Local eateries vs. the supply-chain blues: What we learned about pricing switch-ups, menu casualties, sourcing
The number of challenges facing Santa Cruz restaurants in the pandemic era is astronomical. In fact, we’re plain lucky so many owners and chefs love what they do enough to endure. We talked to four different proprietors around the area to learn about their struggles.
Last spring, when COVID-19 vaccines became widely available, many local restaurants hoped it was the beginning of a return to something that resembled “normal.”
Instead, supply-chain issues, the resulting price increases and a labor shortage have created persistent challenges for restaurant owners. Many are struggling to balance these new costs in an industry where the profit margins were already thin, while still reeling from a devastating 2020.
Derek Rupp, owner of Pleasure Point’s East Side Eatery and Pleasure Pizza, has watched prices surge in food, goods and labor at levels previously unseen.
“I’m having to kind of throw out the way I thought about running my business and look at it with a fresh set of eyes,” he said. “And figure out how we’re going to do this.”
He says a general trend of increasing prices across the board has been punctuated by “spikes,” when prices will suddenly increase by significant percentages. Over the summer, he saw spikes in the prices of chicken, eggs and milk. When the price of beef went up almost 30%, Rupp decided to take his burger off of the menu for a few weeks. “I don’t want to charge $18 or $20 for the burger, and to sell at that price, I’m not making any money on it.”
According to the Consumer Price Index report released Dec. 10, the CPI for all items rose 6.8% for the 12 months ending in November, the largest 12-month increase since the period ending in June 1982. Energy prices rose 33.3% over the past year, and food prices increased 6.1%.
In April, in response to the surge in costs, Rupp raised the prices on his menu by an average of 18%. Even then, the margins on some items remained thin, and he worried about balancing the prices on his menu so his customers wouldn’t get sticker shock.
He rearranged his menu in an effort to draw customers’ attention away from more expensive items and toward items that were more cost-effective: “If chicken is up, we’re going to try to push pork, and get people to find things on the menu where the margins are a little bit better.”
Overall, Rupp says his customers have been understanding about the price increases because they’re also being affected by rising costs. “Whether you’re going to the grocery store, or whether you’re buying goods for your business, we’re all feeling it and we all see it,” he says. “So everyone’s been really very understanding. Everyone gets it. They don’t think I’m trying to gouge people. They’re just like, ‘Yeah, this is what it’s gonna cost.’”
Everyone gets it. They don’t think I’m trying to gouge people. They’re just like, ‘Yeah, this is what it’s gonna cost.’
At the same time, he wonders how much more customers will take before they start adapting to the new increased costs. At some point, he says, people are going to choose to eat at home or look for other dining options that are less expensive, like grab-and-go restaurants. “It’s a juggling act,” he says. “How far can I take it before I pull far away and people say, ‘We can’t go out five times a month, we can only go out three times a month.’? Which would be bad for our industry as a whole.”
Service workers have been slow to reenter the industry as a whole, and Rupp has made an effort to increase wages at his restaurants to attract much-needed workers. He has increased wages for his back-of-house staff by 20% since April, and has given his front-of-house workers larger sections so they have the ability to make more money in tips.
The remodel currently underway at East Side Eatery will reconfigure the dining room to help offset rising service costs. By expanding the bar and rearranging the dining room, only three servers will be needed on the floor instead of four, cutting his labor costs significantly. He will also expand his cocktail, wine and beer offerings, improving his customers’ experience and, he hopes, encouraging them to spend a little more on alcohol, where the margins are better.
The remodel is worth the investment because he doesn’t believe costs will go down anytime in the near future, if they go down at all.
Still, he says he can’t complain. “You have to figure out how to be successful in this new environment. Because everyone’s going through it and the people who are going to get through it are the ones who are going to figure out how to operate like this,” says Rupp. “We have no choice.”
Zameen tries to keep prices the same
Ed Watson, owner of three Zameen restaurants in Santa Cruz County, doesn’t mince words when he describes the challenge facing restaurants: “The challenge for us is how do we not price ourselves out of the market after two years of hell? And then also try to keep your bottom line because that’s the real challenge.”
While prices for meat and, to some extent, produce have gone up, the shift from in-person to to-go dining has ballooned prices for paper goods, particularly compostables and to-go containers, and increased demand has made them difficult to get.
Add to that increasing labor costs in a competitive market, and Watson says it’s going to be an interesting 2022 for restaurants trying to balance returning to normal while working out how to cover costs.
Watson hasn’t had to increase his prices yet at his Mediterranean restaurants, despite watching his margins slowly disappear. He’s hesitant, because he says he’s always strived to give a delicious, fresh product at a good value. He’s also received wonderful support from the community over the past few years, and doesn’t want to increase his prices when he’d rather reward his customers for being so faithful.
To help offset costs, he has changed his menus to be more consistent across all three of his restaurants. The menu at Zameen in Aptos used to be larger, but when the difficulty and costs to secure ingredients rose, it made more sense to pare down that menu to be more similar to Zameen at the Hangar in Watsonville and at Zameen at the Point on 41st Avenue in Santa Cruz.
With the labor shortage and supply-chain issues, it was easier for us to try and get out the most consistent product rather than being out of stock or unable to offer this or that.
“With the labor shortage and supply-chain issues, it was easier for us to try and get out the most consistent product rather than being out of stock or unable to offer this or that,” says Watson. “It has also managed the inventory so we’re buying for all three locations rather than special ingredients just for one.”
He doesn’t think Zameen will go back to the larger menus anytime soon. Still, he is hopeful for 2022. Zameen at the Hangar opened just three months before COVID and was closed for over a year. Now Watson is making an effort to increase the number of days it’s open from four to five or six, and expand hours: “That’s really where our focus is, and hopefully supply-chain issues get a bit easier.”
Steamer Lane Supply keeps it cheap, simple
Fran Grayson’s restaurant, Steamer Lane Supply, is a small takeout establishment located on the edge of Lighthouse Field, just steps away from West Cliff Drive and its namesake surf spot. Many of her customers stop in daily to grab a healthy breakfast, coffee or a quick lunch while walking their dog or checking the surf.
In order to attract repeat customers, offering an affordable price point is vital. Part of the reason Grayson is able to keep her prices low is because she doesn’t have many servers, and thus lower labor costs. Guests order and pick up at a window, and take their food to go or eat it at one of the outdoor tables, overlooking Monterey Bay. Ironically, this cost-saving measure has become a huge expense as prices for paper goods have risen significantly.
As restaurants switched to using to-go containers and disposable items, Grayson watched prices for those goods double, triple and quadruple: “All of a sudden, everybody needed stuff to serve to-go food. Not only did that stuff get really expensive, based on the laws of supply and demand, but it also just wasn’t available.” She says she’s still scrambling all the time to secure basic paper goods like coffee cups. “Every week, it’s something different.”
Grayson recently faced a decision: raise her prices or charge a fee to take orders to go, which seemed complicated. She decided to raise her prices by a small percentage, about 5 to 20 cents per item, to help offset the costs of paper goods. She admits it probably isn’t enough to completely do that, but she is dedicated to maintaining a price point, regardless of what happens. “I’ll forgo my paycheck to not raise prices, as long as I can stay open and pay my bills,” she says. “Ethically, it’s where I stand.”
In the six years she has been open, she has raised her prices two or three times, but she tries to be very conservative. The menu at Steamer Lane Supply includes sandwiches, quesadillas and rice bowls, as well as baked goods, coffee drinks, beverages and specials like smash burgers and fish tacos. With the exception of the salmon poke bowl ($10.95), everything on the menu is less than $9.
“Especially for the quality of the food that you get and the quality of the service that you have,” Grayson says, “and the items that you have available, I’d say that [the prices] are really fair.”
Even so, she says her customers have already noticed: “There’s people that come in every single day of the week and get the same thing, so they definitely noticed.”
Grayson dislikes the increased reliance on disposable containers for environmental reasons as well. Her restaurant’s location draws into focus the kinds of beautiful spaces that are threatened by overconsumption. Even before the pandemic, she limited the use of single-use items at Steamer Lane Supply, such as coffee sleeves, and gave a discount to anyone who brought in their own mug.
Relying on those single-use items now is necessary for everyone’s health and safety, but when Grayson sees those items go unused or littering the sensitive areas around her restaurant, it feels wasteful. She suggests that refusing disposable forks and paper napkins if you don’t need them, or even carrying reusable cutlery and napkins with you, would help offset the costs of these items not just to restaurants, but the environment as well: “I feel like that would help so much as far as costs for restaurants and cutting down on waste.”
Local sourcing has kept Brad Briske right at Home
Chef Brad Briske has always been passionate about sourcing as locally as possible for his fine-dining restaurant, Home, in Soquel. All of his meat comes from Northern California farms and fisheries, and produce is bought from local farms or grown in the kitchen garden at his restaurant.
Even his olive oil is purchased directly from a source in California and delivered in 55-gallon drums. The exceptions are a few dry goods, which he purchases through a San Francisco-based wholesaler with whom he worked with for almost 15 years.
As a result of his hyperlocalism, Briske says he’s been largely unaffected by the rising costs felt elsewhere in the industry. His longstanding relationships with the farmers and his wholesaler have ensured that his prices have remained consistent, and the shorter distance his supplies travel means they aren’t affected by tariffs or shipping delays.
He did order a new dishwashing sink in October that still hasn’t arrived, likely stuck in a port somewhere. It’s an annoying delay, but the need isn’t urgent and he’s happy to wait.
Briske admits that the circumstances at his restaurant are different from others in the area. He is constantly adapting Home’s menu to what’s seasonally available, and the restaurant has a stock of homemade products like pear vinegar and charcuterie to draw from.
He was also able to expand his business during the pandemic by opening a booth at local farmers markets to sell homemade products such house-cured olives, fresh pastas, Bolognese and paté. This allowed him to maintain those crucial relationships with farmers while his restaurant was closed or serving at a much-reduced capacity.
“I was able to lock in my prices because I supported [the farmers] for the last few years and grew as a customer, instead of being a big customer and then closing or tailoring off to nothing,” Briske said. “So they really appreciate that, and they’re not worried about charging me $1 or $2 more right now because, at least in my opinion, I think I help them stay afloat and push through.”
Briske is grateful that, because of his passionate commitment to sourcing locally, he hasn’t had to make his portions smaller or raise his prices. And if rising costs mean that people eat out less frequently, he’s confident that his guests will still choose Home for special occasions.
“I feel like most of our clientele, patrons and customers of the restaurant come here for those kinds of things,” he says. “And luckily we’re small enough and have enough support from the community to keep that going.”