From inflation and rising rents to rising labor costs, most businesses faced at least one major challenge during 2023. Restaurants were affected by: all of them.
“Someone made a good point, saying that when the water is good, everyone makes a good captain. But when there is turmoil and the economy is bad, it becomes difficult to see how well you are managing your business. I get it,” says Kenan Shah, co-owner of Arpeggio Grill, a Mediterranean restaurant in Austin, Texas.
After a year of that disruption, Yahoo Finance reached out to several mom-and-pop restaurants to find out how they overcame their biggest hurdles and what lies ahead.
inflation
Lawrence Tucker, whose family owns the Chicago restaurant Sun Ray Cafe, said he has had to raise prices four times in the past 18 months. He had no choice as the prices of ingredients such as potatoes and eggs rose. “If you don’t jump in and change it quickly, you’re not going to get it back…then you’re throwing away all the material,” he said.
Greg Azzolini, co-owner of Paul & Jimmy's Italian restaurant in New York City, said the solution is a small price increase. “We have some customers who come in three or four times a week, so we don't want to scare them off by raising the prices too much. So we just did a little bit,” he said.
Some restaurants have been able to cope with inflation by controlling costs. For example, David Bergeron, founder of New Orleans ice cream shop The Creole Creamery, said he manufactures all ingredients in-house and has “complete control” over the supply chain.
He added: “Prices are going up and costs are going through the roof, so being able to undercut others gives you a competitive advantage.”
Trouble with remote work
Thank you, Corona.
Mr. Azzolini, of Paul & Jimmy's, said his Manhattan restaurant frequently caters for groups of up to 10 people. now? Remote work has reduced lunch business by about 50%.
“Most of the restaurants in this area aren't even open for lunch because it doesn't make sense. But if you do have people coming into the office, it's only two or three days a week,” Azzolini said. “Not five days a week. And yeah, maybe they don't do group lunches anymore, but I really don't understand…the larger groups we used to do.”
Before going remote, Anis Habib, owner of Casablanca Moroccan Kitchens in Los Angeles, was hosting parties for 25 to 30 people to dine. “They're not eating lunch. They're not going out. They're more comfortable at home. So forget about restaurants, because they'll cook more at home,” he said. said.
food delivery challenges
Some restaurants are using food delivery to clean, a trend that started during the coronavirus pandemic. Other than that? There aren't that many. Shah, co-owner of Arpeggio Grill, said third-party delivery apps like Uber account for up to 30% of takeout sales. As a result, his restaurants are struggling to make the same profits, even though the number of customers has increased post-pandemic.
“Half of our business was things like Uber Eats and DoorDash, so this was really helpful,” he explained. “But… recently they've increased their fees and their percentages significantly. So it's been a bit of a challenge.”
To recoup costs, the restaurant upgraded its point-of-sale system (the software that manages purchases), Shah said. Now, customers can order through the restaurant's website and then the order is sent to the driver through a third-party app like DoorDash (DASH). The app then collects the delivery fee, but the restaurant keeps all of the revenue.
personnel costs
Sun Ray's Mr. Tucker said he would like to hire more employees, but wages are currently too high and business is too slow.
“Being seasonal in Chicago, the first 100 days after Christmas are usually a very tough time for restaurants, as many consumers spend their money on holidays, parties, drinks and gifts.” he said. “So I already know I have to go there on a lean salary. And I have to really watch my numbers. …I mean, it can't be helped. hey”
Shah also said that labor costs have increased significantly. His solution is to be flexible with his schedule, avoid micromanaging, and occasionally cook.
“So we try to give them not only financial compensation but also the freedom and all the perks of being here,” he said. “Sometimes I feel like I'm working for them. But we make it a family-like environment, which means getting paid below market is justified. [rate] Or at the market. ”
high rent
Gregorio Rosas co-owns and operates Rudy's Restaurant in Seattle, but at one time the future of his business was uncertain. His famous Seattle restaurant closed in 2019, and he was out of the industry for four years.
When her daughter initially approached her with the possibility of reopening the restaurant, Rosas said it was out of the question, not because she didn't find the idea appealing, but because of Seattle's astronomical rents.
“We have business, but we don’t have enough business to give up all our business for rent and building ownership,” Rosas said.
But with help from a nonprofit that considers Ludi's an essential business, Rosas was able to secure an affordable location. The restaurant was reopened in June last year.
“We're getting a lot of support from the public and new customers who really love your business and this restaurant,” he said. “I get a lot of positive comments, which makes my day. Of course, the good thing is that I can pay my rent.”
Looking to the future
Overall, restaurateurs were optimistic about 2024. Mr. Bergeron, in particular, expressed his confidence in the strength of his own business and the resilient demand for ice cream.
“I'm not selling durable goods. I'm not selling anything that people would really consider a luxury item. So we need to be sensitive to the cash flow of individual families. You can not.”
Still, owners haven't lost sight of the challenges facing their businesses. In addition to hoping Americans would get back to work, restaurateurs were also hoping interest rates would drop. In particular, Casablanca's Habib said he thinks the future is bright if prices come down.
“The government should do a better job,” he said.If interest rates and inflation fall, “people will [will] I feel like I would buy it again. It doesn't take much to reassure the public, and that's what we need. And I think we can achieve that goal this year… It's going to be a great year and a very productive year for everyone. ”
Dylan Kroll is a reporter for Yahoo Finance.
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