STRATEGY

For Businesses Near New York Pipe Explosion, Headaches Continue

Disruption from the blast is expected to cost local businesses hundreds of millions of dollars.
Advertisement

Restaurant owner Jack O'Brien was in the basement of Grand Central Terminal last Wednesday when a 24-inch steam pipe exploded a couple blocks away, injuring more than 40 people and causing a massive eruption of steam, asbestos, and concrete at the height of rush hour in midtown Manhattan.

O'Brien, who owns several restaurants nearby, said he heard a loud boom and felt the ground shaking, and before he knew what had happened, his first thought was to get back to the site of his business. "I fought my way back against the crowd to get to the restaurant to evacuate the premises," O'Brien said. "I felt I had a responsibility."

By the time O'Brien got back to Domenico's, the Italian restaurant he has owned for 30 years on East 40th Street at Lexington Avenue, the place was empty. "The door was open, food was on the table, drinks were on the bar, and nobody was there," O'Brien recounts. "It was kind of surreal."

An entire bus tour was dining at the restaurant that night and had just been served dessert when the explosion happened; 50 pieces of tiramisu sat untouched. A private cocktail party was just getting going. Making matters worse, O'Brien also owns two other restaurants in the area, one of which -- Fagiolini on Lexington Avenue at 39th Street -- was also affected by the explosion.

Amidst the chaos, O'Brien managed to get into both restaurants to do a quick clean-up and shut off lights and appliances in the kitchen, before being asked by a police sergeant to leave the area. Both Domenico's and Fagiolini became part of the so-called "frozen-zone" -- the streets surrounding the explosion site that were closed-off to pedestrians and traffic to make way for city clean-up efforts. It wasn't until Monday, five days after the incident, that O'Brien was permitted to reopen his restaurants.

Domenico's and Fagiolini were just a couple of the 125 ground-floor businesses that city officials said were affected by the July 18 explosion. According to some reports, economic experts estimate that the aftermath of the blast could cost the area's small businesses and retailers hundreds of millions of dollars in lost revenue. O'Brien says he lost about $50,000 in the days that his restaurants were closed.

Despite speedy clean-up efforts allowing most businesses to return to normal this week, several buildings located in a 100-foot radius of the explosion site remain closed, pending clearance from the Fire Department and the Department of Health.

One of those buildings houses the corporate office for Insomnia Cookies, a cookie-delivery company founded by Seth Berkowitz in 2003. Neither Berkowitz nor his 10 employees were in the office when the blast occurred, and for the past week, they've been struggling to run the business remotely. No one knows for sure how much longer they'll be denied access to the office. For Berkowitz, the unexpected incident was not so much a blow to his sales as it was to his efficiency as a delivery business.

"It's affected our business completely, it's crippled us," Berkowitz said. "We don't have access to our computers, our promotional materials, anything." Berkowitz runs much of the business over the computer, and without access to his files, he can't keep up to speed. In the meantime, Berkowitz is conducting as much business as he can on his BlackBerry, including communicating with his employees. Soon, his rent for next month will be due, and he expects he will have to pay for the whole month.

In an effort to provide quick aid to business owners, the city's Department of Small Business Services announced that it is offering no-interest loans of up to $10,000 to businesses in the "frozen-zone." Loans will not require repayment for the first six months and applications will be processed within a week. City officials from the department have worked on site this week to assist business owners with their loan application.

At a news conference Tuesday, Gov. Eliot Spitzer and Mayor Michael Bloomberg announced that the state has requested federal assistance from the Small Business Administration, and asked for a Physical and Economic Injury Disaster declaration. "We remain committed to providing any and all assistance possible to restore the community's economic vitality," Spitzer said in a statement. According to information collected by state and city agencies over the past week and a half, at least 10 businesses have had a gross revenue loss of 100 percent due to the steam pipe explosion.

The City Council and small-business owners plan to hold Consolidated Edison, which owns the 84-year-old pipe, responsible for the damage, at a hearing scheduled for Aug. 7. But for the most part, O'Brien and Berkowitz do not expect to recover their losses. Fortunately, O'Brien has business interruption insurance, but he says getting a reimbursement check is "notoriously difficult to collect."

"I have a feeling that I'm going to be beaten down by the insurance company and be forced to accept compensation that doesn't cover my losses," O'Brien said. But despite his frustrations, O'Brien added that he is just happy to be back in business. "My only saving grace is that it's July, and the summer is kind of a slow month," O'Brien said. "This could have been a killer."

Last updated: Jul 27, 2007




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: