The COVID-19 pandemic has turned our world upside down, with small businesses being hit especially hard. This is a pivotal time for SMBs, and the way they respond to the pressure will determine how their business runs for years to come. Many companies are taking this difficult situation and turning it into an opportunity. In our Positive Pivots series, we’re diving deeper into what these innovative businesses have done, and what lies beneath the surface to produce this kind of creativity and resilience.
This week we spoke with Lenore Estrada, Co-founder of both Three Babes Bakeshop and SF New Deal, on how she and her team are supporting local San Francisco small businesses.
What is the SF New Deal and why did you start it?
Ten years ago, I co-founded Three Babes Bakeshop, a business that I continue to run. We specialize in pies, but over the past five years more and more of our revenue has come from daily sales to large companies with private corporate dining rooms — companies like Google, Lyft, and Twitch. As the COVID-19 crisis started, we began to see large scale cancellations from our biggest clients, and once the first Bay Area shelter in place began, our revenue shrank to almost zero. Here in the Bay Area, technology companies were early leaders in requiring staff to work from home, so we at Three Babes saw and accepted the severity of the situation relatively early.
At the very beginning of March, well before the shelter in place order was announced, we laid off 20 of our 26 employees, including workers who are supporting families, who lost healthcare when they lost their jobs and couldn’t afford COBRA, and who I knew wouldn’t be able to collect benefits as a result of their immigration status. It was devastating to know that I was no longer able to provide for my staff and that many of them were at high risk of negative outcomes if they were to contract COVID-19.
At that time, my friend Jacob Bindman began asking around to try and find local community-based organizations who served food insecure populations. The idea was that we’d find donors to pay for meals that would be distributed to the community. We immediately found a number of organizations who were in need of support, including Citywide Case Management (a division of UCSF’s psychiatry department serving people with severe mental illness) and the SF African American Faith Based Coalition. Serendipitously, my friend Emmett Shear, CEO of Twitch, reached out independently, expressing interest in sponsoring an effort to assist San Francisco’s small business community. He offered to donate US $1,000,000 if I was willing to form a nonprofit to distribute the money. On March 23rd, SF New Deal was born.
We immediately began getting the word out to small businesses and figuring out the logistical details of safely delivering meals to vulnerable populations. The first day, Jacob and I made 100 sandwiches in his mother’s kitchen, which we delivered to a mental health clinic in San Francisco. By the next day we’d onboarded three restaurants, and served around 1,000 meals the first week. The following week we were working with 24 restaurants and delivered over 19,000 meals. We’ve delivered between 19,000 and 60,000 meals every week since last March and are now working with over 175 restaurants, most of which are owned by BIPOC, women and/or individuals who identify as LGBTQ.
How did your product offering pivot?
At first we used donated money to deliver meals to vulnerable populations in partnership with community-based organizations (CBOs). We’d rely on the CBOs to identify people who needed help and in many cases the CBOs would also do the distribution or last mile delivery. We had overwhelming demand from both restaurants and CBOs and it quickly became difficult to raise enough money to keep up with the need. In May, we applied for and were awarded two government contracts, which was a turning point for our organization.
Typically, small businesses aren’t able to participate in federally funded contracts. The scope of work is way too big for a small business to be able to meet, and it’s a lot of administration for a government agency to be able to coordinate many providers. This is why contracts usually go to huge companies — the kinds of organizations that make food for prisons or airlines. The quality of the food tends to be low, and as the contract is being fulfilled by large for-profit companies, some amount of money has to go to shareholders.
We took these contracts and split them up into 50 or more mini-contracts. We also provided a thin layer of administrative support, ensuring quality control and helping with things like delivery support and finding replacement meals if something goes wrong (everything from closures of restaurants due to COVID-19 to delivery vehicle breakdowns). The money from these contracts flows more quickly into the community than if it were being paid to large corporations for a few reasons: typically, in a small business setting, there is less of a disparity between what the highest paid person and lowest paid person receive. Furthermore, these small businesses are paying local rent and local taxes. They also don’t have corporate offices outside of San Francisco, so all jobs are local jobs. Because we are working with so many restaurants, we can also provide a wider array of choices, allowing people to select the type of cuisine they are interested in eating. And last but not least, our system has many redundancies as a function of the many small businesses that participate. If one provider needs to close because of a COVID-19 infection for two weeks, we have many other restaurants who can slot in.
This model has been a resounding success, and we now are running several programs, some of them which are funded by the government:
What are your plans for SF New Deal and how are you aligning that with Three Babes Bakeshop?
Both organizations are going strong! At Three Babes we’ve been able to hire back 16 employees and last year had our most successful holiday season of all time! We had a tiny profit for 2020 thanks to our expansion into online baking classes, which have become a popular corporate team building activity. We aren’t out of the woods, though. In January we brought in less than half of the revenue we generated last year and are in need of PPP Round 2, which we hope to receive soon.
SF New Deal is on track to distribute nearly US $20 million by the end of our first year in operation and are busy plotting a more proactive approach for 2021. 2020 felt very reactive — we were scrambling to find and distribute resources in a desperate attempt to get food to hungry people and save businesses from laying off staff and closing their doors. This year, we’re aligning around neighborhoods, rolling out programs that empower people to work within their own communities to take action, organize, and solve the problems that they’re experiencing. We’re planning to apply for some multi-year contracts that will extend beyond COVID-19 to address food insecurity and help small businesses participate in community feeding long term. We currently have about 175 restaurants participating, as well as three local courier services and are onboarding new businesses as new contracts become available.
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