A call for help brings diners back to Dharma’s, but long-term challenges remain 

Just before lunchtime on April 3, Yogi Shapiro, the manager at Dharma’s in Capitola, sent out a newsletter to the restaurant’s email list. It was a cry for help. 

The longstanding vegetarian eatery had struggled financially for years, and was in danger of closing. The costs of ingredients, labor, utilities and other necessities had climbed steadily, while business decreased. “We’ve cut where we can, restructured how we operate, and worked to find every possible efficiency. But the gap remains,” he wrote. 

Shapiro asked his subscribers to come in for a meal, to spread the word, and bring a friend. “The truth is, every table filled makes a real difference right now more than it ever has,” he said in the letter. 

Shapiro said he had thought about reaching out to the community for years. “The situation wasn’t dire enough to really motivate it,” he told Lookout on Wednesday. “And I really didn’t know what to say, except we’re struggling, we need your support.”

The response to the email was immediate. People started showing up that evening, and the next day – Saturday – was the busiest day they’d had in years. “People are coming out of the woodwork. The response is, ‘We want you to be here, and we’re going to show up.’ And we’re also getting the feedback of, ‘We want to show up, and this is why we don’t,” said Shapiro, who said former customers criticised high prices – most entrees range from $20 to $29 – and the overly large portions. 

The restaurant’s struggles with high costs and shifting customer desires reflect a changing restaurant landscape over the past 40 years, particularly for vegetarian establishments, and turbulence within the industry since the pandemic. It’s also grappling with a transition in leadership. 

Shapiro’s father, Bernie Shapiro, founded Dharma’s in 1982 on East Cliff Avenue, where Aloha Island Grill sits today. It moved to its current location in a shopping center on Capitola Road in 1989. Father and son have managed the restaurant together for more than 20 years, and Shapiro is preparing to take the reins as Bernie deals with health issues and retirement plans. 

“My vision of what Dharma’s would be when my dad retired has totally changed because of the changing landscape of restaurants,” he said.  “Our restaurant formula just hasn’t been working.”  Shapiro and his father seriously discussed closing, but Shapiro decided to fight for the restaurant he grew up in, and still believes has a valuable place in the community. 

“It’s not just us, our family. It’s our family of employees, some of whom have been here for 30 years or more, and the community of people who depend on us for healthy food,” he said. “I believe in the place we have in the community, and I also know we can do it a lot better and make it more accessible.” 

The newsletter not only had the immediate effect of some much needed cash flow, it also inspired customers to share how they believe the restaurant could improve. The most consistent criticism is that Dharma’s prices are too high, and the portions are too large. 

The all-day menu, served cafeteria-style, offers exclusively vegetarian breakfast, lunch and dinner items with international flair, from gado gao ($22.95) and an Indian curry plate ($26.95), to Nada Chicken Enchilladas ($27.50) and a tempeh Reuben sandwich ($22.5). There are many vegan and gluten-free options. 

The ample portions – which some customers stretch to two or three meals, Shapiro said – are a relic from the 20th century, when vegetarianism was a niche diet and meat-free restaurants were rare. Back then, customers appreciated the abundance of food. “People were excited to go out and have bigger meals, and vegetarian meals,” said Shapiro. “On Fridays, Saturdays, and Sundays in the 2000s, we’d have a line to the door.”

Two years ago, Dharma’s reorganized the seven-page menu, and decreased some portion sizes and prices. But Shapiro thinks they didn’t go far enough to entice customers and offset the higher prices dating back to the pandemic. 

This isn’t the first downturn Dharma’s has withstood. The restaurant struggled through the years after the 2008 recession, but service bounced back by 2019. Then the pandemic hit, and a storm of supply chain issues catapulted prices of ingredients and basic supplies. The price of rice paper, which Dharma’s uses for its popular fresh spring rolls with peanut sauce ($14.95), tripled from $46 a case to $120. 

“Everything else went up five to 10%. After awhile, it just accumulates,” he said. He and his father followed a traditional model to combat the new higher costs: they increased the prices.

For the first year of the pandemic, Dharma’s sustained itself on a government loan. When that ran out, the issues of high operational costs and lower volume couldn’t be ignored. The restaurant hasn’t made a profit in years, Shapiro said. 

His attempts to market the restaurant through newsletters, fundraisers, and discounts haven’t had a lasting impact, and he admits that he struggles with how to reach a new audience. 

While Dharma’s has a large physical footprint, Shapiro believes it would be more expensive to move to a different location, thanks to an affordable lease and good relationship with the landlord. 

Over the past four decades, vegetarianism has become mainstream, with options on nearly every restaurant menu. But Shapiro believes that Dharma’s commitment to healthy, often organic ingredients, and the fact that meat products never enter the building, sets it apart for people focused on a meat-free lifestyle. 

It’s also welcoming to families, with a large kids menu and collection of toy dinosaurs to play with. One upside to forgoing table service is that they never rush guests to leave. 

Since the newsletter went out and people shared that menu prices are their biggest barrier to returning, Shapiro is focused on finding a solution that works for everyone.

 “There has to be a sweet spot in there somewhere where we can make what we need to make and people can afford it,” he said.

Despite the precarious situation, he’s optimistic. 

“I’m really confident that we can find it just based on the overwhelming support. People want to be here,” Shapiro said. “If we find the right formula, people will come and we can stay.”