There has been no doubt in Roger Saadeh's mind that his television repair shop in Old Town Gaithersburg is in a prime spot -- at least until recently. Just off Rte. 355 on East Diamond Avenue, the site was described by Saadeh as a "good midpoint" to accommodate repeat customers and attract new business from the booming upcounty area.

With VCR sales continuing to climb, Saadeh says his repair business, Lakeforest Television, has grown by one-third each year since 1978. He puts it simply: "More VCR sales, more use, more repairs. It's perfect for me."

But that was until the "Road Closed" signs appeared this spring about 150 feet up the road from the strip of stores known as East Diamond Center, where Saadeh and other merchants do business.

Because of a construction project on Rte. 355, drivers coming down East Diamond Avenue are warned by the signs -- and by a barricade blocking about a third of the street -- to turn off and follow a detour. The detour spans several blocks and leads potential customers far from the Old Town shopping area, a section of specialty shops with a small-town feel.

The problem, the merchants say, is that the road beyond the "Road Closed" signs is not actually closed. About 10 businesses remain open along the road, which trails off in a stretch of dirt that dead-ends at the construction site.

The road signs have hurt business, the merchants say -- so much so that some have laid off employes and others are having trouble paying the rent.

Road construction in the Gaithersburg area began about two years ago as part of a State Highway Administration project to improve traffic flow along the Rte. 355 bridge over the Baltimore & Ohio Railroad tracks. Harold Burgess, acting resident maintenance engineer with the highway administration, said the project, which is expected to be completed by the end of the year, will result in two new bridges -- one each for northbound and southbound traffic.

Saadeh and Martha Roberts, who, with her husband Ron, owns Lady Z jewelry, say their business has been cut in half. Roy Passin, longtime owner of Roy's Place, a Montgomery eating institution, said he has experienced about a 30 percent downswing since January.

"If we weren't so well established, I just don't know where we would be," Passin said.

Merchants say they believe that the improvements will be a boost to Old Town by improving accessibility. But until the construction is complete, businesses are struggling to hang on.

Ellen Janiszewski, who runs the Leaning Tower restaurant in the shopping strip, currently helps out as cook and waitress because "we've been hurt so badly we can't keep the help on." Janiszewski, like the others, said the highway administration "has not been helpful to us. Sure, it will be better in the long run, but can we keep going long enough for the good times?" She and Merchant Association President Shirley Favilla complained that repeated calls to the state government had gone unanswered.

The merchants want the sign removed or reworded to tell drivers they can still get through. But state highway officials say any change in the sign may cause too much traffic to go through, jamming up the area near the construction.

One business on West Diamond Avenue -- normally just a couple blocks away, but with construction, now about a 10-minute winding detour -- has found a way to make the best of the construction chaos.

Barron's Gaithersburg Lumber Co. was forced to move across the street because the construction went directly through the old property, which was purchased by the state. Even after the move, which also was subsidized by state funds, access to the new, enlarged business was tough, said President William W. Smith. The firm is near the intersection of Meem and West Diamond avenues and in the shadow of the bridge construction. Randy Stoy, Barron's treasurer, went to the highway administration to ask for permission to tack their own "open for business" sign onto the state "Road Closed" sign posted a few blocks away.

Stoy said he received permission from Burgess, who said, "I said they could do it because we know people are hurting from this. But it's not to the letter of the law."

Michael Snyder, district engineer for state road projects in Montgomery and Prince George's counties, said that "state law does not allow for such private advertisements in the state right of way, and while it's not legal or official, we're allowing it because we're ignoring it." Snyder said that if the merchants in Gaithersburg were to post a similar sign indicating that their businesses were open despite the road signs, he would "ignore it."