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Restaurants feel the pinch as shutdown drags on

Restaurants, which often operate on single digit margins, are feeling a decrease in business due to the government shutdown. Justin Sullivan/Getty Images

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Washington, D.C. sub and hoagie spot Bub and Pop’s is pretty low key on Tuesdays — but it’s been a little quieter of late. 

“We would have at least 10 to 15 people in line and …. there’s only three people waiting at the counter,” said co-owner Arlene Wagner.

It’s been getting worse since the partial government shutdown began, Wagner added, with business down 25 percent.  She’s hoping she won’t have to let any of her employees go.

“I’m reviewing every bill that we get in to see what could we not pay now, and weigh that against what the finance charges are going to be.”

The rub for restaurants is that traditional economic indicators appear strong, with unemployment low and wage growth inching slowly upwards. That said, restaurants often operate on single digit margins and are especially vulnerable to sudden shifts.

Add the polar vortex that has enveloped much of the nation’s Northeast in snow and frigid temperatures to the partial government shutdown, and the picture turns especially bleak.

“At the end of the day, the owner of a restaurant, if they’re taking home 5 percent of the total revenue from that restaurant, that’s probably pretty good,” said David Henkes, senior principal at restaurant research and consultant firm Technomic.

The problem has spread beyond the Beltway. Any eatery near a federal office complex is at risk from these pressures.

“There’s been a 20 percent decrease in my business in the last 32 days,” said Melba Wilson, owner of Melba’s in Harlem, New York City, famous for its fried catfish and eggnog waffles.

Melba Wilson, owner of Melba’s in Harlem, New York City, has seen a 20 percent decrease in her business because of the government shutdown.

Wilson’s restaurant is usually only open for dinner guests, but Melba’s offered furloughed federal employees free lunches, Tuesday.

“I felt that I had to do something … and being from the South and my family being from Harlem, we do everything over food,” said Wilson.

The Harlem hot spot was packed with federal employees who are watching their pennies.

“I’ve been home cooking every day … I mean I’ve been getting better, more cooking skills … but definitely unnecessary spending has been cut out,” said

Akeemah Smith, a furloughed regional program manager at the General Services Administration.

That kind of appreciation is worth a hundred positive Yelp reviews, especially for eateries that depend on regulars to fill seats.

“If you’re servicing the same government workers, much more localized population, then it is really about good will,” said Jason Greenberg, assistant professor of management at New York University’s Stern School of Business.

“Good will matters,” he added.

Chances are the furloughed workers getting a free meal will remember Melba’s once they return to work.

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