As restaurants begin to recover from the closures and restrictions caused by the pandemic, the combination of global inflation and a new minimum wage has increased operating costs, cut profits, raised menu prices and jeopardized their survival.
“I hear people talking about the high prices in some of the local restaurants,” said Chuck Frowein, owner of Hollister’s Grillin & Chillin Roadhouse and Alehouse. “I tell them, ‘no, that’s priced right. You are not figuring out their costs and overhead.’ In the future, you are going to see more low-end restaurants that are economy-based and more high-end restaurants that will become even more expensive. But the ones like us, in the middle, will have a tough time.”
Frowein said that higher product costs and occasional shortages of key ingredients are a significant problem.
I’ve never seen anything quite like this,” he said. “Before COVID, cases of eggs were $19-$24 a case. We’ve seen them go over $100 a case recently. Bacon, at the start of the pandemic, was $49 a case, but it went as high as $120 if you could get it. There are significant increases everywhere and not just by 10% to 20%—sometimes they have doubled.”
For a business known for its double-cut pork chops and 20 oz. porterhouses, the changes in meat prices are even more of a challenge.
“There has been a big sticker shock on steaks,” he said. “When we buy a ribeye, we probably look at paying around $22 a pound. You usually don’t do a big markup on steaks unless you are a high-end restaurant, but even just increasing the cost of the meat by 50% means, with the side dishes and costs involved with the labor in preparing and serving it, that steak should be priced $60 to $70.”
Even low-end menu items can become surprisingly expensive, moving beyond what a customer is expecting to pay.
“When you look at it from a restaurant side,” Frowein said, “there’s a mental price cap on, for example, a burger. A cap on what people are willing or expect to pay. Most restaurants charge three to four times their cost just to stay afloat. So when meat for a single burger suddenly costs $6 or $7, you are now looking at charging $21 or $22 dollars for a burger—or more.”
Keeping prices stable but decreasing portion sizes is not a viable option, Frowein said.
“You can try doing things like, instead of serving half a pound of french fries, you serve a quarter pound,” he said. “But that is just messing with your mojo, and the customer is going to notice. We try to stomach much of the costs of short-term inflation, hoping prices come back down after spiking up. But we never seem to get back to where we started.”
Tami Castaneda-Huaracha, the owner of Doña Esther’s in San Juan Bautista, said that her sales have dropped 20%-30% while prices have gone up by about the same amount and that anytime she has to increase menu prices, people immediately notice.
“It’s funny,” she said. “People will go to expensive restaurants in San Francisco or Monterey that don’t have any prices on their menus, and they order and don’t seem to have a problem with it. But when they eat in a small town like San Juan, they think we are all gouging. But we have the same bills, overhead and cost of doing business as those high-end restaurants. I am not gouging. I am just trying to make it.”
She also said that she constantly has to reinvent the restaurant to attract new customers as more and more dining spots open up locally.
“I love everything that has to do with San Juan,” she said. “But having to deal with another 10 restaurants in Gilroy or Morgan Hill or Los Banos—you just can’t keep up. For example, people want flaming fajita plates that come sizzling at the table. Restaurants that do that kind of thing are built to serve that way. But we added that dish to an existing menu—we are not set up to serve it like that. Then the customer is not satisfied because they expect the dish to be served a certain way, but we can’t afford to redesign the kitchen just for something like that.”
Another factor hurting every business in San Juan, according to Castaneda-Huaracha, is the increased traffic on Hwy 156.
“It has really hindered things,” she said. “We have customers in Hollister who used to come in three or four times a week, and now we see them maybe on Saturday or Sunday. They don’t come in on the weekdays because they are fighting the traffic to get home and then have to fight traffic to get here.
But the true bottom line, as Frowein also noted, is the inflation of food prices, which she said is out of control.
“I used to be able to buy a whole box of pork shoulder for pennies on the dollar,” she said. “Now it has more than tripled. And that is for our Chile Verde, which is a huge deal. The tripe for our menudo used to be 19 cents a pound, and I just paid $6 a pound for it. And we are a Mexican restaurant—we need our lemons and limes. But at $120 a case? My tortilla bill is now over $5,000. How do you deal with that change? I can’t stay in business like that.”
Castaneda-Huaracha said that all she can hope is that the customers be patient while the restaurant business adjusts and finds a way to survive.
“It has been hitting us pretty hard,” she said. “I’m robbing Peter to pay Paul all the time. I have to pull from my personal accounts to keep the restaurant going—I’ve already done it, and I will continue to do it. But I love this place and this business. It is part of my family’s history and, here at the gateway to Third Street, part of the town’s history as well.”
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