Restaurant woes: Industry battling higher costs, labor issues

·6 min read

Jan. 23—TUPELO — Every day, Fidel Cubillo starts work at 5 a.m.

With three restaurants to oversee — Cantina del Sol and two locations of D'Casa — he makes sure they're ready for the lunchtime rush, then dinner later in the day.

"I try to prep the most I can with all three locations because I don't know if I'm short-staffed or not," he said. "So if they're going to show up, they'll be there by 9."

But like other restaurateurs, Cubillo said having enough help is a daily struggle, on top of everything else.

"Every day is a challenge," he said. "Everything went up 15-20% and some staff even more. It's hard to get your hands on anything. There are shortages on everything. Just to keep our doors open for business, I'm calling three or four different companies. And prices are outrageous."

A recent Independent Restaurant Coalition survey of 1,200 restaurants and bars in the U.S. showed the industry in dire shape, with nearly 60% of them experiencing a decline of more than half of their business during December.

In addition, 46% of businesses reported an impact on operating hours for more than 10 days that same month.

Operators who did not receive federal grants through the American Rescue Plan are also taking on more personal debt, according to the survey, with 41% of restaurant and bar owners taking on new personal loans to support their businesses since February 2020. Also, more than 1 in 4 restaurant and bar owners who didn't receive emergency funding had to sell a personal asset to keep their business afloat since the start of the pandemic.

Meanwhile, the National Restaurant Association estimates that more than 90,000 restaurants and bars have closed since the beginning of the pandemic.

"I've never seen it this way in my 25 years in the business," Cubillo said.

Facing headwinds

Bernard Bean, chief operating officer for the Eat With Us Group, whose restaurants include Sweet Peppers Deli, Harvey's, The Grill and Bulldog Burger, said while sales are strong across the brands, the company faces several headwinds.

"There's the cost of product, labor costs, supply chain issues, etc.," he said. "On top of the ability to hire is having people out with COVID, which multiplies the problem."

Like many restaurants, the workforce strains have affected Eat With Us' ability to maintain regular hours at times.

"It's created situations where we can't open for a few days here and there because of COVID, which in turn hurts sales," Bean said. "It seems COVID is going through the general population and working its way through the industry as well."

Kent Randle, who owns Kent's Catfish in Saltillo, has seen a noticeable shift in his business due to the Omicron variant surge.

"Lately, we've seen fewer people coming and eating in the dining room, but fortunately, it's really picked up with our call-in orders," he said. "So, we've been able to make up for that a little.

As far as expenses are concerned, the staple of his restaurant — catfish — is as expensive as ever. While supply isn't the issue, the problem goes back to the lack of labor. Catfish processing plants are working at only partial capacity and are unable to meet the continued high demand from restaurants and stores.

"I can't really go up on prices because you'll lose customers," Randle said.

Even the cost of cooking catfish has gotten markedly higher.

"I've got seven large fryers that I have to change out the oil regularly," Randle said. "It's costing me $400 more now than a few months ago. And it's not like I can avoid it — you have to change that oil."

The restaurant industry typically sees slim margins of 4-6%, and the increased costs are slicing them even thinner.

"You can't raise prices enough to pass the expense on to customers," Bean said.

Help wanted (desperately)

The industry has been plagued for some time with labor shortages, and the pandemic only exacerbated the problem.

"Staffing ... I've never seen it this bad," Cubillo said. "It's just hard to get people to work. I've always like to select the people I work with, but it's so much harder now. I got a call this morning, and I have to go back to Cantina because two guys did not show up."

Cubillo said being a restaurant owner means vacations are far and few between, and all but impossible now.

"I just can't right now; I can't leave," he said. "A week ago, I was able to get a half day off because we had everybody show up. And the thing is, it's been going on for months. But it's not getting better. Don't know what step is ... I would hire 12 people right now if they were available. I would love to have 24. But that's not happening."

Jennifer Brignac, co-owner of Jo's Cafe, said their business hasn't suffered during the pandemic, as customers have several options through either their food truck, brick-and-mortar location, meal prep plans or catering.

Having enough help is Brignac's biggest challenge.

"We're struggling with finding help that we can afford to keep, as well as just getting them to show up," she said. "We know everybody is in that situation. The people we have are good as gold — we just need more of them."

More grants needed?

Last year's American Rescue Plan provided federal money to businesses, and the restaurant industry got help via the Restaurant Revitalization Fund.

The RRF closed to applications on May 24 of last year with $29 billion to distribute. Restaurant operators applied for $69 billion in relief.

According to the recent IRC survey 28% of restaurants that did not receive Restaurant Revitalization Fund grants are facing eviction, while only 10% of operators who obtained RRF funds may be evicted. Forty-two percent of operators that didn't receive RRF grants risk filing for or have filed for bankruptcy, compared to only 20% who received RRF grants.

Many in the industry are asking Congress and the Biden administration to add more funds to the program.

Bean, though, isn't so sure more federal help is the answer.

"Federal money helped, but I don't necessarily like that — I want open competition," he said. "The big banks aren't going to learn their lesson until a bunch of them get wiped out. Restaurants got assistance, and it helped many stay open, but the long-term prospect is that the money will eventually run out. Then what?"

Bean said he is particularly sympathetic to small, independent restaurants, which face a far greater risk of closing their doors during the current environment.

"I don't want them failing," he said. "They help create a community. I think the biggest threat is inflation, and if it doesn't slow up, it's going to be devastating to the industry."

As for Cubillo, he expects the current challenges facing his industry to continue for the foreseeable future.

"I can see restaurants closing their doors, with all the costs and issues going on," he said. "And I don't see it getting any better anytime soon."