Nov. 29 (Bloomberg) -- When Robert Freed walked into Pet Foods Plus, his flooded store on Midland Avenue in Staten Island, two blocks from the Atlantic Ocean, he knew what he smelled immediately: the stench of rotten kibble and cat food, a few tons of it.
During good times, that $250,000 worth of inventory was the equivalent of Freed’s bank. Now his windows had been broken, the walls had been pushed in by the storm surge, and his counters and the platform they rested on were gone, washed way up the avenue. His racks and shelves were knocked over, dog food was spread all over the floor, his cat toys and doggie chews soggy and covered in what looked like seaweed.
It was Oct. 31. Rob, 47, and his younger brother Matt, 37, had waited out superstorm Sandy in New Jersey, Bloomberg Businessweek reports in its Dec. 3 issue. Their homes were in the highest-risk, Zone A sections of Staten Island, as was their store. The first morning the Outerbridge Crossing, one of the bridges that connect New Jersey to Staten Island, reopened, they hopped in their cars to check on their store.
Rob had gotten calls from friends and neighbors telling him it was on fire, the callers shouting over emergency sirens wailing in the background. He’d dismissed these as the hysterical bulletins of those who were still in a state of shock from the flood. But after crawling across Staten Island -- traffic was backed up because the traffic lights were out -- he realized that the Metro PCS location next door had indeed gone up in flames. The old, wooden clapboard house was now a charred mess spilling blackened shingles into the street.
Their store, a cinder-block structure built on a concrete slab, hadn’t burned. Instead, it had been flooded. The waterline, marked in kelp and mud on the walls, stood at 9 feet (2.7 meters).
“I went numb,” Rob says, “I’m standing there thinking this is my store but this isn’t my store. This, this is -- it’s like being at a wake. You’re standing there, laughing about the person who died, but then it hits you.”
Matt was by his side, and as they headed inside, he bent to pick up a flat of Fancy Feast cat food that had broken open, then stopped and dropped it. What was the point? There was so much, spread and piled so high, mixed with sewage and sand.
Then they were surrounded. A dozen people had entered the store with them. They were stepping over the spilled dog food and scattered cans and were stuffing cat toys and leashes and dog bones into garbage bags. They were looting.
“They didn’t even know we were the owners,” says Matt, “They were pushing us out of the way to get in the store.”
They had seen a few cops on a boat going down the still-flooded Colony Avenue, but they were still in a search-and-rescue phase. They would find at least eight dead within five blocks of Pet Foods Plus. The police weren’t going to stop the crowd now making off with the store’s goods.
Rob turned to Matt and told him he was going to get the Chevy Tahoe, back it into the store through the broken doors, and then sleep in the car. “We gotta protect our business,” he said.
“We can’t protect it. They’re gonna kill us,” said his brother. The sun was going down soon, he pointed out. “They’ll stab us.”
The brothers agreed to leave. They walked down Midland Avenue toward the beach. They saw shoeless children using plastic bags and rubber bands to keep their feet dry, survivors hosing down the inside of their houses to wash the mud from their walls.
Both men decided that while there was nothing they could do to save their store, they could at least help some of their neighbors -- their customers -- in the area.
Rob and Matt spent the rest of the afternoon, and the next four days, hauling soggy drywall, waterlogged furniture and moldy carpet from the bungalows of Midland Beach, helping those who’d lost much more than a business.
“We were just doing the next thing,” says Rob. “Lift this mattress. Strip that carpet. Whatever needed to be done, we just did it. We just kept going.”
Every once in a while, walking around, they would come upon cans of cat food or a piece of a point-of-sale display that looked familiar. Much of their inventory had been carried by the floodwaters and deposited around the neighborhood.
After a disaster, the immediate focus of government officials and ordinary citizens is saving lives and providing food and shelter to those who have lost everything. In the aftermath of Sandy, that’s what countless small businesspeople in New York City and New Jersey did -- people like Rob and Matt Freed.
With their business partner, Bernard Hilzenrath, the Freeds spent days in hard-hit areas, not just Midland Beach but also the Rockaways and Breezy Point in Queens, helping friends clear out flooded basements and first floors. Through it all, concern about their own livelihood was never far from mind. Lending their muscle to those less fortunate helped keep the fear at bay, but only for a little while.
For a community to return to normalcy after a catastrophe, small businesses also must come back. In New Orleans, the lag in the reopening of small businesses has made some low-lying communities into retail ghost towns more than seven years after Hurricane Katrina.
“It won’t matter if you rebuild your residential areas,” says Mary Wong of the Office Depot Foundation, part of the U.S. Chamber of Commerce’s Business Civic Leadership Center. “If you don’t rebuild your downtown, your small businesses, then you don’t have an engine.”
While individuals can get immediate help -- and zero-interest loans -- from the Federal Emergency Management Agency, there is no similar agency that’s prepared to work with small businesses. The Small Business Administration is the only federal agency set up to provide assistance to small businesses -- in the case of retailers that means those with annual revenue below $21 million -- but it doesn’t provide zero-interest disaster-related loans. The U.S. Chamber of Commerce estimates that after a natural disaster such as Hurricane Katrina or Sandy, 52 percent of small businesses never reopen.
The Freed brothers are luckier than many of their peers. Their homes survived the storm with little damage, giving them more cushion than store owners who need to find housing before even considering whether to restart their business. Up and down Midland Avenue, numerous businesses have already decided to give up. Midland Pharmacy, a block from Pet Foods Plus and in business for 25 years, has shuttered, as has Krypton Comics on the corner of Midland and Baden.
“I’m done,” says owner Arthur Palomba. “My stock was destroyed.”
The prospects for Pet Foods Plus are only slightly brighter. “We don’t have retirement plans, 401(k)s, IRAs, savings. Everything we have is in our inventory,” says Rob. It will take months, or even years, before businesses in Staten Island and other New York communities recover fully from Sandy’s devastation. The Freeds believe theirs will be one of them. But neither nature nor time is on their side.
Rob Freed, short, stocky, muscular, with graying hair at the temples, had bought fully into the idea that the supreme American achievement is to run your own business. The fourth of six children and the oldest son, he’d been a mediocre student -- “my best subject: lunch” -- at Brooklyn’s John Dewey High School. He never considered college, finding work in a delicatessen and as a car salesman after graduating. He settled into a decent-paying job as a wholesale meat salesman, selling sides of beef to restaurants and butchers, and occasionally taking home a few scraps for his dogs, a boxer named Hank and a Lhasa apso named Wally. He usually bought his dog food at a store on Kings Highway in Brooklyn, where an older man named Ira Licht sold him 40-pound bags of Eukanuba.
“Pet food stores are like bars,” Rob says. “People come in to talk. They like to talk about their animals, so you get to know your customers.”
In 1997, when Ira, who’d started the store 15 years earlier, wanted to sell out, he asked Rob, then 32, if he was interested in taking the place over. The store was about 2,500 square feet, a long and skinny one-story retail building in Sheepshead Bay, one block from the F train. It was shabby, the racks sagging, some of the inventory expired, but Rob thought there was potential. Matt had just graduated from high school and Rob talked to him about going into business together. Matt liked the idea. Rob and Ira negotiated a price: $10,000 for the inventory, and Rob would take over the lease.
“That’s what you want, isn’t it? Your own place,” Rob says. “Of course you have your doubts, you’re scared, but still, it’s a great feeling.”
The pet-food business, like the people-food business, is low-margin, low-markup. The profit on a bag of dog or cat food is about 10 percent. Cat and dog toys, leashes, catnip -- those are the items with the big markups. Carpeted kitty castles are a relative gold mine.
Most days, though, you’re slinging dog food. Some customers come in every day to buy one can of cat food because they like to stop and talk. Rob and Matt are convinced that people who take care of animals are good people, making for a nicer clientele than you might have if you ran, say, a liquor store.
“We’re not making money on people’s vices,” says Matt.
“Not usually,” Rob says. “You do get those ladies who say they own 60 cats. And that’s what they admit to. The reality is probably 180.” Cat ladies are great for business.
Pet Foods Plus averaged about $300,000 to $400,000 a year in revenue, with the brothers each taking out about $20,000 a year in salary, putting everything else back into the store: in inventory, in improvements, in promotions. Managed carefully, the business, while no great moneymaker, supported their young families. Rob had married and already had a boy and a girl at home.
Their neighborhood, however, was changing. Working-class Italians and Jews -- pet owners --had given way to more recent Syrian Jewish immigrants, who weren’t in the habit of keeping dogs or cats in the home.
The other problem, Rob had realized, was that pet stores do most of their volume in bulk -- those 40- or 50-pound bags of dog food and cat food or 50-pound bags of kitty litter -- but at a city store like theirs that lacked parking, customers could only buy what they could carry, which kept revenue at a trickle.
About eight years ago, they began looking for a second location. Rob knew that pet food salesmen who weren’t willing to cut much of a deal for one store’s business would be more inclined to do so if they could double their volume. Also, with two stores, it might not be necessary to carry as much inventory in each location if Rob could move product as needed. And if two stores worked and those savings were realized, then what about three, four?
Many of their former customers had moved to Staten Island. Rob and Matt had moved there as well, to a beachfront community they felt was improving. They found a new 2,500-square-foot building on a commercial strip, at the corner of Patterson and Midland, across the street from a deli and a dog groomer, up the block from a comic book store, a judo dojo, a Chinese restaurant and a Mexican grocery.
The ethnic makeup of the neighborhood was diverse, with Chinese families crammed in next to retired widowers, yuppies tearing down bungalows to put up two-story houses, plus a few city workers who enjoyed the fresh ocean breezes. They knew the neighborhood wasn’t great -- there was a welfare hotel nearby where drug addicts overdosed at an alarming rate -- but it seemed to be on the way up.
The brothers and their friend, Bernard, each put up $50,000 and made a deal on the location, paying about $6,000 a month in rent, with three months’ rent free that they’d use to build out the store. They did the work themselves, laying out the retail aisles with chalk on cardboard, erasing and redrawing until they were happy with the configuration. They wanted a raised platform and counter for the cash register, so one person working behind it could also take in the whole store.
“And because I’m short,” jokes Rob. They put the dog food in the back and the higher-margin leashes, cat toys, and dog treats in colorful displays near the register. (Eventually, if you work in a pet food store, you will try the pet food, usually to win a bet or answer a dare. Rob recalls there was one brand, Rewards, that wasn’t bad. “They had turkey with gravy and the gravy was pretty good.”)
Their red-and-white logo, a cartoon illustration of a dog and cat, was stenciled on the window. After a few months of 16-hour days, they had a store that looked as spiffy and professional as a chain retailer. They could duplicate it in a third store, or a hundred stores, if they generated the capital to do so.
Opened in 2005, Pet Foods Plus’s Staten Island location wasn’t an overnight sensation -- very few retail operations are -- but the brothers didn’t expect that. What they found was that they had surveyed the neighborhood correctly. This was a pet-friendly community, and business was steady. After three years, Rob had paid off the line of credit he’d taken out for the store. They were in the black most months.
“Every month was a little better,” says Rob. “You keep making a little more, you keep putting it back in the store, buying more inventory because of the volume discounts.”
The salesmen from the pet food companies were cutting them better deals, taking the brothers out to dinners to write up the orders. Rob and Matt never took more than $20,000 apiece per year out of the Staten Island location, but the business grew, surpassing $400,000 in revenue last year and climbing steadily as the brothers’ reputation spread in the neighborhood.
This year was on track to be their best yet, and the Christmas season was looking particularly promising. The three partners decided to put up $15,000 to buy cat and dog toys in bulk.
“We figured that never goes bad, it’s like money in the bank,” says Matt. “That turned out to be the wrong decision.”
They were going to go all out this year, with a fancy Christmas display they finished putting up just days before the order to evacuate.
One of the strangest after-effects of natural disasters is the impulse of Americans to collectively empty out their closets and donate everything that doesn’t fit or that they don’t want anymore. It’s a well-intentioned gesture, in most cases, but the result is that neighborhoods like Midland Beach very quickly resemble a giant, messy closet with abandoned clothes strewn everywhere.
Five days after the storm, several relief agencies have set up on the sidewalk and inside Pet Foods Plus, pulling out some of the retail racks to serve hot food and distribute some of the tons of used clothing that have poured into Midland Beach.
There is a Salvation Army distribution center in the parking lot. Inside the store, garbage bags of donated clothes are now mixed in with the rotting dog food.
“People are donating sandals and bikinis,” Rob says. “In November? What are they thinking?”
Girls hauling wagons walk by regularly and ask if anyone wants water or a snack. “Otherwise we gotta carry it all back,” they say.
Richard Aloi, the owner of a nearby building gutted by the flood, says he needs to get his place fixed up or he’ll lose his tenant. He has a generator going and several pumps to dry the place out.
“This was my achievement in life,” Aloi says of his small retail building. “If I lose the tenant, I’m gone, I’m shot.” The Russian martial-arts instructor who runs a judo school in the building has promised to come back if Aloi can get the place cleared out.
He says he got through to the Small Business Administration, who told him he might qualify for a 3 percent loan. “How about zero percent?” Aloi says. “Look around this place. We’re shot. I can’t afford 3 percent.”
Rob shakes his head. “Even at zero percent, I’m not sure I could reopen. One hundred thousand dollars over eight years, paying back $1,000 a month on top of my overhead. I don’t know if I could do it.”
His brother Matt adds, “And if we reopen, where will our business be? Twenty percent, 40 percent of before the storm?”
The most common complaint among Staten Island business owners is they can’t reach their insurance companies on the phone, or if they can get through, they’re told there’s a backlog of claims and the company can’t schedule an adjuster to come out.
“Our company said they usually get about 7,000 claims a year,” says Rob. “They told us they have 30,000 pending right now.” (They were also told by their insurance company, Tower Insurance, that they don’t have flood insurance.)
The Freeds’ landlord lost his home in Brooklyn and hasn’t even been able to make it out to Midland Beach to survey the damage. His insurance company is similarly backed up.
“We don’t know anything,” says Rob. “How can we make a plan when we don’t have any numbers?”
The Office Depot Foundation’s Wong points out that it usually takes about eight weeks for the disaster response to transition from rescue to recovery. That’s when the business and political leadership of the community has to come together to make the long-term recovery plan that will presumably also include some support for local businesses.
New York Governor Andrew Cuomo has already asked for about $42 billion in federal disaster relief, some of which will probably be distributed by local politicians or through local agencies. The Manhattan Chamber of Commerce has implemented a microloan program to help businesses reopen their doors after Sandy. But along Midland Avenue in Staten Island, Rob and Matt wonder if this flooded area should even be rebuilt.
The response of Cedar Rapids, Iowa, to the devastating floods of 2008 provides a possible model for a post-Sandy recovery. The state initiated a comprehensive plan to rebuild outside the flood basin and help businesses recover. It set up a $3 million small business grant fund and earmarked an additional $7 million to clear debris. A similar program in New York and New Jersey, with many more zeros at the end of it, may jump-start small businesses and encourage them to stick it out.
“Where am I going to get the capital to start over?” Rob wonders. “I’m not borrowing the money. I’m not going into debt again.”
Rob, Matt, and Bernard are walking down Midland Avenue to Father Capodanno Boulevard, which runs alongside the Atlantic, now blocked from view by an eight-story-high pile of toxic rubbish on the beach. Garbage and dump trucks are idling on the highway, waiting to unload more of what used to be the interior walls, floors, and fixtures of people’s homes and now labeled hazardous waste.
In better times, the men had strolled along this beach with their children, and each shared the same dream: that they could pass on the business to their kids. Now, with the beach closed, the three head up the boulevard, turn inland along Hunter Avenue, and then back to the store. On every block, in every other house, families are digging out, piling their ruined possessions in heaps along the sidewalk, waiting for sanitation trucks to take them to the beach.
“See, here’s the thing,” says Matt. “The people who own their own houses, they might stay. But if you were renting? Would you wait two months till the landlord made your house habitable?”
Bernard says, “Our customers may be gone.”
“If we were a big company,” says Matt, “if we had real money, we’d hire a team to go out and survey the neighborhood to see who’s staying and who’s going, who has pets.”
Rob recalls all the talk during the presidential campaign about small businesses being the backbone of America. “Sometimes,” he says, “I think what they mean by small business is actually big business.”
A woman with red hair comes out of her house and asks how Rob and the guys are doing. “I saw what happened to the store,” she says. “Terrible.”
“You got power?” Rob asks.
She shakes her head. “No power. We got water.”
“How’s your dog?” Rob asks.
Rob says he’s sorry.
As he’s walking away, he smiles and says, “I hope she gets another dog.”
Back at the store, the relief workers are long gone, and they’ve taken all the remaining undamaged retail racks with them, without asking. Steadily, Rob’s customers and neighbors come up and give him a hug. One customer who stuck it out through the storm, the water in his house rising up to his neck, somehow saved three of his five cats. “Thank God, thank God,” he says. Rob looks around the store for some unopened cat food. Another neighbor comes by and recommends drinking plenty of Irish whiskey.
Matt is inside the store, kicking at the ruins. “My son Gavin, he’s 3, he heard about the damage and he said, ‘Daddy, I’ll fix it. I’ll bring my paint brush and fix it all up.’”
Rob nods. “In my heart, I want to reopen. But my head is telling me it may not happen.”
As he speaks, an attractive blonde wearing gold-rimmed sunglasses parks her convertible Lexus and walks up to the store before noticing it’s not exactly open for business. She looks around, confused. “When did this happen?” she asks.
She gets back into her car and drives away.
To contact the reporter on this story: Karl Taro Greenfeld, through Romesh Ratnesar at firstname.lastname@example.org
To contact the editor responsible for this story: Romesh Ratnesar at email@example.com