Dallas Restaurants Are Struggling To Stay Alive
Last week AP ran this story on the horror all restaurateurs are facing: the price of food is soaring faster than the price of oil. Most of the local owners and chefs I have spoken with are struggling hard to keep menu prices reasonable and still make enough to stay in business. These people are not magicians; they just can’t wave a wand over their menu and make this reality go away. They have to adjust and we, as consumers, have to adapt along with them if we want to keep our restaurant community healthy. I’m not just talking about high-end restaurants, pizza joints are taking a hard hit–the price of flour has doubled in the last two weeks. Restaurant owners who place a complimentary basket of rolls, bread, or corn tortilla chips on your table may as well lay down a couple of ten-dollar bills—their cost for these giveaways is astounding. Rice, milk, and beef? Same song: second, third, and fourth verses. Fine dining can still be fine but be kind to restaurateurs who substitute local or regional products for high-end ingredients flown in from far away. Thankfully Dallas is about to hit the prime growing season for fresh fruits and vegetables. Stock up. Freeze it. Hug a chef.
Update: See Part 2 Here
15 Comments to “Dallas Restaurants Are Struggling To Stay Alive”
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” restaurateurs who substitute local or regional products for high-end ingredients flown in from far away ” Sounds good to me !
Golly…too bad they haven’t been able to make it, selling wine for $12/glass, or more, when the acquisition cost is roughly $2/glass, or less. Breathless, gushy stories by newspaper and blog columnists; overpaid publicists, with the next big party for some charity; golly, it’s just a shame.
Hey, I did my part at Mothers Day brunch at Fearings 450.00 bucks before tip for 4. Had to stop at Kellers for a burger on the way home to fill the hole.
I don’t know too many restaurants that can get the margins listed above on a glass of wine, unless they like to drink TOTAL CRAP. Most “high end” wines have a lower markup % than cheaper wines, because the house still makes more on each sale.
Many people don’t realize that a drink served in a bar or restaurant is not charged sales tax. However a 14% gross receipts tax is remitted on each dollar of liquor/beer/wine sales. Add that to the average 33% cost of product, and you are pretty close to a 50% cost, before any other expenses. And if you think rent in a “wet” area is cheap, ha, ha, why do you think the majority of Dallas is dry?
Sounds good to substitute local or regional products, if they are being grown locally. But it’s tough to get local salad greens in Texas in August.
The revised franchise tax is a real killer for small businesses with low profit margins. Regardless of the bottom line, the tax will be assessed on the gross margin.
And I would like to add, that your neighborhood restaurant which holds a “Club Permit” for Liquor/Beer/Wine sales is NOT allowed to purchase their product from wholesalers, but must purchase from a retailer with a specific license. Competition is limited, prices of product are significantly higher.
I can’t tell you how many times I’ve been asked to get product “at wholesale” (not that I would). I have to tell them prices at Goody Goody are lower than the prices we pay through our “middleman”.
Amy, thank you so much for your input. Great insidery look at the biz.
Yeah, well I could go on ad-nauseum about membership records needing to be kept on premise for 7 years (the state actually has people go through records to make sure they are all signed and in the correct minutes envelope, last year we had four years worth audited). But the more hoops you have to go through, the more competition is limited.
Add these additional costs to the current problems in the capital funding markets, and the result is investments in new restaurants will be lower since the potential risk/reward ratio has been altered. Now I like to call our industry a “tax generator”, not that we pay all the taxes (our guests pay the sales taxes, but we collect and remit them to the state), gross receipts tax on alcohol beverage sales and property taxes are significant for the square footage occupied by these businesses. If we have fewer of the “tax generator”s in the marketplace, I have to wonder where the governments will go to next to replace these monies. Great question for Wick.
Amy,
We need more level-headed operators like you in the industry. The uninformed customer only calculates inflated prices by the retail price they see at Majestic, Central Market, or the local Tom Thumb. Costs of operations are outrageous, not to mention the headaches of insurance, tax records, credit card security, etc. Kudos to you for hanging in there.
I’d love to bring my crew by your establishment some time. I’ll even sign up for a “membership”.
Great posts. I’m addicted to SideDish.
I’m disappointed to see such a not-very-useful comment from Chef McGrady, who, one would assume, is familiar with some of the very best ingredients to be had. There is a limited number of top-quality ingredients that can be sourced locally (Texas and surrounding states), and, even then, only seasonally. I support the development of the local/slow food products scene, but they are, as my claim asserts, in the developmental stages. And we’ll never have local sources for key products, take, for example, non-Gulf of Mexico seafood or even acceptable short-grain rice. Chef McGrady’s flippant comment does little to increase understanding among diners, who are already seeing the cost of dining out shoot up, of the “why” behind the rising tariffs, of what the hospitality industry deals with in trying to offer high quality experience in the face of rising costs and high investor/owner/creditor expectations. Thanks to Amy S for her much more reasoned-out counter and for helping to point out one more role of eateries and watering holes in the fabric of our economy and culture.
I don’t think I quite said ” let’s build a wall around Texas and become self sufficient” But their are too many chefs nowadays hunting for that “wow factor ” dish for their menu. Soay Lamb from the Scottish highlands for example when Colorado has amazing quality grass fed lamb that would taste as good, be cheaper, support local and lessen carbon footprints. Gosh, even Wholefoods trek all the way to New Zealand for lamb these days. I just think if local produce is available then let’s use it. As for local produce being seasonal - Perish the thought that we would go back to the iron age and start eating “seasonal” again.
Amy, thank you for pointing out exactly what I was going to point out. Wine costs tend to hover around 30-35%, not including the liquor tax of 14%. You end up with a cost of goods at around 45%+ This doesn’t account for overhead, labor, and a health department that two years ago couldn’t find anything else wrong so they made me pay to put wheels on my beer cooler.
AmyS makes some good points re: no sales tax on retail alco-drinks sales, the tax markup on liquor receipts and the cost of getting your own product for a dry-area place. But, she is totally out to (a free) lunch with stating “And if you think rent in a “wet” area is cheap, ha, ha, why do you think the majority of Dallas is dry?” The reason a large part of west/northwest Dallas and south Dallas is dry is because of county or (once autonomous) city ordinances going back up to 100 years ago. It has diddley squat to do with the cost of rent and operations in a wet area.
And I am tired of the “wine defense” markup rationale that always comes out at times like this. Most restaraunteurs here charge that 3-4x markup because THEY CAN. It’s also their main defense against shrinkage elsewhere (inc. alco-drink shrinkage!).
There’s a few well-run places where this markup does not occur as egregiously. And, I hope Paul Pinell’s new place puts wine pricing pressure on all those who still think that 12 bucks is a fair price for a glass of Alamos Chardonnay, that even at a 55% surcharge only cost the owner 13 dollars!
Chef McGrady: thanks for clarifying your comments. I’m all for supporting local when possible, but let’s not throw it out there as if doing so is as simple as substituting B for A. Restaurants (and Whole Foods, et al) go after the the “wow” factor because, at least in part, diners want it. Also, let’s be real about how much a typical restaurant, even the independent ones, can really change to support local/slow. My “guestimate” would be to no more than 5%-7% effect. Agreed, that’s better than nothing, but it still ain’t much, and therefore comprises part of the gist of the original article that sparked all these comments.
As an aside, I completely dig Colorado lamb. As the Chef asserts, the quality is amazing and has improved greatly in the past decade.
Bill, every 10 or so years, Dallas considers being wet like our neighbors, allowing people to actually pick up beer and wine at their neighborhood grocery stores and restaurants to have the same competitive advantage in those neighborhoods as ones that are in “wet” areas. The biggest funding for the fight against the proposals always comes from two sources, 1) the liquor distributors who are getting a premium on club sales and don’t want the grocery store competition, and 2) the real estate moguls that own the “wet” areas. Maybe I’m the only one who remembers the “Battle of Buckingham”, that little incorporated area between Garland and Richardson that had maybe 60 residents who voted themselves “wet”. The fight stretched over years, with the biggest opposition coming from landowners in Addison who didn’t want a competing “wet” area.
The last election carried the “yes” vote in Dallas to allow these sales, but thanks to our County politicians the vote was nullified. I miss being able to by a 12 pack at my nearest Tom Thumb, instead I drive to Addison, which is the nearest packaged place around.
Correction: A petition drive fulfilled the requirements to allow this issue on the ballot a few years back, but the County “powers that be”, found a way to disqualify based on a technicality.