Gary Tanashian has an unusual way of measuring the health of San Diego’s restaurants and he said that so far this year, they’re doing better than some expected coming out of the COVID-19 pandemic.
Tanashian’s company, New Leaf Biofuel, recycles restaurant cooking oil and 2022 has been a record year, far exceeding pre-pandemic levels, said Tanashian, who also is a board member of the California Restaurant Association’s San Diego chapter.
From his point of view, “The restaurant industry is very robust right now,” Tanashian said, adding that he is recycling 115,000 gallons of oil per month this year, up from a pre-pandemic level of about 81,000 gallons and up from about 26,000 gallons during the worst of the pandemic.
Hitting a Plateau
Restaurant owners present a more mixed picture of the industry post-pandemic, with many saying they’re well on the way to full recovery but worried about rising costs and labor shortages.
They’ve raised prices to keep up with inflation and wonder how much their customers can absorb and some have changed menu offerings, removing some of the pricier offerings.
“We’re dealing with a lot of the same issues that everyone’s been dealing with, which are supply chain issues and getting product in,” said Jon Weber, president of the San Diego chapter of the Restaurant Association and co-owner of Cowboy Star Restaurant & Butcher Shop in East Village.
“When everyone talks about inflation at the grocery store, that’s hitting us too,” Weber said, adding his costs are up by about 30%.
Weber said he’s had to raise prices and made adjustments to the menu.
“Our whole thing is we always want to be a place where in the back of their minds, people say ‘let’s go there and we’re not going to break the bank,’ ” he said. “That’s why it’s so important to start engineering our menu to still create value and a reason for people to come in.”
Weber said he saw “a big rush” of customers returning once pandemic restrictions on indoor gatherings were lifted.
“There’s been kind of plateau where we’re starting to see the level of diners level off. I would say we’re trending a little under what we saw before (the pandemic).”
Finding workers has been an ongoing challenge.
“We have a standing ad out for a job right now,” Weber said.
Without giving details, Sami Ladeki, owner of Sammy’s Woodfired Pizza and Toast Gastrobrunch, said that he’s planning to open a new restaurant in North County.
“I’m worried about how we’re going to staff the place,” he said.
Rising costs are another concern, from the packaging he uses on take-out orders to poultry and beef.
“It’s crazy, crazy, crazy,” Ladeki said, adding that he had to raise menu prices 8.6% in August to compensate.
“Either I raise prices or I go out of business. People understand, the American public understands,” Ladeki added.
Despite the rising costs and labor issues, Ladeki said, “We’re chugging along. It’s not for the faint of heart, this business. You have to know what you’re doing. It’s not for everybody.”
Ladeki said he’s optimistic about what’s ahead for the restaurant business.
“I live for hope for next year. We all live for hope for next year,” Ladeki said. “I live on hope and there are better days to come. I do believe there are better days to come.”
Dario Gallo, who owns Civico 1845 restaurant in Little Italy with his brother, Pietro, said that he’s noticed fewer European tourists, who had been a reliable source of customers.
“Usually, this is the time of year when we have a lot of Europeans, a lot of Italians, a lot of French,” Gallo said. “A percentage of those might still be scared about traveling.”
Adding outdoor tables has raised the seating capacity of his restaurant from 100 to 140 Gallo said, but he said sales are down from 5% to 10%.
With his costs rising, Gallo said that he raised prices earlier this year by about 5% but is trying to avoid additional increases in hopes inflation will ease.
“We are positive and we believe that things are going to get better,” he said.
Grant Gottesman, partner in Fresh Kitchen Hospitality restaurants, said he would normally keep his restaurants open seven days a week but has had to cut back because of labor shortages.
But Gottesman said the biggest post-pandemic issue for him has been the growth of third-party delivery services.
“That was something that was growing pre-pandemic and during the pandemic, that became a way of life for our trade area, in the suburbs,” Gottesman said. “I thought after the pandemic, those numbers would decline. In fact, those numbers have either maintained or in some cases increased. From a restaurant operator’s standpoint, it takes a big chunk out of what already is a fairly small bottom line. Some of those delivery services charge 30% to the restaurant so we’re basically giving away any profits we could be making.”
Gottesman said overall restaurant sales are recovering slowly but not yet back to the level they were pre-pandemic.
Even so, Kitchen Hospitality this year opened a new restaurant, La Cocina Mesa in Carlsbad.
Niccolo Angius, owner of Cesarina Restaurant in Point Loma, said his sales this year are running 45% higher than they were pre-COVID.
“Today, we can say that we’re stronger than ever. We came out of the pandemic stronger than before,” Angius said, adding that he’s added two patios to Cesarina in addition to the one he had and is opening a new pizza restaurant across the street.
But like others, Angius said he’s been hit with huge price increases for supplies.
“Before the pandemic, we used to pay $100 for three liters of extra virgin olive oil from Italy. Now, it’s $270. Flour went up 150%. We run through about 1,000 pounds a week. It’s a big hit,” Angius said. “We’re eating a majority of the costs but some of it, we have to reflect on our guests.”
Watching the Economy
Pam Schwartz, general manager of Ranch 45 restaurant in Solana Beach said that 2022 has been a disappointment so far.
“We thrived during the pandemic, really kind of absorbing it and being one of the few people being open for business the entire time,” Schwartz said, relying on take-out orders and family dinners and diversifying.
Because the restaurant included a small market, hers was considered an essential business.
“We kept our kitchen open. We sold everything under the sun that we could think of,” Schwartz said.
After a strong 2021, Schwartz said that she thought that this year would be even better, but “this has been our worst year of business so far.”
“We’re down about 20% so far,” Schwartz said, attributing the downturn in part to people who went away on vacations they’d put off during the pandemic.
She’s optimistic that the situation will improve with an uptick in catering and the addition of full dinner service.
Bob Carpenter, who owns Sunnyside Kitchen in Escondido with his wife, Kate, said that they did better than ever during the pandemic. The restaurant specializes in gourmet breakfast sandwiches.
“We had a good established base of customers,” Carpenter said. “People wanted to support the mom and pops so we got a lot of business that way.”
With the addition of sidewalk seating, business has continued fairly strong, Carpenter said, although it’s tended to fluctuate from month to month.
“It’s unpredictable,” Carpenter said. “May, June and July were iffy. August was through the roof and September was down.”
Carpenter is hoping to add a patio to give diners more room.
He, too, is worried about the rising cost of ingredients and said that he’s raised prices by about 15%.
“We’re hopeful that the economy shows signs of strength and people are encouraged,” Carpenter said. “We just hope for the best and do our best to get the word out that we are there.”
Dena Shamoo, owner of Craft Kitchen in La Mesa, said that everyone told her that if the restaurant survived for five years, she was safe. Then the pandemic hit just as she was celebrating five years in business.
“We’ve been building it back up,” Shamoo said. “We’re good, but never could we say we’re back to where it was.”
She credited the community of La Mesa for helping her survive the pandemic.
“It’s a tight knit community,” Shamoo said.
Like others, Shamoo said that she’s had to raise prices but said her biggest problem has been finding workers.
“We’re finally in a good place but we went through months and months trying to hire people,” Shamoo said. “You get some people and you train them and they show up for a while and then leave.”
Joe Carmichael, co-founder of Local Roots Kombucha in Vista, recently opened a second location in Solana Beach.
“It took much longer than we wanted but we’re finally here trying to get back on that nice growth spurt,” Carmichael said. “We are getting more and more event inquiries than we had, which means people are looking to get back together for weddings and holidays.
The California Restaurant Association Foundation in partnership with Wells Fargo, SoCalGas, Pacific Gas and Electric Company, and SDGE this year handed out $1.5 million in grants through the foundation’s Restaurants Care Resilience Fund to help restaurants recover from the pandemic.
The money, in $3,000 increments, went to 356 independent restaurants, including 50 in San Diego County, said Alycia Harshfield, foundation executive director.
The grants could be used to upgrade equipment, buy new equipment and offer bonuses to employees.
“Restaurants were telling us that they want to be able to take care of their employees, especially those who have been so dedicated,” Harshfield said. “We like the idea of being able to provide direct support to the employees.”
Meanwhile, demand for restaurant property has reached an all-time high in San Diego, with space in many areas at a premium, according to Randy Stratton, managing director of Newmark in San Diego and Craig Killman, executive vice president of JLL in San Diego.
“There’s no quality space available,” Killman said. “I’ve got restaurants that I represent that I can’t find homes for. I’m not alone. Other brokers will tell you the same thing.”
Anecdotally, Killman said that it’s often difficult to get reservations at some of the county’s more popular restaurants.
“People are doing what’s called revenge dining. Because they were locked up for so long, everybody wants to get out and about,” Killman said.
Still, Killman said some restaurants in the Gaslamp Quarter are struggling because the convention business hasn’t fully recovered.
“The problem of Gaslamp restaurants is they live on the quantity and quality of the conventions,” Killman said.
Like Killman, Stratton said the overall restaurant market in San Diego County has been surprisingly resilient.
“It’s been a fight,” Stratton said, but added: “There’s a lot of restaurants, depending on the markets, that are looking to expand with their current concept or even creative new concepts.”
“Restaurants have been just so creative and adapting to what’s next,” Stratton said.
A change she’s noticed is that many restaurants have put a greater emphasis on outdoor dining and restaurant owners are looking for less indoor space than they were prior to the pandemic.
“Everyone’s got to have a patio,” Stratton said. “Everybody wants to sit outside.”