May 26, 2023
Can small businesses survive in Friday Harbor?
Kathryn Wheeler

Kris Drain is among Friday Harbor merchants struggling to stay in business; her art gallery is also among a number of businesses up for sale in the face of challenges. (Kathryn Wheeler / Salish Current photo © 2023)

May 26, 2023
Can small businesses survive in Friday Harbor?
Kathryn Wheeler

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Updated June 8 and 12, 2023

Friday Harbor, to many, is the picture of small-town America preserved in time. Its historic charming buildings dot a wide main street, full of unique shops and no chain stores. But underneath the facade lies a growing crisis.

Take the experience of Los Angeles native Mike Ryan, for example.

Compelled to attend a Friday Harbor whale convention by his wife, he wasn’t thrilled to visit a small island he’d never heard of. But when he got on the ferry, he said, “something just hit me. A wave of nostalgia, for me, [and a] frequency here that resonates.” The visit inspired his move to the island in January of 2022. 

Ryan developed a quick love for San Juan Island’s tight-knit community. And he noticed that there were few spaces for locals to dine out affordably, with menu items in the tourism-based restaurant business often hovering between $25 and $40 a plate. As a long-time restaurant owner, he sought to change this.

When he noticed a for-sale sign for the water-facing units of a charming red building at the edge of the marina, he decided to go for it. Little did he know that this would be a gargantuan task.

Friday Harbor’s small businesses are struggling to stay afloat amid astronomical rent prices, outdated and failing infrastructure and a workforce shortage. Another factor, according to several businesspeople, is landlords with an unusual amount of say in who makes it, and who doesn’t. All of this means small business owners are facing mounting challenges to realize their dreams.

At his newly purchased restaurant, Ryan mapped out a French brasserie on the water where he would serve affordable breakfast and lunch. Next-door would be an outdoor shack for snacks and ice cream, and underground, a speakeasy serving cocktails. From the beginning, Ryan experienced what felt like unusual actions by his landlord, Roger Bennett, a long-time Friday Harbor landlord who lives off-island.

The building needed a lot of work when Ryan purchased it. All of this would come at Ryan’s expense as per the terms of the “triple-net lease,” which puts all responsibility for maintenance, property taxes and utilities on the tenant. 

As construction began, Ryan said, Bennett sent drawings and sketches of the design he imagined and told Ryan what kind of soda he should serve. Bennett also watched the crew work, which made them feel uncomfortable. When he didn’t like something he would take the keys away from them, refusing to let them continue working until he had his say, according to Ryan. 

Behind the locked door

Halfway through the construction process, the crew found black mold, a major code violation and health risk, which Bennett had not made Ryan aware of. Even more alarming was the discovery of a door to a hidden mechanical room, which Bennet initially refused to open. After calling the Town to have the room opened, Ryan claims to have discovered a grease-covered dungeon of sorts, where sewage was being illegally pumped directly into the ocean without the Town’s knowledge. 

Bennett refused to amend these issues and soon placed even more restrictions on Ryan, a seeming effort to sabotage his business and remove him from the lease, Ryan said. 

Ryan launched a legal battle to try to get Bennett to pay for the fixes, but eventually, after losing thousands of dollars, he abandoned the lease. The building remains vacant today.

In response, Bennett said that “a lot of the problems were their own,” in reference to Ryan, and that he wouldn’t discuss the issue. 

Friday Harbor’s charming downtown Spring Street is lined with small businesses serving both locals and visitors. (Kathryn Wheeler / Salish Current photo © 2023)

This was “the worst experience I’ve ever had,” said Ryan in a recent interview in his new restaurant, Rocky Bay Cafe, a bustling diner filled with locals. Ryan is grateful he was able to pursue his restaurant elsewhere, having the financial background and resources to recover from the experience. Others, he said, aren’t so lucky.

Space costs

Interviews with more than a dozen business owners surfaced complaints about treatment by Bennett and two other landlords — Lex Salie, located off-island, and Charles Thomas, located on-island. [Ed.: Edited to clarify property management roles. June 8, 2023]

Many small business owners described rent prices that couldn’t match the revenue generated in a town like Friday Harbor, which sees a boom in business in the summer and all but drains in the winter. In addition, many of these buildings are reportedly not up to code, which means high rent that doesn’t match the quality of the facilities. Like Ryan, other tenants spoke of encountering an unwillingness to resolve structural issues and a general attitude of “do it yourself, or get out.” 

Rent prices in Friday Harbor tend to reflect Seattle’s consumer price index (CPI), the highest in the state. The owners of one 305-square-foot retail store in the center of Friday Harbor pay $1,283 in rent each month, or $50.40 per square foot. That doesn’t include utilities or taxes. 

Included in the majority of these leases are upkeep of old and finicky buildings, which can present numerous problems. Fixing these issues under triple net leases falls to business owners.

Paul Moore owns The Computer Place under landlord Charles Thomas. “Do I think that the space is worth paying for every month? No,” he said. Moore is dealing with a leaking ceiling that his landlord has said he would fix, but so far has not done so. “That’s one of the characteristics of my existing landlord,” he said. 

Thomas owns the row of buildings adjacent to the Computer Place, which include the San Juan Island Fitness center, now up for sale. The owners of the facility are $100,000 in debt and are trying to sell in order to relieve the debt. “What happened in the last three years has been devastating,” said Paul Hopkins, the longtime owner, in reference to the debt that has amassed largely due to the COVID-19 shut-down.

On top of this, “We just had a 5% increase tied to Seattle CPI. The timing of the increase is unfortunate. Like most businesses we had to pass that on to our clientele,” Hopkins said. He remains hopeful that the business will sell. 

Thomas declined to comment on these claims on the record. 

Help wanting

Piled on these expenses are the costs of hiring workers, already scarce due to a lack of affordable housing on the islands. This has left business owners stretched thin. 

Kris Drain, the owner of Island Studios since 2017, works at the art gallery alone seven days a week from May to January. She is unable to afford to hire employees. It’s “gotten to be a lot of work and not a lot of big return,” she said. Sales are down 30% over the last year to date, said Drain, who although uncertain as to why, wondered whether the unpredictability of the ferries and general inflation are to blame. Drain is now trying to sell the business, which is overseen by a landlord located in Hawaii. 

The nature of being an isolated island may be part of the problem for tenants. It’s the “wild, wild West out here,” one current business owner said, describing a lack of oversight and regulations in place to protect business owners. 

Island lawyer Mimi Wagner, who represents residential tenants, explained that “a residential lease situation is completely different than a commercial lease … [residential tenants] have so many more protections under the law than in commercial tenancies.”

In essence, business owners shoulder much more responsibility. While the burden can feel harsh and unforgiving, in most cases, it isn’t illegal. In addition, if business owners can’t afford to present a legal case, any possible illegal actions by landlords go unpunished.

“If you’re owning a business and leasing it, you are sophisticated,” said Wagner, acknowledging that business owners, having few protections, must have know-how. Jim Carroll, the property manager for landlord Salie, who has also received multiple complaints of strict and inflexible practices, agrees. 

“A lot of people think they want to do something but they really don’t have the financial depth to do it, not just the rent but everything else that has to be done,” Carroll said. 

On a small island that sees its culture as different — supportive and noncompetitive — this perspective can feel out of character. For this reason, Carroll believes that outsiders may have better experience to exist in these conditions, more typical of the mainland. As to running a business, “I find the locals don’t have the depth, or they’re wealthy and don’t need to work. It takes somebody with some knowledge and experience,” he said.

Vacancies

Locations of Cask and Schooner and Tops’l are currently vacant. Multiple locals have attempted to purchase the businessess, but said they ran into issues with the expected cost of rent and outdated structures that would require many fixes. Prospective buyers who asked for changes to the lease said they were denied. [Ed.: Corrected to clarify ownership and buyer status, June 12, 2023.]

Carroll said the former owner of the two businesses brought in an appraiser to certify that the rent was fair. The selling price of the business has been cut in half over its year on the market in order to incentivize a purchase as well. Carroll said that prospective buyers had asked for too many unrealistic changes to the lease, which is why they were denied. 

An empty, formerly bustling restaurant is one of the first sights greeting travelers on disembarking the ferry in Friday Harbor. (Kathryn Wheeler / Salish Current photo © 2023)

Some observers contend that landlords have incentives to leave buildings empty despite offers of purchase or rental. Salie is still receiving lease payments from the former restaurant tenants, who are required to keep paying rent until the lease ends or they sell the business.

In a recent meeting with the island’s Soroptimist club, Town Administrator Denise Kulseth said she had concerns about such vacant buildings. According to a member of the group, Kulseth said many of these buildings have unrealistic rental prices. One reason, she proposed, may be to stave off buyers due to a tax write-off landlords receive for vacant buildings. Kulseth could not be reached for further comment. 

What will evolution bring?

Change is coming, whether we like it or not, said Friday Harbor Mayor Ray Jackson. The mayor acknowledged that he is aware of insensitivity and high rent by landlords, but sympathized with both landlords and tenants. “It’s going to take compromise” on behalf of both owners and landlords to amend the problem.

“We’re living in an evolutionary stage of this island. What used to work yesterday will not work today,” he said. More specifically, he thinks businesses need to be more creative in how they operate. Many businesses have variable hours, long periods of closure for vacations and high prices that exclude locals who might otherwise be regular customers. 

While this level of business flexibility can be a draw for business owners, it may not be keeping up with the times and a business landscape that is increasingly mirroring the mainland.

“Until we all sit down and talk about what we want as far as the future of the town, we will always be where we are,” said Jackson. As of now, there is no meeting planned to discuss such issues.

Ryan’s Rocky Bay Cafe, which often has lines out the door, may be one example of what it takes to thrive here. Prices for an entree are almost all below $15, drawing the many locals who fill the restaurant each morning. Ryan, through his business success and financial resources, has been able to house his workers and retain a large staff. 

Ryan admits that this isn’t feasible for everyone. “It’s impossible to incubate success here. [For] an aspiring chef who is 24, it’s unreasonable to ask [them] to pay $10K a month.”

While not every restaurant owner has deep pockets, it is clear that catering to locals, and not just tourists, can at least keep tables full and customers coming back. 

‘Power from unity’

Across the Salish Sea, in Bellingham, which has seen a similarly tough landscape for small businesses, one activist is pushing for change. Rebecca Quirke, who began Tenants Revolt, is attempting to fight landlord abuses. She is doing so by bringing tenants together to form a major lawsuit that she hopes will hold landlords accountable. 

Quirke believes power comes from unity, especially for those who don’t have deep pockets to afford a legal fight on their own. While she works for the rights of residential tenants, she sees this model as applicable for business owners too. 

The loss of small businesses is a “community destroyer” she said She advocates for rent stabilization as one solution, but believes that building a stronger economy that actually serves the needs of locals is necessary too.

“What do we do with privilege when we get it?” is a question she asks often. 

As the San Juan Islands’ income gap continues to widen, Friday Harbor may have to reckon with similar questions. Beyond regulations, or government interference, it is the community that has the power to change things. “Support goes a long way, neighbors go a long way,” Quirke said.

— Reported by Kathryn Wheeler

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