Hurricane Sandy Still Impacting Businesses

It’s been a year since Hurricane Sandy struck the U.S. east coast and left countless businesses in ruin. Many of those businesses have closed their doors for good …

It’s been a year since Hurricane Sandy struck the U.S. east coast and left countless businesses in ruin. Many of those businesses have closed their doors for good due to poor insurance coverage, failed loan deals and government foot-dragging. Others, however, have a rosier outlook and have taken lessons from the disaster. One lesson is that carefully choosing and investing in insurance is a wise thing to do. Another, more subtle lesson, is that it’s important to cultivate deep and lasting connections with customers so that they feel compelled to stay loyal to a business that’s come upon hard times. For more on this continue reading the following article from TheStreet.

After 16 years in business, Sun Kissed Tanning, a tanning salon in Long Beach, N.Y., officially closed this past April because it couldn’t come up with the investment needed to rebuild following Hurricane Sandy.

For months, owner Allie Cohen posted optimistic comments on the tanning salon’s Facebook page, with all signs pointing toward a re-opening. But Cohen was waiting on insurance money to come through – a Small Business Administration loan and for new tanning beds to be delivered. 

Finally on April 5, 2013, she called it quits on Facebook. It was a heart-wrenching decision.

"I am very sad to say that after over 16 years in business, Sun Kissed will not be able to reopen. The salon took a beating from Sandy… ALL tanning beds, sunless tanning and other electrical equipment were trashed… Unfortunately nothing at ALL was covered by insurance. The investment to complete the rebuild, purchase ALL the new tanning equipment and utilities is far too high for me to accomplish. The SBA loan has been dragging me along and still not in my hands. I always took pride in the homey, comfy environment in Sun Kissed. My staff has been amazing and like family to me. … This is a very sad situation and I feel sorry for all my beautiful clients who have been loyal and waiting for me. I thank you all very dearly for making Sun Kissed a success. Wishing you all the best from the bottom of my heart. XOXO Allie"

Sun Kissed Tanning’s story is one that’s heard throughout the seaside towns across New York, New Jersey and elsewhere after being pummeled last October by Superstorm Sandy, the media’s nickname for the late-season hurricane. Sandy’s wrath was particularly destructive because the hurricane merged with another winter storm and happened during a full moon when tides are already higher, turning it into a megastorm that affected the entire eastern seaboard before making landfall near Atlantic City, N.J.

There is a terrible reality that oftentimes comes with being a small-business owner. Sandy reinforced the notion that owning a business is a risk. Everyone has heard stories like Sun Kissed Tanning’s — business owners who couldn’t afford to rebuild on their own, but getting a grant funded by the government, financing (if they could even take on more debt) or an insurance company to cover their losses hasn’t exactly worked out.

Also see: Small Businesses, Social Media Saved My Town During Hurricane Sandy

Also see: Businesses Hurt By Hurricane Sandy Are Forced to Rebuild on Their Own

Just about one year later, the businesses that TheStreet spoke with have had varying experiences with rebuilding. On the bright side, lessons have been learned and some are coming back with brighter outlooks and a renewed sense of enthusiasm for their businesses. Others have reservations and wonder whether their businesses will ever be able to regain the same traction as before the storm.

Long Beach, N.Y.

Dr. Sean Pastuch, a chiropractor, and his business partner Mike Abgarian were forced to close their original CrossFit location in Long Beach, N.Y., after the establishment suffered a "complete loss," when water, sewage and fuel rushed into the gym during the storm.

At the time, they were also negotiating for a second CrossFit location in Brooklyn, N.Y., which they have since been able to complete by partnering with the Aviator Sports and Events Center, however they have not re-opened the Long Beach location.

They’ve opted to open a gym in the neighboring town of Island Park, N.Y. but are unsure if they will return to Long Beach because many homeowners are still not home yet and many renters in the seaside community were forced to find housing elsewhere. Pastuch says the team doesn’t know enough about the new demographics in Long Beach to determine if it will support two CrossFit’s so close. Additionally, its original location – in a strip of stores – was not suited for the gym’s needs, he says in retrospect.

"It’s difficult to find the right type of building for the right price. Long Beach was not a home-run hit for us financially," says Pastuch, who also operates his clinic out of Island Park. Still, they’re keeping their options open.

In the meantime, Pastuch and his partner have been successful in the new locations and he talks of lessons learned from the storm.

A major lesson for the gym – besides purchasing flood insurance – was to improve upon its email and social media outreach to members and learn how to cultivate new customers at a more aggressive pace than previously.

"Because of the storm we probably lost $120,000 to $130,000 if not more," Pastuch says. "We lost 60% of membership when we re-opened and then it was about getting those old members to come back and finding new people to join our community, which by the way, the people we have in our gym are incredibly resourceful and incredibly dependable. Our membership base was basically what got us through everything."

Business now is good and getting better, he says. "It can always improve. We like to continue to build on it, but business has definitely improved. We have more members than before the storm. We were a little more aggressive about getting people back into the gym," he adds.

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The clinic was tougher to get back up and running. After being closed for six months, patients who needed his services went elsewhere for treatment. "I went from seeing 70 patients a week to seeing three when we re-opened. We are just now back to where we were before the storm," he says.

"It sucked, but it sucked for everybody. We had no choice but to continue to move forward and that’s what we did and hopefully we don’t have to do it again," Pastuch says.

Though it’s hard to give an overall tally of just how many businesses were forced to shut their doors because of Sandy — in terms of Small Business Administration assistance, Hurricane Sandy is the third largest natural disaster event in U.S. history, after the combined Gulf Coast hurricanes Katrina, Rita and Wilma in 2005, which in total cost $10.9 billion, and the Northridge, Calif., earthquake in January 1994, which cost $4 billion, according to the SBA. (Applications for SBA disaster loans related to Sandy have since closed.)

As of press time, the Small Business Administration approved 36,634 Sandy-related loans worth about $2.45 billion to individuals and businesses across New York, New Jersey, Connecticut, Rhode Island, Maryland, Virginia and North Carolina. The vast majority of those loans were for individuals; while just $484 million, or 4,110 loans, were specifically business disaster loans. (The SBA’s Disaster Assistance division did not close during this month’s government shutdown.)

There are a host of reasons why the business loan number was so relatively small – some businesses chose not to take on more debt, others were denied by the SBA when they couldn’t show enough income to satisfy the agency’s loan eligibility, at least in those first few months. Another factor was the lengthy and document-heavy application process, which could prove futile if a business owner lost all of his or her paperwork as a result of the storm.

New York City

It’s one of the reasons New York City, for instance, is providing expanded and re-launched programs for small business owners. In May, it re-launched a $72 billion recovery loan and matching grant program with funding from the federal Community Development Block Grant Disaster Recovery Action Plan for small businesses that still haven’t been able to reopen yet.

Small business owners impacted by Sandy can generally receive up to $150,000 in the form of 1%-interest loans or matching grants of up to $60,000 to use toward working capital and moveable equipment. (Some businesses may be eligible for loans of up to $1 million and grants up to $100,000.) Applications are being accepted through September 2017. (Note: assistance received from other entities, such as insurance, other private grants and state and federal assistance are taken into account when determining the award amount, the department says.)

The program follows the efforts immediately after the storm by the city to reach businesses through a loan and matching grant program funded by the New York City Economic Development Corp., Goldman Sachs (GS) and the New York Bankers Association. Yet those loans maxed out at $25,000 and matching grants were made up to $10,000.

In New York City, "there’s been tremendous rebuilding and recovery," says Merideth Weber, press secretary for the New York City Department of Small Business Services. "Not everyone, unfortunately has been able to reopen, but we’re definitely seeing places that are actually stronger than before the storm."

Weber also pointed to initiatives the city is supporting to help specific "commercial corridors" under its watch rebuild and improve their business vitality.

Red Hook, Brooklyn, for instance, is looking to broaden its appeal to shoppers, through the utilization of a grant program sponsored by MasterCard (MA), the Department of Small Business Services and the Mayor’s Fund to Advance New York City.

Red Hook, which received $40,000 after the storm, has been working with a consulting company as part of the MasterCard grant to help retailers determine where there is a gap in business demand and then attract relevant businesses to the neighborhood, Weber says.

Another area that’s rebuilding with a plan is Rockaway, Queens. A $90,000 grant is specifically helping merchants along Beach 116th Street – one of the hardest hit areas from the storm — start a new merchants’ organization, improve safety and sanitation and generally revitalize what was seen as a deteriorated neighborhood.

"Our focus started with Beach 116th Street because with an estimated 74 business spaces, a diverse retail mix, direct access to the beach and A train, and family businesses that have operated on the corridor for decades, Beach 116th Street is uniquely positioned to lead commercial revitalization in the Rockaways," Weber adds. "If revitalization starts with Beach 116th Street, the idea is that neighboring corridors will follow."

The Rockaways

Speaking of the Rockaways, Madelaine Chocolate Company, a family-owned and run chocolate manufacturer in Far Rockaway, Queens, just opened its doors on Tuesday. As the largest employer in the Rockaways before the storm, with 450 employees, 14 molding lines and eight production kitchens in operation, Madelaine Chocolate was and is essential to the area’s economy.

But even for a company as large as Madelaine, with many more resources available to help it re-open, the process was just as excruciating.

"A year ago I wasn’t sure if we would be here today," CEO Jorge Farber told TheStreet in an interview earlier this month. He estimated the company’s storm damages at around $50 million between equipment, inventory, repairs and working capital.

"What we’ve learned is we’re very resilient," Farber says. "This was a test you either came out with hands up over your head or you fight it."

"We still have a lot to do in rehabilitating our equipment and some of the properties to bring employees on," Farber says. "We’re learning to look one step at a time, a machine at a time, bringing a couple of employees back a day at a time and that’s how you get up the next day."

After being closed for nearly a year, the company has hired back just a quarter of its employees, but Farber hopes he will be able to bring all of the staff back eventually. Right now five of the 14 production lines are in operation. The company is targeting 2013 sales at half of what it was bringing in before the storm.

"I’d love to get everybody back. I don’t know how long it will take. The question is of resources to be able to rebuild. It was a huge financial loss as well," Farber adds. "All of our inventory was devastated. The equipment was destroyed. Hundreds and hundreds and thousands of dollars just to clean the place and put the lights on, which happened five weeks after the storm."

The storm came just as Madelaine’s peak holiday season got underway, which starts with Halloween and ends with Easter. "On October 29th we were overflowing with product that was going to be shipped the next day. November is our biggest shipping month. Consequently many of our customers were without product to put on their shelves," he says.

Yet Farber is thankful that the company’s customers did return. "It’s a great incentive for us. The orders are in but it’s very challenging because we need to get the product out," he says.

In order to manage expectations only a handful of product lines are being made – staples like chocolate turkeys, Christmas Santas, snowmen, hearts for Valentine’s Day and roses, among others.

"We cut down some of those items that are not in much demand and items where the machinery to make them is a little bit more challenging" to restore, he says.

Still, for as large (and as popular) as Madelaine Chocolate is, Farber notes that the approximately $13 million SBA loan it received – backed by real estate collateral and personal guarantees — was just dispersed roughly five weeks ago. Thankfully the company was able to get private financing and a grant through National Grid of $250,000 to begin the process of rebuilding.

"We did what needed to be done," Farber says. "We want to make this a success. I believe we made the right decision."

Jersey Shore

Over in the Jersey Shore, one business owner has reservations about rebuilding.

Greg Kohr owned five locations of Kohr’s Frozen Custard: The Original, an offshoot of the famous Kohr’s dynasty, before the storm. Two of his stores have re-opened, two have been moved inland to new locations and a fifth avoided the storm’s wrath because it was not on the shore. (None of Greg Kohr’s stores were affected by last month’s Jersey Shore boardwalk fire – that was his cousin, he says, who lost all four of his stores.)

Since the frozen custard stores are seasonal (typically open from around Palm Sunday through Columbus Day), Greg Kohr had been fortunate that he didn’t lose all of his business to Sandy, but even so, business fell about 40% this summer.

Kohr credits Stronger Than The Storm, a consumer campaign developed to raise awareness of the Jersey Shore’s recovery, for helping with business this summer.

"There was a lot of misconception that the boardwalk wasn’t open, that there were so many damaged businesses … I think we really would have been hurting a lot more if we didn’t have that campaign," he says.

Yet Kohr is already nervous about the 2014 summer season, predicting that business will improve just 30% over this past summer. It shows just how long the recovery process will truly take from storms like Sandy, but it’s not from a lack of love or determination for their stores or the communities they are in.

"One of the neighboring towns, Ortley, is still pretty much destroyed. There is not a lot of rebuilding of the residences yet. And Ocean Beach … A lot of summer bungalows are there. Probably 60% is still not rebuilt, and I don’t know if it will be rebuilt for this year," Kohr says.

"There’s a lot of questions. Do I rebuild another store on the boardwalk? I’m … giving a lot of thought and consideration to opening up across the bridge on the mainland, as we call it, either in Toms River, Bricktown — somewhere close," he says. "There’s a difference between the mainland and being at the shore. I opened up in Ortley and Lavallette because I believe in the towns. And the people over here are really great, and I just love the shore community. I grew up in Seaside. So my heart’s here."

It takes a lot of guts to be a small-business owner, especially these days. When a natural disaster like Sandy hits, and there will be more of them, local economies would falter if it weren’t for the resilience of this special group.

This article was republished with permission from TheStreet.


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