High cost of food, labor shutters some Sacramento-area restaurants ahead of new year
SACRAMENTO -- Some Sacramento-area restaurants will not see the new year, shutting down just days before January 1.
Impacted business owners say that due to rising costs, staying open just is not possible. With a looming state minimum wage increase on the horizon, it's the perfect storm.
Goodbye to another West Sac staple
There's a family feel to La Bou Cafe, tucked into a Jefferson Boulevard shopping mall in West Sacramento.
"My good friend," owner Johnny Garcia said, hugging a longtime customer Wednesday.
On Friday, Dec. 29, his cafe will close for good after more than seven years in business.
"So we're eating here probably for the last time," said loyal patron Mickey Fausett. "I'm gonna miss it but you know, we are slowly losing especially the family-owned places."
Fausett said it's especially sad when you consider other popular West Sacramento spots recently closing down, like Club Pheasant.
"I was trying to fight, trying to do my best I can," said Garcia.
Garcia said, like many California restaurants, his operational costs are out of control.
"The food cost, it's incredible how high it is. You can't raise the prices every three months, every four months," said Garcia. "Who's going to spend $13, $14 for a sandwich here?"
It's the cost of food but labor, too, with another looming state minimum wage increase on the horizon: a bump up to at least 16 dollars an hour on Jan. 1, 2024.
Restaurant expansion woes
Andres Valencia, owner of Mexico Lindo, opened Sacramento-area locations starting in 2020 in El Dorado Hills, then later in Roseville. After seeing his flagship location thrive in San Jose, the expansion seemed like a good call.
Instead, he had to close both the El Dorado Hills and Roseville stores for good on Dec. 24.
"I kind of had to make the hard decision even though it wasn't a pleasant one," Valencia told CBS13.
A host of issues that started with management and staffing challenges coupled with complications getting a liquor license were only made worse by the same problems that have plagued Garcia at La Bou -- high costs of food and rising minimum wages for employees.
"It's kind of hard to give a raise when we are not making any money," Valencia said. "I already have a hard time making the payments as is with the current rate, not making and generating enough."
Valencia said it was impossible to dig his business out of the hole.
"Now because we are not hitting our numbers, instead of focusing on what we should be focusing on, we were focused on cost-cutting," he said. "We had constant turnover in the front of the house and back of the house. If you don't have a consistent product and service, you're not going to have a consistent business."
His San Jose location remains open and will be his sole focus in the new year.
An economist's perspective
These tough calls for local restaurant owners come as no surprise to Christopher Thornberg of Beacon Economics.
"For your standard restaurant, they feel like they are running faster than they ever have and they are just staying in place," Thornberg said.
Given the context of this story, it might, however, come as a surprise to hear Thornberg say that consumer restaurant spending is actually up this year.
So why are restaurants struggling?
"Yes, there's lots of demand, but at the same time, restaurants are experiencing a big increase in labor costs. A lot of our policies like minimum wage make running restaurants more expensive. Consumers pay that price when you check out at the end of the meal. We also pay it in the fact that there's fewer restaurants," Thornberg said. "Whether or not you think the policy is right, there's a consequence that, of course, is the higher cost of food in California."
Both keeping staff amid labor shortages and keeping up with rising wages has become impossible for some California spots, but Thornberg said some California restaurants are thriving. You cannot paint them all with the same brush.
As inflation cools and the economy continues to grow, Thornberg said we could expect to see the high cost of food plaguing restaurant owners trend back to normal, as they have started to, in the new year.
