivering the goods Fees, police stops, and booming cannabis

Pana food truck | Provided photo

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As shelter-in-place halts the economy, local businesses are exploring new revenue models. Most are barely keeping the doors open, but some have had surprising success. 

By Charlotte West

From brand new establishments to community mainstays, COVID-19 is having a dramatic impact on local businesses, some of which have shuttered entirely. But restaurants and marijuana dispensaries are both considered essential businesses during the current shelter-in-places orders in Santa Cruz and Monterey counties. To keep the doors open, many have started experimenting with delivery and to-go orders.

Delivery and takeout have always been a cornerstone of Heirloom Pizza Company’s business model. Michael Foley started the eatery in Monterey three years ago. While he hasn’t run all the numbers, he estimates that business is down by about half. Deliveries are up slightly, Foley says. They work with a local partner, Green Pedal Courier, who delivers their pizza by bike.

Foley says that they’ve reduced their opening hours to three hours a day, six days a week. He works all day preparing for the evening and staff have seen a reduction in the number of shifts. “We’re making the best of it, but I’m just breaking even and I’m working as hard as I ever do,” Foley says.

Foley is optimistic about Heirloom’s ability to weather the pandemic. He was working at a pizza shop in San Francisco when the 2008 recession hit. “That place was busier than ever, because people still want to go out and then they know that this food is a good value,” he says. “For 30 bucks, you can feed four people.”

But there was also evidence of how many people had lost their jobs. When he advertised for a host position, 90 would apply. “I don’t know if that’s going to happen (after the pandemic), but I can’t imagine that it wouldn’t,” Foley says.

In Santa Cruz, the Buttery Cafe & Bakery has been a community staple since its original owner Janet Platin founded it in 1982. Manager Tommy Park says that they looked into a delivery model last year but decided against it because of the fees that third-party delivery services DoorDash and UberEats take out of the order total.

Many delivery services take 25-30 percent, in addition to the delivery fee they charge customers that goes to the driver. On a $10 order, the restaurant would receive $3. Park says that working with third party services isn’t a sustainable business model, but it helps keep the doors open and employees paid for now.

“It’s quite a bit of money that they take from the food industry,” Park says. “It’s not doable for somebody who has to pay rent, and has a lot of employees. So we never did it up until recently. Right now we’re doing it because we just need to get some sales in order to keep our employees.”

The Buttery currently employs around 80 staff members, around half of whom work full-time. Park says that it would actually be cheaper for them to hire their own delivery driver, but the logistics are complicated.

Park estimates that business is down by 80 percent. They can operate on the current delivery and take-out model for a few months because of cash reserves and cutting down on inventory costs. “We’re not making enough to be making payroll, but we can’t close because we have a lot of staff that rely on us,” he says.

Park hopes that the recent support for small businesses, such as a payroll loan, announced in the federal stimulus package will also offer some relief.

The Buttery prepares all of its food for the next day, and staff can take home anything that’s left at the end of the day. They’ve closed their cafe and only allow four customers in the store at a time to prevent crowding. They are offering cold sandwiches and salads, but are no longer selling hot food.

They plan to add additional items at the request of customers. “A lot of stores are closing around us. So that means people have nowhere to go eat if they don’t want to cook,” Park says.

Several employees who work in the bakery at night have been pulled over by police asking them where they are going. Park says they’ve had to issue a letter that staff can use to prove they work for an essential business.

The bulk of the Buttery’s current sales come from cakes and cupcakes. “People still have birthdays, they’re just not having parties,” Park says.

While the Buttery is a well-established Santa Cruz mainstay, other businesses were just getting off the ground when the pandemic hit. German Sierra started his mobile eatery, Pana Food Truck, less than eight months ago. Normally parked at the Farmers Market Westside in Santa Cruz, the truck features different flavors of arepas from Sierra’s native Venezuela. (Sierra says Pana’s signature dish is the Pabellon, an arepa filled with plantains, beans, beef and cheese.)

While they occasionally hire extra help, the truck is mainly operated by Sierra and his wife. “We can still keep the doors open but our business has dropped maybe 50 percent,” Sierra says.

Pana Food Truck has been promoting delivery and to-go orders, primarily by partnering with third party delivery services. “Sometimes people call and we’ll deliver ourselves,” Sierra adds.

He’s seen a drop in walk-ups, but says “we still have really good support from the community.” Sierra adds they are also making a conscious effort to support other local businesses.

While food businesses are struggling, the cannabis industry seems to be weathering the storm. At 3Bros in Santa Cruz, deliveries are up, although sales are down. Overall business is down by about 25 percent.

Owner Mark Taylor says that deliveries have increased from just a few a week to hundreds. Consumers can log onto the website, pick their products, upload a photo of their ID, and then pay the delivery driver in cash.

In-person sales have dropped from 250-300 to around 175 per day, partially because only two customers are allowed in the Fair Avenue store at a time.

In addition to delivery, 3Bros is promoting online orders where customers select their products online and then come in to pick up their order. The company is also exploring using CanPay, a payment app that allows customers to make purchases at cannabis retailers with a debit card. The app would eliminate the need for a cash transaction altogether.

The company has had some reduction in staff due to the overall slowdown. “Some employees want to stay home and I get that,” Taylor says. “So for the ones that are here, we’re taking every single precaution possible to keep them and the public safe.”

He adds that 3Bros doesn’t charge a delivery fee. “I was one of the first ones delivering for us,” Taylor says. “And it was nice as an owner to be out there delivering and see people being happy that we’re bringing [products] to their doorstep.”

For other cannabis shops, business has never been better. Nate Hill, delivery operations manager at The Reef in Seaside, says that the company had its best month in three and a half years in February and sales in March topped that. “Projections for this month (April) are about three times the average month of 2019,” he says.

Hill attributes all of the growth to deliveries, which have increased 200-300 percent since the shelter-in-place order went into effect. The day after Monterey County issued its order on March 16th, the store had record sales. Demand has been so great that Hill even had to hire a new delivery driver. “Right now, operating in Monterey and Salinas, I have three full time drivers on the road as well as a full time dispatch person answering phone calls, transmitting the online orders, and preparing the bags,” he says.

He describes The Reef’s business model as “pizza delivery style.” Customers order from a menu and then the drivers pick up their orders to take to customers’ homes or public places. “You don’t drive around with an on site inventory,” Hill says.

Hill says The Reef’s ETA from order to delivery is between 30 and 45 minutes. The amount per order has also increased because customers are trying to reduce the number of times they have to go out and interact with people.

Hill says that foot traffic in the store is down, down to 220 per day from 350-400 people per day before the shelter in place order. Employees that have vulnerable family members or who live in Santa Cruz county have opted not to come to work. The two employees who live in Santa Cruz County were pulled over by police when they tried to come to work.

The Reef has also tried to find remote work like menu updates and social media marketing for staff who aren’t comfortable coming in. “I don’t need five bud tenders on the floor if there’s only three consumers at a time, “ Hill says. “The store is slightly less busy due to the amount of people that could walk through the door. But because delivery is up, we’ve been able to hit our sales targets.”

The Reef is still operating its storefront in Seaside, but only three customers are allowed in at a time. The company has both recreational and medicinal marijuana licenses.

The boom is likely industry wide; Hill’s business partner in San Francisco has seen similar growth in deliveries. However, Hill says that cannabis businesses that didn’t have delivery in place have not likely had the same growth. “If you’re a storefront that said on March 16th, ‘I need to roll out delivery,’ that wouldn’t be a successful model,” he says. “We were lucky to have the resources [in place] to expand almost immediately.”

Hill is hopeful the delivery boom will continue after shelter-in-place ends. Customers who didn’t know delivery existed have realized how convenient it is; older clientele in particular welcome the service. He also anticipates that many people will still try to limit their exposure even after the shelter-in-place order is lifted.

He recognizes that his business is one of the lucky ones. “It is bittersweet to be performing in a time of apocalypse,” Hill says. “However, it’s nice to be able to help people and be able to provide safe access to alternative medicine.”

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