For the last three months, Franklin Street has been uncharacteristically quiet. When Carolina ceased all but essential operations in response to the COVID-19 pandemic on March 17, it launched a time of trepidation for downtown Chapel Hill businesses, which count students, faculty and staff as the bedrock of their customer base.
Summer in a college town is always slow, but this year it was as if summer arrived two months early. And with Maymester and summer session classes all conducted remotely and local businesses operating at limited capacity since the state government’s Phase 2 orders began on May 22, the future remains uncertain. Local shops that rely on heavy foot traffic are suffering. Many restaurants simply aren’t structured to shift from sit-down to takeout only.
But all is not lost. Business owners, community leaders and University partners are all pitching in to keep struggling shops and restaurants afloat. Some owners have found innovative ways to get their products to customers. Others are diversifying inventories to supply high-demand products in a safe manner. On May 29, the Chapel Hill Downtown Partnership launched a bold new campaign, Experience Downtown Chapel Hill (XDCH), to encourage a return to downtown and responsible physical distancing. And the University is amplifying the message that downtown matters.
“The Carolina community doesn’t stop at the campus borders,” said Kristen Smith Young, Carolina’s director of community relations. “As we look towards a safe return to work and school, I hope faculty, staff and students will continue to ‘think local’ and safely support our community’s local businesses.”
The hope, says Ted Zoller, the Kenan-Flagler Business School’s T.W. Lewis Clinical Professor of Strategy and Entrepreneurship, is that pent-up demand among local residents will result in an immediate spike in sales during Phase 3 of reopening the state, tentatively scheduled for July 3 — a spike to see the town through until August 3, when the majority of Carolina’s students begin their return to campus.
Really hard at first
Vickie Gibbs, the executive director of Kenan-Flagler Business School’s Entrepreneurship Center, heard from small business owners at the onset of the pandemic that they were feeling doubly stressed, concerned for themselves and their employees.
“Entrepreneurs basically had to turn off their business and wonder how to survive without any incoming revenue,” said Gibbs. “They were also thinking, ‘How do I take care of my employees?’ ‘How do I now think about the culture of my organization?’ ‘How do I lead when things are so uncertain?’”
Even a long-standing downtown business such as Mediterranean Deli, which built a loyal customer base during its 28 years, is struggling. Owner Jamil Kadoura said his business lost almost $40,000 in cancelled catering during one week in March and served less than 10% of its usual customers during graduation weekend, typically the busiest three days of the year.
Kadoura’s message to the community is simple: “I would encourage people to keep ordering takeout and frequenting as many of their favorite places as possible. If they don’t, we might not be here in a few months.”
Forced to get creative
Scott Maitland, owner of Top of the Hill, chose to close the iconic Franklin Street restaurant and brewery until the pandemic ends, even though Phase 2 rules allow businesses to operate at 50% capacity while maintaining six feet of distance between customers.
“We made the difficult decision to stay closed until we can open at full capacity,” said Maitland. “Most of our customer base is made up of people affiliated with the University, so it’s just not feasible for us to try and bring back all 150 employees to serve half or even less of our usual customers.”
But Top of the Hill also distills spirits at a facility on West Franklin Street. Maitland is one of many owners who have adapted their business model to fill shortages, halting production in the distillery and using the facilities to manufacture hand sanitizer.
“People are thankful that we were able to step in and fill a shortage in the market for hand sanitizer,” Maitland said, “but the community has also been incredibly supportive by purchasing the hand sanitizer.”
Pivoting from making liquor to making hand sanitizer is the kind of innovation required to weather the storm, said Gibbs.
“I think a lot of restaurants are leveraging what they can accomplish under these constraints so that they can still serve their customers in some way,” she said.
Another example of entrepreneurial adaptation came from Alex Brandwein, founder of Brandwein’s Bagels, a New York-style bagel shop originally scheduled to open in July. When Brandwein heard from the community that grocery store bread aisles were bare, he decided to launch Brandwein’s Bagels four months early.
“We started opening every Saturday and doing preorders with contactless pickup and delivery,” said Brandwein. “We’ve been selling at least 1,200 bagels every Saturday, so the response from the community has been immense.”
Brandwein is also giving back to the community, in particular to front-line health care workers fighting COVID-19.
“I realized that my business was an avenue I could use to serve the community, and we started dropping off bagels for the health care workers at UNC Hospital’s emergency room twice a week,” said Brandwein. “It’s our way of supporting them and giving them a sense of normalcy during a crazy time.”
The density paradox
While a walk-up shop like Brandwein’s Bagels can easily serve customers as they practice physical distancing, the structure of Chapel Hill hinders some businesses from efficiently functioning under the COVID-19 restrictions, according to Research Professor Emil Malizia of the department of city and regional planning in the College of Arts & Sciences.
“College towns tend to have a denser environment and more foot traffic, which under normal circumstances drives sales,” said Malizia. “There are certainly some areas of downtown that aren’t easily accessible for takeout business. Many restaurants and stores have no parking or rely on limited street parking for their customers.”
That crowding of traffic could hinder businesses from moving customers in and out of the area promptly, which Malizia cites as a key component of pandemic safety. Chapel Hill’s downtown businesses are crowded into a few streets that all connect and are highly developed.
But many businesses in downtown Chapel Hill rely on regular, dense traffic to sell small impulse purchases. Epilogue, a coffee shop and bookstore that opened on Franklin Street four months before the pandemic, shifted its entire business model when pedestrians disappeared from city sidewalks.
“A coffee shop is a volume business based on selling many small purchases of coffees or pastries,” said owner Jaime Sanchez. “We realized quickly that we had to adapt, so I created a website, and we started selling books and gifts online.”
According to Sanchez, Epilogue’s transition to online sales helped keep the business afloat during the onset of the pandemic and served as an outlet to help its customers and vendors through an unprecedented situation.
“As a business, you need to find a way to help people either mentally escape from a situation or find ways to help them in general. One way we’re doing that is building surprise boxes from products in our store, like a book, some coffee or tea, candies, pottery, cards and candles,” said Sanchez. “This supports the vendors whose products we stock, and our customers can either send the box to themselves or as a gift to someone else they can’t visit because of social distancing.”
The fear of losing local businesses
Malizia believes that Chapel Hill faces some special challenges because of its position within the Research Triangle, and that proximity could slow economic recovery for retail businesses downtown.
“When you think of other typical college towns, like Ann Arbor or Charlottesville, they are self-contained, whereas Chapel Hill is part of the Research Triangle,” said Malizia. “Small, local businesses face significant challenges because of the many choices that people have to fulfill their needs, all within the Triangle. For example, Southpoint Mall is less than eight miles from Franklin Street.”
One consequence of the pandemic will be fewer small businesses in brick-and-mortar storefronts, like the ones on Franklin Street, and more corporate-backed chains, said Kenan-Flagler’s Zoller. “In order to open a small business on your own, you have to have a favorable market and quite a lot of capital, and current conditions make it nearly impossible to save that kind of money. Even those already in business are facing unparalleled challenges and are teetering on the brink of disaster,” said Zoller.
Zoller also explains that the Paycheck Protection Program loans offered by the federal government aren’t helpful to locally owned businesses or even small chains that lease their buildings because one of their largest fixed expenses is monthly rent, and only 40% of the loan amount can be used towards businesses’ mortgage, rent or utilities.
Local businesses not only have to compete with big-box stores and consolidated shopping centers for customers, but they’re also catering to a largely homogeneous customer base, with most affiliated with the University or working in fields tied to the University.
A diversification of downtown Chapel Hill could lessen that strain on local businesses in the future, said Kenan-Flagler’s Gibbs.
“Students support a lot of downtown businesses, but that also results in big ups and downs,” she said. “One option to mitigate those swings is bringing in more corporations that aren’t related to the University. They provide a consistent, year-round workforce, and they can use the University’s resources and talent to build their business.” For example, Well, a health technology company, moved to Franklin Street last year with over 400 people, which boosts the consumer base for downtown businesses through summer.
In the meantime, the Chapel Hill Downtown Partnership — a non-profit economic development organization that promotes downtown as the social, cultural and spiritual center of Chapel Hill — is putting on a full-court press to revitalize Chapel Hill while encouraging healthy behavior.
The road to recovery is paved with community support
“One of the first things we advocated for was ensuring that parking was free so that it would be really easy for people who did want to get takeout or pick up online orders could do so easily,” said Elinor Landess, the Partnership’s Campus and Community Coalition director. “We helped businesses access PPP loans and provide the most up-to-date information, which is ever-changing. Another critical component is assisting businesses in figuring out how to reopen safely and how to communicate their plans to their customer base.”
The Partnership also launched a bold new campaign on May 29 to encourage people to safely return to downtown and shop local.
Experience Downtown Chapel Hill (XDCH) includes new signage to encourage physical distancing and wearing a face covering when entering stores and restaurants. The campaign will also raise funds to support hard-hit businesses and provide safe, free events and programs to reinvigorate the downtown atmosphere.
This plan fits Malizia’s definition of a vibrant downtown: “Dense, diverse and connected.”
From his perspective of city planning, density is an important facet of downtown that can continue even through the pandemic. Density, he said, refers to clustering businesses, not crowding people together, and physical distancing downtown is achievable through clear signage, spacious pedestrian walkways and face coverings.
On June 3, the Chapel Hill Town Council voted to allow public sidewalks and other outdoor areas to be used for retail and restaurant activity — a swift and promising adaptation that to will enable more customers to safely spend time downtown.
Zoller believes that once all restrictions are lifted, downtown restaurants and stores will see a spike in spending. “People are feeling cooped up with a pent-up demand for goods and experiences,” Zoller said. He predicts that spike will provide much-needed cash flow to local businesses.
And then there is the expected return of students on the first move-in day, August 3, a light at the end of a long, dark tunnel for many small businesses. Until that time, community members are the sustaining force keeping restaurant and store signs flipped to “Open.” With North Carolina well into Phase 2, Malizia encourages those who are healthy enough and in possession of a face covering to visit downtown again.
Economic recovery for Chapel Hill depends on one thing, he said: “Feet on streets.”
Editor’s note: This article was updated on June 11 with the latest information on the terms of the Paycheck Protection Program.