The Grove’s Hayes Valley Location Has Closed for Good, and Fillmore’s on the Bubble

The Hayes Valley location of cozy neighborhood mini-chain the Grove will never reopen, its owners confirmed Friday, after alleged delays from Bank of America spoiled their chances for a paycheck protection program (PPP) loan. Its owners say that the restaurant’s Fillmore Street location might also close, as it will be hard for that spot to profit with the social distancing guidelines that restaurant dining rooms are expected to eventually need to follow.

In an email sent to Eater SF and another member of the media, Grove co-founder Kenneth Zankel confirmed reports that the restaurant’s location at 301 Hayes Street had been placed on the market, saying “weeks ago we had an honest, totally transparent phone conversation with our landlord there, who’s a great guy and over time became a friend, and agreed that while we figure this out, it would be a good idea to see if there was someone else who has a different type of operation that was excited to get the space.”

It wasn’t until this week that Zankel and his co-owner and wife Anna Veyna Zankel agreed to close the location — which had been open since 2011 — for good. “The last straw,” Zankel said, was learning that Bank of America — through which the Grove had applied for a PPP loan intended to keep the business afloat — had allegedly failed to submit their application for the funds, “even though we completed it the literally first day that the bank began taking applications in early April, almost four weeks ago.”

According to Zankel, their B of A representative told them that “we needed to re-apply from scratch all over again, then the application would go through their internal review process again, which for the other restaurants took multiple weeks.” Saying that “we could not continue to live with the uncertainty and pressure,” he says that they decided to shutter the Hayes location for good.

The uncertainty around funds isn’t the only factor endangering the Fillmore Street location of the Grove, which opened in 2002. Zankel says that the layout of that spot’s dining room is a problem for maintaining social distancing — as it’s expected restaurants will be required to, when they’re eventually allowed to reopen. “The indoor capacity of that restaurant would be about 25, as opposed to the 60 seats in there now,” Zankel says.

The lease for the restaurant at 2016 Fillmore Street “expires in about 18 months,” Zankel says, so “between the time to re-layout the restaurant and the costs any restaurant is going to need to invest to reopen in a manner where safety of the guests and employees with today’s health challenge is as certain as humanly possible, 20–25 seats for however long, and then be gone in fall 2021, the math does not work.”

That said, the decision to close the Fillmore Grove has not yet been made. “It was always our intention to renew” the Fillmore location’s lease, Zankel says, and “we are having an amicable conversation [with the landlord] where we hope we can find a solution that works for all. We would like to re-open Fillmore and be there for another 20 years, if that can work for all involved. Shortly, we should have an answer.”

That leaves the Grove’s Yerba Buena spot, which opened in 2010, and the Design District location, which opened in 2017. Zankel says that both will eventually reopen, and the latter location, at Townsend and Division, is expected to resume takeout and delivery service on May 15. “We are going to first re-launch a more abbreviated menu of what we did before,” Zankel says, “then in stages add family meals [and] weekend packages.”

In the end, though, the Grove’s future hinges on if it manages to get a PPP loan during the second round of funding, which took effect this Monday. Zankel’s frustration with Bank of America is palpable when he describes the loan process, which he suggests B of A botched. Here’s how he describes the situation:

[The PPP loans] are designed to bring people back to work. Everything was prepared and calculated and ready to be uploaded by us in advance. That was 4 weeks ago. [Bank of America] missed the opportunity for us to be part of the first round of SBA financing for all four restaurants by delays in their internal review resulting in them not submitting those applications to the SBA.

Our representative at BofA, as of this morning, will still not state in writing that says that they have finally submitted the PPP applications for Fillmore, Yerba Buena, and Design District to the SBA. The banker had previously told us on the phone on April 10th at 4pm that all the applications had been sent. The banker handling our business there finally told a third party yesterday (!) verbally that two have been submitted and the third one is “in the queue.” But that is all they have given us to go on despite multiple requests we have made by email and telephone.

If we again miss out due to this and the SBA fund again runs out, this would make it significantly more difficult to re-open these other three restaurants and to hire back our staff, which is why the PPP was created in the first place.

As we said, BofA told us Sunday (!) that they never submitted the one for Hayes, and wanted us to re-apply and then the bank would have to have it go through their internal review process again, blah, blah. Anna called the banker in tears and left a message literally begging him. But he never even called and left a message or emailed her or me back.With everything else going on, we finally just said to ourselves “that’s it, we can’t live sanely like this, no Hayes.”

It’s incredible really, because we opened the first business account at BofA over 20 years ago, have 5 accounts for the restaurants and management company, have had credit lines with them and paid them back in full, and last year we ran over 17 million dollars through that bank. And we aren’t asking for a favor. Simply to process our applications on a timely basis, keep us informed along the way, and have the professionalism and humanity to say “we sent it, here’s your number or code or whatever.”

“We can open a restaurant without a loan,” Zankel says. “But to re-open multiple restaurants, make all the changes we and everyone else is going to need to make from the kitchen to the dining room to the POS system, have a cushion to most likely lose money for a while … you need a substantial amount of cash, period. So obviously these loans have a material effect on what we will do.” That means that if the “money does not come through, the plans we are making for the 3 restaurants we plan to re-open will need to be changed.”

Here’s Zankel’s letter in full. It’s long, but provides a remarkably candid look at the struggles restaurants are facing, and is definitely worth a read:

Greetings All,

First, far more important than anything to do with our restaurants, we hope you are safe and healthy. Luckily, we are.

Clearly you are still working!

Thank you your reporting.

We have never had a public relations person, not sought publicity. Frankly, we didn’t think that many people would be interested in reading about us. We just wanted to create places we were proud of and make sure our guests had a fantastic time when they visited us. But it’s clear now that although we actually DO know where we are headed, the message was not coming across cohesively. As subscribers to and avid readers of all of you, we learned this when we opened our emails the past day. So please allow us, besides thanking you for being interested in reporting on The Grove, to tell you in our own words exactly where everything stands right now. And, in doing so, provide just our personal experience transparently of what the blowup was like, the ppp/eidl loans, and our excitement combined with a good dose of fear about re-emerging. For whatever its worth. It’s most likely way, way more than you are interested in. But once we started writing this we just added whatever we thought was relevant. Since we won’t have a public relations person after this either! We are under no illusion the world needs to know about The Grove. But since the stories were running, here it is.

THE GROVE IS ABSOLUTELY< POSITIVELY ALIVE AND COMING BACK! WE HAVE BEEN PART OF THE FABRIC OF OUR BELOVED NEIGHBORHOODS FOR 21 YEARS AND WILL CONTINUE TO BE.

The Grove - Fillmore: We want to re-open.

To maintain social distancing until we all come out of this pandemic, the indoor capacity of that restaurant would be about 25, as opposed to the 60 seats in there now. The lease expires in about 18 months. Between the time to re-layout the restaurant and the costs any restaurant is going to need to invest to reopen in a manner where safety of the guests and employees with today’s health challenge is as certain as humanly possible, 20 - 25 seats for however long, and then be gone in fall 2021, the math does not work. However, it was always our intention to renew, the landlord is a good guy we have a nice relationship with, and we are having an amicable conversation where we hope we can find a solution that works for all. We would like to re-open Fillmore and be there for another 20 years, if that can work for all involved. Shortly, we should have an answer.

Opened March, 2002. We lived a few blocks away on Bush and Octavia, and always liked the bones and potential of this space, which was a deli at the time. The Grove on Chestnut had been open a few years by then and was doing pretty well. Ken had recently sold ZInzino, not only his first restaurant but also where he hired Anna Veyna Design to achieve the vision (it’s where A-16 is located now … those pizza ovens were brought in from Italy by us in 1995). So we went for it. It was and our little neighborhood jewel. Some of our crew have worked there from when we opened; its theirs as much as ours.

The Grove - Yerba Buena: We plan to re-open.

Opened January, 2010. By this time, we were living about 5 blocks from this location. When the financial crisis of 2008/9 occurred, and SF had sort of come to a stop, we wanted to be here and signed the lease in 2009. Everyone we knew thought we were nuts! We still walk to work there. We put a grove of trees, 3 from there Grand Canyon and from Utah here. Excellent landlord relationship.

The Grove - Design District, opened 2017: We are re-opening .

Opened in August, 2017. This too had been an empty lot. We had spent tons of time in the neighborhood the past 20 years due to Anna being a professional interior designer, plus we just think the light there, the low buildings, the scale, the cobblestone … its just so beautiful and we always wanted to some day be part of the fabric there. We have a patio that holds over 150 guests. Everything about our life together is reflected in that restaurant in one form or another.

The Grove - Hayes: We will not re-open.

Opened in January, 2011. The final straw was when Bank of America informed us 2 days ago that that they had not even submitted our PPP application to the SBA, even though we completed it the literally first day that the bank began taking applications in early April, almost four weeks ago. And that we needed to re-apply from scratch all over again, then the application would go through their internal review process again, which for the other restaurants took multiple weeks. More below regarding our personal experience with Bank of America and PPP loans. We could not continue to live with the uncertainty and pressure. More about the PPP’s below. We had put a lot of thought the last 6 weeks into whether our particular restaurant will work well enough there in the upcoming environment to make it worth taking the risk or and spending the money required for re-opening. Weeks ago we had an honest, totally transparent phone conversation with our landlord there, who’s a great guy and over time became a friend, and agreed that while we figure this out, it would be a good idea to see if there was someone else who has a different type of operation that was excited to get the space. So that if we decided ultimately not to stay, there would hopefully be others already interested. That was why the “Available” sign was posted on April 16 … to test the waters. The clincher was BofA.

Opened in January 2011. The person who was going to build an apartment building where a parking lot had been there approached us, and we went for it. We felt a personal connection as we were constantly in Hayes Valley anyway, going to the performing arts, eating, shopping, hanging.

Takeout and Delivery: We are re-launching, and it will initially all come from the Design District location. We hope to begin by May 15th.

We had a strong presence in this at all four Groves . We shut it down when we closed the restaurants. Frankly, in retrospect I think it was mostly because we were still in shock. But that did give our team time the last few weeks to think of where we wanted to take this. We are going to first re-launch a more abbreviated menu of what we did before, and then in stages add family meals, weekends packages, some other ideas that we think our audience will love. Safety is everything. We are currently re-laying out the kitchen for social spacing and the pickup area at Grove To-Go for touchless pickup, as well as obtaining best in class secure packaging.

Catering: We will resume when offices begin to re-open.

We began 18 months ago and it has become a significant and totally exciting part off hat The Grove does.

Re-opening the Restaurants as full-out restaurants:

The Grove restaurants that are re-opening will open sequentially one by one once the shelter order is lifted. Since Design District will already be operating for the takeout and delivery that will be first.Obviously the public will decide when they want to return to restaurants and what that word even means to people now.

Like most of our peers, we are not just trying to figure out the layouts, but how do you provide connection and engagement to and with people in whatever the new-normal will be. Our places have always intentionally been multi-sensory - food, art, design, music, and most all of all vibrant and convivial. And especially our staff making a sweet connection with the guests. We are about providing a personal, comforting, neighborhood experience. Community. So we and our team are working hard to create ways to do that in this environment.

Private Events At Yerba Buena and Design District: To follow shortly after the restaurants re-open in full.

Money to Re-start and Make It Work: For The Grove there are 3 key factors: the PPP’s , the EIDL’s (terms we had never heard of literally two months ago!), and landlords.

We and our crew, some of which have literally been with us for 20 years, have built what we have over the course of 21 years. We have never had venture capital or private equity or outside investors. When we started it was a fraction of what it costs today to open a restaurant. And when things went generally well, we reinvested over time in the next one, and built really slowly. It was never even intended to be multiple locations. We lost $210,000 in the month of March. One month. Rents, cams, insurance and utilities alone were almost $100,000. We had 170 people. We had to meet a $240,000 payroll for first 2 weeks of March. There was no investor group to turn to. So it has been a beating for us and just about all of our friends with restaurants.

- Payment Protection Plan Loans (PPP): None of the 4 restaurants has gotten a PPP loan yet and we have no evidence that Bank of America has even sent a single one of those applications to the SBA yet, despite our completing and uploading all required documents literally the first day the bank put them online April 4th.

These are designed to bring people back to work. Everything was prepared and calculated and ready to be uploaded by us in advance. That was 4 weeks ago. They missed the opportunity for us to be part of the first round of SBA financing for all four restaurants by delays in their internal review resulting in them not submitting those applications to the SBA.

Our representative at BofA, as of this morning, will still not state in writing that says that they have finally submitted the PPP applications for Fillmore, Yerba Buena, and Design District to the SBA. The banker had previously told us on the phone on April 10th at 4pm that all the applications had been sent. The banker handling our business there finally told a third party yesterday (!) verbally that two have been submitted and the third one is “in the queue.” But that is all they have given us to go on despite multiple requests we have made by email and telephone.

If we again miss out due to this and the SBA fund again runs out, this would make it significantly more difficult to re-open these other three restaurants and to hire back our staff, which is why the PPP was created in the first place.

As we said, BofA told us Sunday (!) that they never submitted the one for Hayes, and wanted us to re-apply and then the bank would have to have it go through their internal review process again, blah, blah. Anna called the banker in tears and left a message literally begging him. But he never even called and left a message or emailed her or me back.With everything else going on, we finally just said to ourselves “that’s it, we can’t live sanely like this, no Hayes.”

It’s incredible really, because we opened the first business account at BofA over 20 years ago, have 5 accounts for the restaurants and management company, have had credit lines with them and paid them back in full, and last year we ran over 17 million dollars through that bank. And we aren’t asking for a favor. Simply to process our applications on a timely basis, keep us informed along the way, and have the professionalism and humanity to say “we sent it, here’s your number or code or whatever.”

We do personally know quite a few restaurants that have received the PPP loans by now, some in the first round and quite a few the last couple of days.

BofA did submit a PPP loan application for our management company during the first round, and the SBA made the loan about 10 days ago. We had kept everyone in the management company on anyway even after all the restaurants closed, and paid them out of pocket since of course we had (and still have) no income. The PPP funds that recently arrived for the management company have permitted 8 weeks of their pay starting about 10 days ago to be subsidized. And to pay ourselves for those 8 weeks, after which we will of course go back to no salaries to ourselves for a while. But of course that does absolutely nothing for our hourly crew.

For Anna’s design company, First Republic is her bank, they were all over it, kept us apprised every set of the way, and that PPP was funded the first round.

- Economic Injury Disaster Loans (EIDL): We applied for and received a $10,000 grant from th SBA for each restaurant. But there has been no communication following that, for instance asking how much you want to borrow or even just stating “here’s how much we will offer you” for these loans.

So when we said we are “in limbo,” as far as the money part of that its the PPP’s above but also the EIDL’s.

A few but not many have gotten EIDL loans beyond the $10k grant.

But we are remaining hopeful for now. These loans really, really matter because unlike the PPP’s that have to be paid back quickly, the EIDL’s are long term. You have time to try to get the business back on its feet, make out out the other side, and go from there without a gun to your head.

We can open a restaurant without a loan. But to re-open multiple restaurants, make all the changes we and everyone else is going to need to make from the kitchen to the dining room to the POS system, have a cushion to most likely lose money for a while … you need a substantial amount of cash, period. So obviously these loans have a material effect on what we will do.

So if intended-by-Congress SBA low interest,non-personally guaranteed money does not come through, the plans we are making for the 3 restaurants we plan to re-open will need to be changed.

Landlords: We need temporary lease modifications that can work for both parties

We are optimistic because we have really good relationships, and we believe they are all sophisticated, in it for the long game as we are, and working together we can all get past this. They have to pay their lenders. We have always, for 21 years without exception, paid in full, and on time or early. But we and other tenants get the money for those payments by conducting business. Which is currently - and rightly so in our view for everyone’s health and safety - illegal except takeout and delivery. So it’s a mess for everyone. We are expecting we and our landlords will make some adjustments in the agreements - there are lots of ways it can be done - that none of us are thrilled with in the near term but all of us come out well after this hump. But, just like with the loans, this is yet another variable where if it doesn’t happen that changes things.

We and our peers and millions and millions of employees got the non-privilege of participating in The Week An Entire Industry Was Gutted.

For The Grove: the sales at Yerba Buena collapsed when the city did the right thing and declared a state of emergency. Travel to SF was a over in a minute. Design’s sales and Catering’s sales were over when companies said to work form home. Hayes was done when the performing arts were cancelled. Fillmore took the longest to crater, being a residential neighborhood, meaning an extra week or so versus the others.

It’s a surreal and terrifying shock to watch your life’s work crushed in the course of a week or two, as restaurateurs across the country did.

A good note is that it has brought us and a bunch of other owners closer, some we knew well but others who we’d never even met. There’s just no possible front for anyone anymore - everyone needs someone to just talk about it with. The San Francisco restaurant industry is uniting more than ever.

We and everyone else wants our restaurant families back. The employees who really are the culture and the backbone and have the institutional knowledge. And who are suffering beyond belief right now. Way worse than us. These people need jobs and they need them right now. There are quite a few not getting unemployment because the offices are closed, and the phones are often not picked up, or they tried online and the website kept crashing. It is awful. Our HR people have filled out the forms for everyone who had trouble applying and we sent each of those people the form and a stamped envelope addressed to the EDD, so they could simply sign it, put it in the pre-addressd and stamped envelope, and send it. Every restaurant we know is trying so hard to help their employees. The Grove is trying to feed our people once to twice a week with meals-for-two given to each person each time. They have to wear a mask and gloves, and we tape out the social distancing lines. Everyone is appreciative … even though we all know its not enough for some of them to make it through. Smiles abound when they arrive , but you see there are some very scared faces. They want to come back. We want our work-family back. Our regulars know a lot of their faces and stories far more than ours.

Most restaurants we know are doing everything they can.

Now what?

Loans. Amicable agreements with our landlords. Being able legally to re-open in some fashion. Provide jobs and bring people back to work! Serve our guests and communities.

And some reinvention. This has also been - for all the wrong reasons - a creative challenge: “what if you could start again? With constraints you didn’t have before, but also the ability to reinvent yourself?”

We, like others, really, really want to return to our life’s work.It was never an industry you expected to get rich in. But we can’t return at the level of pre-Covid if at this stage of our lives it means selling our home, draining what we have put away for retirement or at least stepping back a bit at some point, piling on a ton of personally guaranteed debt, and entering a world where no one has a clue what will happen. So we plan for the best, and wait

Thank you very much for this opportunity. Feel free - we are sure you will! - to use as much or as little of the above as you like. We are just grateful for the opportunity to provide you with the facts as they stand right now.

Stay Safe, Be Well, We Will Be Back Soon!

Ken and Anna